
How Colleges Are Selling Out the Poor to Court the Rich - georgefox
http://www.theatlantic.com/business/archive/2013/05/how-colleges-are-selling-out-the-poor-to-court-the-rich/275725/
======
DanielBMarkham
I don't mean to restate the obvious, or pander to the crowd on HN, but every
time we read one of these articles it needs to be stated that _the current
system is broken even when it is paid for_. That is, for all the ink spilled
over who can afford what and how much money is spent where, there are tons of
kids right now graduating without a sliver of hope for a job. Worse yet, the
system has been blowing smoke up their asses for so long that many of them
somehow feel entitled to a job whether there's one out there or not.

I love education-related stories. I feel that hacking in this area can help
the most people and advance the species the furthest. But we also need
desperately need to keep new information we receive in context.

~~~
ChuckMcM
I'd like to test your assumptions here.

You claim : "the current system is broken"

You submit as evidence to that claim : "there are tons of kids right now
graduating without a sliver of hope for a job."

If I ran this claim backwards (which is to say reverse its assertions) then a
"working" education system would produce "most of the kids employable" ?

I wonder why that defines "fixed" (or broken for that matter). I feel a bit
differently about it of course (or I wouldn't be whining here :-) that the
'publicly funded' part of our education system (that is K-12) should strive to
make you generally employable, and that higher learning institutions should
help you explore your interests _regardless of the applicability of those
interests to employment_.

Of course looking at it that way its a harder problem, since it really says
that every kid who graduates from high school should have the equivalent of a
two year STEM degree these days, but those are the _base_ skills that
employers want to start from, and we're still not even graduating 100%
literate kids from our high schools.

~~~
DanielBMarkham
This is a difficult issue for a lot of reasons, hence my restating the
context.

I'd venture that no matter what else an education provides, if it does not
enable a graduate to repay their loan, it is non-sustainable. (Whether you
want to use "good" or "bad" here is up to you)

Even the phrase "public education" is broad and fuzzy. With a tremendous
amount of student loans publicly-financed, with public financing also
intricately involved in the public university system via research grants,
there's a distinction between secondary education and higher education, but
I'm not sure how much the distinction matters for purposes of broadly-based
public policy discussions.

~~~
brudgers
Repaying the loans is only one way the system might be corrected. Allowing
student loans to be discharged via bankruptcy would be another, which has
recently been outlawed. Thus prices for education are set in a marketplace
which rewards bad loans by shifting all of the risk to the borrower.

~~~
matwood
Why shouldn't the borrower shoulder most of the risk? If we shift risk to the
lender then they will simply stop lending. Then people will complain how they
can't get a loan to go to college.

~~~
fnordfnordfnord
The borrower, the taxpayer, and anyone who holds dollars shoulder the risk to
one degree or another. The "lender" has only to move paperwork in order to
reap a profit. Can you not see that if the lender had to assume some risk,
then the lender would probably lend more to high paying, high demand job
skills, and less to skills in saturated market segments and unproductive
skills.

~~~
sokoloff
I can also see that lenders might exert their influence in ways you'd find
objectionable, making lending predicated on family assets/income, requiring
co-signing from a parent with a 650+ credit score, not lending to liberal arts
majors at all, refusing to lend at "black colleges", or preferentially lending
at Ivys, etc.

Of course, they'd do it in the name of lending to high paying, high demand job
skills and high likelihood of repayment. Under such a system, I'd have still
gotten loans, but I'd rather see a system where some percent of people who
make bad choices suffer from their choices, but where educational loans are
widely available than a system where few are "allowed" to make bad choices,
but loans are more narrowly available.

I don't want a world that's even more "rich get educated, poor don't" than
today. If I look back at my family, my generation is much, much better off,
primarily via education, than my grandparents who very literally mined coal
and worked in a steel mill. They scrimped and saved so my parents could go to
college to become teachers, who in turn ensured we did as well. That's no
college to no-name college to top-name college in the span of two generations.

