Redistributing the Wealth: College Tuition

rich-poor-ratio

by James A. Bacon

In the on-going sparring between left and right over inequality in the United States, the left has succeeded in framing the debate by defining the issue as income inequality, as in income reported to the Internal Revenue Service. Conservatives have countered that IRS income does not include income generated through the $2 trillion underground economy, nor does it include more than $1 trillion a year in means-tested transfer payments such as Medicaid, food stamps, the Earned Income Tax Credit and Temporary Assistance for Needy Families. Conservative pundits have generated some traction by highlighting the government-funded income transfers but even that doesn’t tell the whole story.

Our society is riddled with other means-tested programs. Social Security skews payouts in favor of the poor. Medicare increases contributions based on income bracket. Many hospitals and doctors provide billions of dollars of free or reduced-cost health care services to the poor, or at least they did before Obamacare. Speaking of Obamacare, the Affordable Care Act itself is a massive income transfer scheme. And let us not forget private philanthropy, which underwrites thousands of community programs across the country. (See the list of programs, most of which are focused on poverty, supported by the United Way of Greater Richmond and Petersburg.)

Rarely considered, much less debated, is the income transfer engineered by higher education. The cost of education is significantly discounted for the poor. We always knew that as a generality. Thanks to today’s Times-Dispatch’s Degrees of Difference” report, we now have that information broken down institution by institution for Virginia.

The chart above shows the average net cost of attending a Virginia university in the 2011-2012 school year. That includes tuition, fees, room, board, books and miscellaneous expenses. For each university, I have calculated the ratio of what households making $110,000 or more pay compared to what households making less than $30,000 pay. Thus, for the College of William & Mary, with the most “progressive” tuition scale in Virginia, students from upper-income families pay 6.7 times more than students from poor families. Please note: We’re not talking millionaires and billionaires here. A middle-class family with two working spouses can easily fall into that category.

My point here is not to criticize colleges and universities for discriminating against the middle class. I accept the idea that it is in society’s best interest to make it possible for talented lower-income students to attend college. I’m all in favor of promoting social mobility. (I’ll set aside for now the question of how many lower-income students are prepared for college and how many drop out, accumulating large debts in the process.) My point is that our society is steeped and marinated in wealth transfers. But for liberals, nothing is ever enough. President Barack Obama has dedicated the remainder of his second term to flagellating the idea that income disparities are too great and that society needs to do something more.

Fine, let’s have that debate. All I ask is that, instead of focusing purely on income reported to the IRS, that we consider all the actions our society is taking to ameliorate the effects of poverty. That includes the cost of a very big-ticket item, attending college.

11 Responses to Redistributing the Wealth: College Tuition

  1. keep in mind also – that – almost everyone can get tax credits for attending college.

    some of those credits are applied to any taxes you owe – they reduce your taxes and others are refundable which means you get the money back no matter even if you owe no taxes.

    The American Opportunity Tax credit, for instance is up to $4000 of qualified expenses of which you can receive a $2500 credit allocated between a credit to offset taxes owed and a refundable credit.

    I’m quite sure that folks with teen-aged kids headed to college are aware of this credit plus the Lifetime Learning credit – as well as the direct deductions for tuition and books and loan interest if you can’t use the other credits.

    so our tax policies are set up to encourage higher ed which for many people is not necessarily a 4-year degree but instead occupational certifications for computers or medical technology, law enforcement, etc.

    but there are two other critical parts – 1. you have to have some kind of earned income to benefit (except for the refundable credit) and 2. you have to have a good enough high school education – to be able to pass the 100-200 level courses – even in a 2yr institution and there are folks who simply do not have an good enough academic background without some remedial work …

    My continuing lament – is that our K-12 schools have a fail-to-graduate rate approaching 20% and another substantial percentage that get DINOs – Diplomas in name only.

    and .. unfortunately – there is no shortage of commercial educational providers who will … once you get your govt loan – take your money and teach you “stuff”.. until you use up all your credits and benefits and flunk out whereas a 4yr or 2yr state educational institution would likely force you into a remedial program first (unless you have a sports scholarship or course)..

    and these failures directly affect all of us – because people who fail to get adequately educated – receive entitlements.. so we all have a dog in this hunt.

    we can pretend we don’t… but we do….. sometimes in really mean and ignorant ways….

    we’ve got ObamaCare in part because of the failure of our education system that results in millions of people either unemployable or employable only as minimum wage without health care benefits.

    we sort of act like we are “observers” rather than “participants” in this rolling disaster…
    ;-)

  2. Thank you for not counting Longwood as both a public and a private, the way the TD did this morning…But then, what is a public and what is a private anymore? That was one of the interesting take-away points this morning, as the net costs were surprisingly similar.

