Tim Fernholz

Wednesday, April 25, 2007

College financial aid just got sexy. Well, it got exciting. With New York Attorney General Andrew Cuomo (the second coming of Spitzer?) on the war path against financial aid officials whose personal interests conflict with their responsibility to help students pay for the education they deserve, the story has hit the front pages.

While white-collar crime grabs the headlines, the underlying problem of middle- and low-income students still struggling to pay for college keeps getting worse. As higher-income students maintain, and continue to expand, their admissions advantage and higher-ed institutions react by reaching out to low-income students–often with an emphasis on first-generation college students–it’s those in the middle that feel the heat.

“The institutions are doing better, but now it is the middle two quarters that are getting pancaked in the process,” said Georgetown Senior Associate Dean Hugh Cloke, who has been involved in admissions for 35 years.

In the end, it’s not just access, but also equity and diversity that count. While getting into strong public universities can be difficult, it’s even harder for many American students to find their way to a top-tier private institution–and then pay for it. An article in The New York Review of Books by Columbia University Professor Andrew Delbanco aptly titled “Scandals of Higher Education” dissects this problem. Delbanco notes that in the latter part of the 20th century the number of students from the lowest income quartile at private universities has stayed around 10 percent, while the percentage of students from the top quartile rose from about thirty percent to fifty percent.

“In short,” he writes, “there are very few poor students at America’s top colleges, and a large and growing number of rich ones.”

Since 2001, the median cost of college educations has gone up 41 percent, to yearly average fees of $22,218 for a four-year private institution and $5,836 for a four-year public institution. Meanwhile, the median family income in the United States is about $46,000. And Harvard’s dean of admissions was quoted in the Crimson stating that “middle-income” Harvard families have a household income between $110,000 and $200,000.

These middle class misapprehensions aren’t limited to Harvard, though. I exchanged email with Monica Inzer, Dean of Admission at Hamilton College, number 17 on the U.S. News and World Report list of best liberal arts colleges in the country. Hamilton recently made a much-heralded switch from giving merit-based aid to offering only need-based aid, traditionally a sign that a school no longer has to work to create a strong class academically (all the Ivies use this system), but instead needs to attract diversity.

But it’s hard to understand what kind of income diversity they’re attracting.

“Ultimately, this policy shift will help the middle class,” Inzer wrote. “Middle class can be defined many ways, but the average income of a Hamilton family receiving financial assistance is nearly $90,000. Furthermore, half of Hamilton families on financial aid are in the top 28 percent income bracket for all U.S. households and in a recent study nearly one-third (31 percent) of Hamilton students receiving aid came from families earning more than $100,000.”

Hamilton’s yearly cost is approximately $43,890. And for determining the middle-income, well, 50 percent of U.S. households make between $22,500 and $77,500.

Given the demographic spread, the question at hand is why increasing numbers of wealthy students are going to elite private colleges. An obvious reason is simply their advantages–wealth gives students the best college preparation, at private high schools and top-tier public schools, and the ability to join extra-curriculars and prep for the SATs; wealth correlates with higher grades and test scores. Another is the advantage of legacies and fundraising connections. Walter Benn Michaels, a professor at the University of Illinois, argues that the academic left has focused on issues of diversity–race, gender, etc. –over the harder issue of economic disparity, at its peril.

The other question is what is to be done. Within the higher education community, the elimination of early admissions–which gives the wealthy an advantage because they do not need to compare financial aid offers–is part of the equation. More aggressive recruiting at schools with less affluent student bodies or even economic affirmative action are further options. And grants are better than loans, but only the schools with the largest endowments–those with the wealthiest alumni, typically–can afford that.

And then there is the government. The Democratic Congress that took office made student loan interest rate reduction part of its “Six for ’06” legislative agenda. Democratic leaders and operatives consider college payment issues an integral part of their populist program because, as one staffer told me, many people are paying off their college loans, trying to pay for their kids’ college, or doing both at the same time.

A year ago Campus Progress ran a story about the challenges faced by legislators trying to reform student loan law. It painted a bleak picture of the Republican-controlled–and loan industry-influenced–committee. But last week a couple Education Committee staffers who spoke to Campus Progress on background because of their involvement in ongoing legislative negotiations painted a much rosier picture of the situation. They noted the bipartisan majority that passed HR 5, the interest rate reduction bill the House passed earlier in the year.

What else is on the agenda? A bill to make financial aid forms easier to fill out, a bill–in response to the Cuomo investigations–to demand transparency for student loan officials, and most importantly, the Student Aid Reward Act.

The STAR Act is an incentive package designed to make more institutions choose federal direct lending over giving government subsidies to lenders. Both programs exist now, but direct lending is cheaper–to the tune of $13 billion–because it eliminates the loan company middleman. Today, private lenders manage to control almost all of the lending market share (77 percent) using various incentives, like making fees and rates competitive for some. In some cases they buy off school officials with the kinds of gifts that get state attorneys general excited–this New York Times article details some of their practices. The STAR Act promises to make direct lending come out on top–without eliminating private lending entirely–by reinvesting $10 billion in Pell and other student grants, much of it being returned to higher ed institutions for direct distribution to students. That’s a definite move in the right direction.

Cooperation between the government and higher education institutions to put in place a variety of policies friendly to middle- and low-income families can help stem the problem of inequality in higher education. But the real solution, as one of the education committee staffers said, is working to improve our public education at every stage to level the playing field. But until that happens, at a minimum, we need to make sure we don’t forget what “middle income” really is.

Tim Fernholz is a junior at Georgetown University and managing editor of The Georgetown Voice. He can be reached at tfernholz@gmail.com.