Of course that's only one data point, and if I read it in a paper, blog or on
news.YC, I'd roll my eyes at the cherry-picking, too, because it'd be 1 story
hand-selected from 100s of millions. In my case, it's 1 of 1, so I want to
ensure we preserve the conditions that let my parents work hard to forge a
better life for themselves and my siblings. Maybe in a world where college
loans are hard to get (such as the world they lived in), this would all work
out similarly, and easy college loans are in fact part of the problem, but I
think there's been heaps of hidden benefits to having education being more
widely available and more common that people overlook when they see Mr or Ms
Bad Choices as an adult with untenable student loan debt.

~~~
fnordfnordfnord
I was responding specifically to the parent comment who appears to like the
fact that the borrower assumes a high degree of risk, and the paper lending
company assumes essentially none. I hadn't really meant to offer it as a final
solution to all our problems.

 _> I can also see that lenders might exert their influence in ways you'd find
objectionable, _

If the gov't decides to use economic forces to manage the supply of college
grads, I would hope that a large portion of funding would go into very
productive areas. It should/would likely change over time to correct
oversupply, changing demographics of society, etc.

 _> making lending predicated on family assets/income, requiring co-signing
from a parent with a 650+ credit score, _

An unfortunate but predictable outcome. Ideally, a parent with a 650+ credit
score would be able to afford to support a child in college w/o much support.
I have such a credit score, but probably won't be able to educate my kids
based on my college instructor salary alone. Ironic, eh?

 _> not lending to liberal arts majors at all,_

Funding the arts via loans is right out, obviously. Funding the arts is a
problem that has spanned pretty much all of recorded history. No simple scheme
such as mine can pretend to solve it today. Attempting to use economic/market
forces in the normal manner to produce good art will only ever have comical
results at best, and the nominal result will be crap. (I have an amusing idea.
I'll tell it further down.)

 _> refusing to lend at "black colleges",_

Grants? Be prepared to write off a lot of the "loans" to minority and
impoverished areas. Since they are minorities, it will be cheap anyway. We
could probably do away with race-based affirmative action, and simply make
grants to students and institutions in impoverished places, and from
impoverished families.

> or preferentially lending at Ivys, etc.

I'm also not sure how to effectively stop the well-connected wealthy from
sponging off of everyone else. I could say "means testing" but we both know
that these types of parasites are clever and quickly adapt to their
environment. Hopefully if the rich use loans, the majority will repay them,
and thus be a source of income rather than a drain. More likely, their parents
will hire expensive accountants to help rid their heirs of this debt,
justifying this thievery because it is "so unfair" to "tax success."

 _> Of course, they'd do it in the name of lending to high paying, high demand
job skills and high likelihood of repayment._

Yeah, so, at least we agree that there may be a possibility for a pseudo-
private-ish loan outfit to be somewhat profitable for some higher-ed funding.

 _> Under such a system, I'd have still gotten loans, _

I could have gotten loans too, but I refused (for better or worse, I'm not
sure). I had negative/neutral financial support from family, and eventually
dropped out of Uni before completing my BS. meh.

 _but I'd rather see a system where some percent of people who make bad
choices suffer from their choices, but where educational loans are widely
available than a system where few are "allowed" to make bad choices, but loans
are more narrowly available._

I don't want to see people suffer, but I don't think that's what you really
meant. I think it would improve our economy, and the lives of many people if
some of us were economically herded into productive industry. I know, it
almost sounds like communist central planning, and it probably is. But letting
high school seniors choose the economic direction of our country at their whim
seems like a poor alternative.

 _I don't want a world that's even more "rich get educated, poor don't" than
today._

Me neither.

 _If I look back at my family, my generation is much, much better off,
primarily via education, than my grandparents who very literally mined coal
and worked in a steel mill. They scrimped and saved so my parents could go to
college to become teachers, who in turn ensured we did as well. That's no
college to no-name college to top-name college in the span of two
generations._

Yes, it's so obvious that it shouldn't need to be said. Education will improve
everyone's life to a greater degree than pretty much anything else.

 _Of course that's only one data point, and if I read it in a paper, blog or
on news.YC, I'd roll my eyes at the cherry-picking, too, because it'd be 1
story hand-selected from 100s of millions. In my case, it's 1 of 1, so I want
to ensure we preserve the conditions that let my parents work hard to forge a
better life for themselves and my siblings._

Let's call this a friendly chat over coffee, and overlook these misdemeanors.

* Maybe in a world where college loans are hard to get (such as the world they lived in), this would all work out similarly, *

I think it needs a systematic approach. The colleges themselves have to adopt
ethics. It will be tough, you can't really outlaw meanness, wanton greed,
stupidity.

 _and easy college loans are in fact part of the problem,_

Greedy businessmen are sucking this money out of kids' pockets as fast as the
kids can borrow it. I see it every semester. Students pay 2X, 3X, 10X, prices
for books, computers, supplies, etc. because the campus store is integrated
with the school and makes spending that money much easier than buying used
texts from individuals, the internet, etc. The bookstore stocks lab items for
my courses, but at a huge markup over retail. Next to every nasty decrepit
warm-water fountain is a vending machine full of cold Dasani(TM), or better
yet Coke!### Prices at the "food court" are another outrageous example.
Privately financed campus housing? The same.

* but I think there's been heaps of hidden benefits to having education being more widely available and more common that people overlook when they see Mr or Ms Bad Choices as an adult with untenable student loan debt.*

Absolutely, but, I think that was probably true to a greater degree in the
past, and that the [education funding] system for people in our cohort
(middle-class-ish?) is tending more toward a sort of Hobson's choice of debt-
slavery / indentured servitude vs. forgoing formal education.

## Arts funding should be fragmented from education funding. It should be as
independent as possible from political influence. There could be divisions
administered by appointees (appointed for life) who would primarily give block
grants to institutions of their choosing. Funding divisions could be run in a
variety of ways, but at least one should be required to only make funding
decisions while under the influence of mind-altering drugs. Now that I think
of it, the same arrangement might do well for science funding (especially
Physics).

### Unless Pepsi has the vending "contract"