    Another one was that $110,000 in family income is “rich.” No it isn’t, not in any part of Virginia.

    What do we want in this country? What was the point of this exercise? The reality behind it is that need-based financial aid in the public sector has not kept up with tuition increases. Merit-based aid has, or general support with no means or merit test, but not need-based aid. That’s what I got from it anyway. It was also interesting to see the school by school disparities. Again, we give these schools all but total autonomy and then wonder at the different outcomes.

    I didn’t see a mention of Virginia’ Tuition Assistance Grants (TAG) to state residents attending private colleges. Those greatly level the “net cost” playing field between public and private and are granted with no consideration of either need or merit. If you are enrolled and breathing, you qualify. The mere suggestion this year that they become need based has those schools (Liberty leading the list) in a snit.

    Yes, Jim, if you could choose a country in which to be poor, especially to grow up poor, you would choose the US of A. But you wouldn’t choose to be poor anywhere. There are many, many welfare and transfer programs that I resent and consider a total waste of money (Obamacare leading the list), but subsidizing education is not one of them. I read the story and just shook my head that 1) we have allowed these institutions to set absurd prices to finance padded administration and gorgeous buildings that stand empty far too often and 2) we have made no effort to match need-based aid with the fattened (and unjustified) fat tuitions and fees. (Don’t get me started on the fees.) Oh and 3) we have basically eliminated any price advantage to the state-supported schools, since they are all state supported now.

    • re: ” There are many, many welfare and transfer programs that I resent

      ,,,,,,,, we have allowed these institutions to set absurd prices to finance padded administration and gorgeous buildings that stand empty far too often and 2) we have made no effort to match need-based aid with the fattened (and unjustified) fat tuitions and fees. ”

      All these colleges know that students are getting financial aid, loans, credits, etc… JUST LIKE organizations like Phoenix and others who specialize in enrolling those with GI benefits…

      the money is there – they have a business plan to access the money – and to use it for purposes they deem advantageous to them.

      Isn’t the problem the fact that students get the money and once they have it the Universities get it – and how would you stop or control that?

      The Universities and Colleges are essentially charging whatever the market will bear – and that “market” that exists through government subsidies.

      this is working like subsidized flood insurance – the subsidies drive the market…. few folks would build in flood-prone areas if they could not get insurance.. far fewer folks would to to college without the loans, grants, credits and Universities and Colleges would have to compete for a smaller pool…

      right?

      see the thing is – the folks on the right complain very loudly about subsidies they don’t like (like Medicare, welfare, unemployment benefits, Obamacare, etc but they are pretty quiet about they ones they do like…. like college loans, grants, credits, subsidized flood insurance, mortgage interest deduction on vacation homes, etc.

      Jim was making a point about income inequality… and looking at the colleges which.. I think is easily explained.. some Universities are the standard fare for the better off folks and while you may not consider 100K in annual income as ‘rich’ – I’d just point out that there are many, many, many people who make 40, 30 and even 20K a year also.

  3. What’s up with the math?

    The “average” tuition for William and Mary is $24,974, but those with households making more than $110,000 are paying only $23,662. How does that work?

    Does that mean there are households above $30,000, but below $110,000, who are paying more than the average household over $110,000?

    I think I know what’s going on. The high earning, duel income households of Northern Virginia are at least “protected” from higher tuition costs by being out of state. But out of state families that aren’t from Northern Virginia, actually earning less than the average Fairfax resident, are picking up the bill.

    Sounds like a good deal for poorer Virginian families.

