By Richard Vedder
For a year, we have been complaining about Harvard, noting the school has the financial wherewithal to eliminate all undergraduate tuition, which we have advocated. In a study I am writing on federal tax policy for higher ed, I am advocating eliminating tuition at Harvard-like schools for students from modestly above average income families (say up to $90,000 a year), and reducing expected payments for those earning up to double that amount ($180,000 a year).
Harvard has just announced doing something very similar to what we have advocated. News stories indicate that no Harvard student from families with an $180,000 a year income or less will have to pay more than 10 percent of his/her income to the school. Currently, a student from a family with an $180,000 income typically pays $30,000 to go to Harvard --now that will be $18,000. At $120,000 a year income, the family cost of $12,000 probably compares favorably to that at many public universities. Moreover, Harvard is no longer expecting students to take out student loans as part of the financial aid package.
The cost of this to Harvard is chump change --$22 million a year at first. This is less than seven basis points on its endowment. If Harvard is spending 3.25 percent a year from endowment principal annually, now it will have to spend 3.32 percent --big whoop. The school could have gone farther, been bolder, but this strikes me as good, and about right. People from families with $150,000 incomes should be spending something for their expensive education. On technical grounds, I see a need to slightly tweak the formula to avoid some problems, but probably Harvard has already taken care of this.
This does show political heat and public pressure matters. We at CCAP, including our adjunct colleague Lynne Munson, have been yelling at schools like Harvard to do something like this for months, and Harvard is scared out of its wits by a potential endowment spending rule that Lynne, Senator Grassley and others are advocating. This is smart politics for Harvard. But most important, it is a victory for those promoting greater affordability and access to America's premier colleges.
I am going to put crimson lights on my Christmas tree in honor of Harvard this year.