~~~
sokoloff
That was one of the most well reasoned wall of text, point-by-point replies
that I've ever read. Well written and I suspect we agree far more than not.
Thanks also for teaching me "Hobson's choice". Cheers!

------
rickdale
I graduated from a college that cost over $160,000 through four years. I am
also from a low income house hold and I will attest to the fact that the
college was very hesitant to give me any financial aid, while these kids that
would pour in from Marin County California and Manhatton were going to school
on a huge price break.

What I realized is that for the institution, my tuition money is all the money
they were going to get. From the rich families they could expect donations
throughout the year. I had a friend who paid very little to go to school
there, but it was also clear to us that without his Dad financing the tennis
team, we probably wouldn't have had any of the amenities that we were treated
to. There's always that give and pull.

Another point to bring up is that financial aid can be up to the individual in
charge of your application. When I worked at the schools technology center
fixing faculty computers, one time I happened to fix the head of financial
aid's computer and when she came to pick it up she asked to thank me
personally and told me that, "If you need anything from the financial aid
office, even just a little bit more, you come tell me and I will make sure to
take care of you." I didn't know this lady until then, but I was sure glad to
have fixed her comp...

------
mdkess
When people vote to not raise taxes to fund these schools, what do they expect
is going to happen to subsidized tuition? We saw this happen a few years ago
in Washington after voters voted against raising taxes to fund schools, and
schools started accepting more foreign students and fewer local students to
make their budgets. People were upset about this, for some reason.

If the school gives four students $5,000 scholarships on a $20,000 bill - the
school makes $60,000 and the students feel good about themselves. If they give
one student $20,000, they make zero. At the end of the day, someone has to
foot the bill - and if it's not the taxpayer, it'll be the people who can
afford to pay.

Of course, high quality education should be available to everyone, but as a
society we have to be more lucid about where the money is coming from. If
taxpayers want people from low income families to go to school (and I am
firmly in this camp), taxpayers need to be willing to pay for these people to
go to school.

~~~
protomyth
It seems we play plenty of taxes if the opening quote to the article can be
believed: "Neat fact: If the federal government were to take all of the money
it pours into various forms of financial aid each year, it could go ahead and
make tuition free, or close to it, for every student at every public college
in the country."

~~~
superuser2
If the government were to make the current cost of attendance available to
students, colleges would just double their prices (unless you implemented
_gasp_ price controls).

~~~
vinceguidry
I'm highly doubtful people would put up with that. Essentially people would be
paying for college twice.

~~~
superuser2
People will put up with anything if it's a prerequisite for being employable,
as we've seen from the massive rise in tuition already.

------
ohazi
Tuition increases coupled with equivalent financial aid increases are also a
convenient way for relatively well-endowed universities to turn "strings
attached" money into "no strings attached" money that they can then use
however they want. They're essentially laundering donor money.

> At most private institutions, a substantial majority of grant aid comes from
> endowment funds set up by trustees, alumni, and other generous donors. Many
> pay into the system hoping that their grants will make college more
> affordable for their endowed students. In the short term, it does. However,
> in the long term, the institution responds by raising tuition rates to keep
> the net price at the market value. While this may benefit especially needy
> students who qualify for additional grant aid, the average student feels no
> difference and the additional scholarship money gets diverted to other
> purposes. They are rarely fraudulent or scandalous. Most of the time they
> just involve making the institution prettier and more competitive in the
> cutthroat race for the best and the brightest of America's high school
> seniors. But looked at from a birds-eye view, one gets the uncanny feeling
> that colleges are not honoring their donors' wishes to make the place more
> affordable. And lest you think that you can avoid all of this by refusing to
> donate, remember that as a United States taxpayer, you pay into the system
> just like millions of your fellow-citizens. Are you satisfied with how your
> money is being spent?

