Monday, December 10, 2007

The Equality-Reputation Tradeoff

By Richard Vedder and Thomas Ruchti

A major justification of public subsidies for American higher education --both private and public -- is that they make college more accessible to the poor, students who otherwise would be unable to attend college. Yet colleges want to maximize their reputation, not to mention their wealth, and taking in lower income students hurts them. Lower income students are likely to have lower SAT scores on average, and lower SAT scores hurts a school's US News & World Report rankings. Poorer kids are less likely to attend schools with lots of Advanced Placement classes, after school enrichment programs, etc. Their French Club, if they have one, is less likely to go to Paris over spring break.

Hence colleges face a trade-off --meet the access/egalitarian needs, by taking in lots of poor kids, or meet the "academic standards/high quality" reputation needs by being indifferent to those students. Also, taking in a poor kid instead of a rich kid is costly financially --- the rich kid pays the sticker price and parents give a financial contribution, while the poor kids requires expensive scholarships.

Data on Pell Grants, a good measure of low income presence on campus, bears out our conclusion. See the graph. Kids going to the top 20 schools in the US News & World Report national university rankings are only half as likely to get Pell Grants as those going to a broader sample of universities of varying levels of quality and distinction. The less distinguished colleges are coming closer to meeting the national egalitarian ideal. The high ranking schools --which typically are the wealthier ones as well--give only lip service to serving the lower income part of the population.

Having said that, the growing concern about this problem is leading to some changes at the top, as today's majestic announcement by Harvard attests (dramatically reducing costs for kids from all but the most affluent homes). As the economic barriers to entry at the top erode, the schools still impose rigid academic standards. There are good justifications for these, but schools wanting to more fully meet the egalitarian ideal will perhaps adopt an "income-adjusted" admission criteria, that accepts lower income students with high but not pristine grades and SAT scores but who are far better students than what their socioeconomic circumstances would suggest. Students who overcome adversity should have some advantage, and perhaps that is the way to do it.

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