[http://www.stanford.edu/~rhamerly/cgi-
bin/Interesting/Educat...](http://www.stanford.edu/~rhamerly/cgi-
bin/Interesting/EducationInflation.php)

------
vsbuffalo
> At Wabash College in Indiana, 28 percent of students receive Pell Grants,
> and low-income students pay an average of $15,480. Yet 12 percent of its
> freshmen get merit aid, averaging $15,393 each. At Case Western Reserve, one
> of the better known institutions among the high-pell, high-net-price
> schools, 23 percent of students receive Pell Grants grants, and low-income
> undergrads pay $18,381 on average. And yet 19 percent of freshmen also
> receive merit aid, averaging $18,359 each

I don't mean to nitpick, but these are tiny differences between averages.

~~~
jellicle
You're misreading (and the article is poorly written). That quote is listing
the amount paid by low-income students, and the amount in merit scholarships
received by high-income students. Apples, and oranges.

------
rayiner
That's not quite true. They're giving merit aid instead of income based aid.
You can be poor and get high test scores and they'll court you too.

~~~
yaok
Did you read the article? They prefer giving small amounts of merit aid to
many rich students than large amounts of merit aid to fewer poor students. The
result is that, for the same level of merit, the rich get a subsidy and the
poor are denied.

------
habosa
I wish more schools had the resources to go to the aid model that the Ivy
League schools (and also Stanford?) have moved to in recent years. Fully need-
blind admission and financial aid based ONLY on financial need. At Ivy League
schools today there are ZERO merit or athletic scholarships. There are a few
special programs that give merit-based grants for research or other special
academic expenses but none that cover tuition or living costs. Even more
importantly, there are semi-rigid guidelines laid out in advance that show the
correlation between family income and expected family contribution (how much
you'll pay for your kid to go to school). So if your child gets in on merit,
you can reasonably predict how much you'll have to pay and in many, many cases
it is a greatly reduced price. This is a good version of the "high tuition
high aid" system. Best of all, all of this financial aid is no-loan and no-
strings-attached free money.

Yes, of course elite schools will always court rich kids. Need-blind
admissions will never change this. If your business school is named
McGruberstein School of Business and Mr. McGruberstein's child applies to your
school you'll probably take him. While this chips away at the idea of a true
meritocracy it does encourage many of the donations that fund the financial
aid for low income students in the first place. Yes this is "evil" and is
certainly Not Fair, but the colleges need to court these donations in order to
build facilities and provide aid at current levels. I know that many of the
elite schools spend much more on students each year than they bring in via
tuition, and this is financed by the large and ever-growing endowment that
they so value.

------
tokenadult
Both the Atlantic story kindly submitted here and a recent Business Week story

[http://www.businessweek.com/articles/2013-05-09/college-
fina...](http://www.businessweek.com/articles/2013-05-09/college-financial-
aid-isnt-going-to-the-neediest)

are reporting on findings from a report by Stephen Burd for the New American
Foundation, "Undermining Pell: How Colleges Compete for Wealthy Students and
Leave the Low-Income Behind."

<http://newamerica.net/publications/policy/undermining_pell>

[http://newamerica.net/sites/newamerica.net/files/policydocs/...](http://newamerica.net/sites/newamerica.net/files/policydocs/Merit_Aid%20Final.pdf)

This has been an ongoing problem for a long time. Colleges seek the advice of
consulting firms that tell the colleges how to maximize revenues, and one way
to do that is to skew "financial aid" policies in favor of students from high-
income families.

[http://www.maguireassoc.com/services-challenges/optimize-
net...](http://www.maguireassoc.com/services-challenges/optimize-net-revenue/)

As a matter of talent development across the whole country, the United States
finding consistently is that it is more advantageous for a child to a be a
low-ability child from a high-income family than a high-ability child from a
low-income family.

<http://www.jkcf.org/news-knowledge>

<http://www.nagc.org/index.aspx?id=10000>

[http://www.nytimes.com/2013/03/17/education/scholarly-
poor-o...](http://www.nytimes.com/2013/03/17/education/scholarly-poor-often-
overlook-better-colleges.html)

It's understandable why a parent who has money would want to use that money to
give Junior leverage to gain upward social mobility. What's harder to
understand is why publicly subsidized financial aid programs would fail to
identify the most able students who lack family means to attend college,
rather than being used by colleges to leverage the admission of even more
average students from well-off families.

AFTER EDIT: Other comments in this thread are asking where parents and
taxpayers can find information about the costs of each college. The United
States federal government IPEDS database gathers data about college revenues
and spending from all colleges in the country, and the federal data are
presented in the most user-friendly format by the College Results website

<http://www.collegeresults.org/>

operated by the Education Trust. You can look up how radically colleges differ
in what they spend per student and in graduation rates of admitted students,
among many other interesting statistics, on the College Results site.

~~~
larrys
"being used by colleges to leverage the admission of even more average
students from well-off families"

Entirely possible that the mix of students at a University as far as "class"
needs to be skewed a certain way as well to gain other hidden benefits..(Add:
in addition to what else is being talked about in your and other comments.)

For example you don't want 90% of your students coming from NY State, you
don't want 90% of your students to be asian and you may very well want a
larger percentage of your students coming from upper middle class families
just because it creates (in their opinion) a better environment as a whole at
the University.

Meaning a mediocre student from a wealthy family is still a person from a
wealthy family. A mediocre student from a lower class family is a person
raised in a lower class family. Different dress, different actions etc. (I'm
purposely using extremes to try and make the point about possible motives.)

All of this of course is not talked about but entirely possible that it exists
(pure speculation). Just as it's possible that two women interviewing with
exactly the same qualifications (and family background) one who is extremely
attractive and one that isn't, the attractive one gets the admission.

Your thoughts?

~~~
tokenadult
I don't how much more clear I need to make my last comment in this thread to
point out that the United States problem is that wealthy family students are
already HUGELY overrepresented among college students, and an actually DUMB
student from a wealthy family is much more likely to be recruited by a
college, admitted to a college, and supported through graduation by a college
than an actually smart student from a "lower class" (your term) family. Money
talks more than smarts when it comes to college admissions in the United
States. Many countries consciously set different policies, and I think that is
a good idea. (For one thing, among many other possible reasons for supporting
such national policies, national policies that favor brains over money in
admission to higher education appear to have higher sustained rates of
economic growth for the whole country and lower rates of income inequality in
the national population.)

From the Business Week article I linked to in my first comment:

"For example, the paper cites data that show 19 percent of freshman with SAT
scores under 700 (out of a maximum 2,400) received merit aid, as did 27
percent of freshman with scores between 700 and 999. The term 'merit
scholarships,' in other words, is a misnomer, the report says, because schools
can distribute the aid however they please."

I do agree with you that if colleges decide the policies, they will presumably
decide for the benefit of colleges, rather than for the benefit of society as
a whole. What is objectionable about United States practice is federal tax-
supported subsidies to colleges that the colleges distort into benefits for
wealthier individuals.

~~~
waps
Another way to formulate the same issue would be: Colleges more likely to give
$5000 in aid than $10000 in aid. News at 11.

Sucks if you absolutely need $10000 in aid of course. Is it killing the poor ?
No. I worked my way through college and paid full tuition, and only got semi-
sponsored housing because some friend told me that some monks actually did
that if you made your case to them (essentialy you had to get and keep getting
good grades. 80%+ good grades that is, a lot tougher than it sounds (average
of class was < 50%), especially if you need a job to pay for tuition as well).
So I did present my grades to these monks, and they got me in that system.
Later I was able to trade other things (like helping run a fraternity in trade
for a room at the fraternity house).

"Many countries consciously set different policies, and I think ..."

Yes, I've seen that in Western Europe. Specifically you can get full tuition
scholarship + free housing if your parents pay less than $x in income tax.
That sounds great, until you realize ... that rich people are often paid
through a company, and can simply set their own pay, and "invest" the rest in
a new mercedes or a new house (which I agree is a defensible investment in
some cases, but not in most cases). The pay they set, you ask ? $the_limit - 1
for example. (the same limit is used for free childcare, >50% reduction on
health insurance, the list goes on ...). About 50% of the people in the free
housing had rich parents (you can't tell how much tuition they pay, but you
can tell where they live, and whether it's sponsored). That's how at least one
"other country" does it.

They try to keep these rich cheaters people away from housing aid, and even
that is just mostly people behind the counter acting illegally on behalf of
the poor.

------
smsm42
So, if the people pay, they bargain (successfully), if the government pays, no
need for the people to bargain, so the costs skyrocket. How many times we have
seen this? Now we see it in education too. Will we ever learn the lesson?

------
darkxanthos
Historically hasn't this always been the case? I thought it wasn't until
recently when college became a at least remotely affordable option.

~~~
technoslut
It's been quite the opposite. College tuition fees has risen rapidly (as most
other things have) but the middle and lower class wages haven't been keeping
up with this trend. The middle class today is working more for same amount of
money they made a decade ago.

~~~
saraid216
I think darkxanthos is talking about centuries when you're talking about
decades.

------
edoceo
Maybe we'll bring back the apprentice program. That's what I'm working on, I'm
an Edoceo-er

------
tnuc
Why is the graph so small?