  4. I cannot find the source data with the provided link… but my inclination is – that something about these numbers is not right and once again – these are the kinds of numbers that can be used to draw all kinds of speculative conclusions.

    re: IRS “reporting” of income – and ObamaCare.

    folks who got a W2 this year should look at Box 12 for the code “DD”.

    that DD code is how much your employer provided to you in tax free health insurance.

    what ObamaCare does – is the same thing – it provides an equivalent tax-free benefit for those who do not get tax-free employer-provided health insurance. It levels the playing field.

    and where does some of the funding for ObamaCare come from? It comes from taking the current subsidy for Medicare Advantage – which basically pays the 20% copay for Medicare for about 1/10 what it would cost out of pocket without Medicare Advantage.

    think about this – when you want to talk about income transfers, subsidies for the poor, etc..

    ask yourself who could buy guaranteed full coverage health insurance with no lifetime limits, for 100.00 a month? Who can buy that much health insurance for that 100.00?

    Only seniors can – and yes.. while Medicare is means tested – think about this – that 100.00 a month price is all you pay even if you are receiving 85K a year in income -more than what many 40-hour a week workers get.

    when we want to talk about rich and poor and income disparities – we need to at least admit that those with employer-provided insurance – get significant tax benefits, subsidies and those retired – also get significant tax benefits and subsidies and make no mistake – those who get these subsidies are able to pay for college for their kids much easier than those who don’t have them.

    I don’t think we can have real honest discussions about these kinds of issues – if we ignore the significant existing tax benefits and subsidies than the middle and upper class receive… or pretend that only the lower class gets transfer payments …

    these things are called tax expenditures and they look like this:

    http://static4.businessinsider.com/image/50adfd7e69bedd8f1700000f-706-512/tax-expenditures-deductions.png?maxX=606&maxY=439

    look at this and tell me the poor and low income are getting most of them.

  5. Any student attending the University of Virginia is an adult. They can be drafted in time of war. They can enlist in the armed services. They are eligible to vote. If they commit a crime they will be tried as an adult.

    It’s time to stop treating these people as children. If their parents are poor the students should be loaned money to complete their education. Then, they should be compelled to repay those loans.

    Any student attending the University of Virginia has a full measure of economic opportunity in the United States. It is unconscionable to take the hard earned tax money from construction workers, waiters, bookkeepers and other middle class Americans and use it to subsidize the adults attending the University of Virginia who will become lawyers, doctors, business executives, etc.

    The fact that some of these students have poor parents has no bearing on the economic opportunity of those who graduate from the University of Virginia.

    As an aside, I worked my way through the University of Virginia by waiting tables during the school year, working as a paid researcher and mowing lawns and moving furniture in the summers. I also borrowed from the Virginia Education Loan Authority at interest rates that would make today’s Wahoos shudder. I used my education to get a good job and paid back all the loans in full and on time.

    Listening to the left whine about how the adult children of poor families need handouts on the path to being among America’s highest paid people is more than frustrating.

    98% of all undergraduate students graduating from UVA’s McIntyre School of Commerce have jobs or are accepted into graduate study programs by August of the summer after their graduation. The average salary for these 22 year old adults is $64,666 with an additional average signing bonus of $8,525 and an average annual bonus of $21,162.

    That’s $94,353 for the first year of work for these 22 year old adults.

    Now, one more time – please tell my why they shouldn’t be expected to borrow and repay student loans to fund their education.

    • re: ” Any student attending the University of Virginia has a full measure of economic opportunity in the United States. It is unconscionable to take the hard earned tax money from construction workers, waiters, bookkeepers and other middle class Americans and use it to subsidize the adults attending the University of Virginia who will become lawyers, doctors, business executives, etc.”

      totally agree…

      “Listening to the left whine about how the adult children of poor families need handouts on the path to being among America’s highest paid people is more than frustrating.”

      I’m sure you meant something that did not sound so contradictory… or perhaps I need to do a better job of reading.

      let’s be honest. The 20% who do not graduate from K-12 and then the next 10-20% who have symbolic diplomas.. are not the folks getting “handouts” to go to college…. and that covers a good number of the “poor” whose parents themselves never went to college ..

      sorta leaves me asking – who are the “poor” that get the handouts to go to college.

      • I was typing while stuck in Jacksonville at the airport. Thank goodness I got out of that moderate clime to make it back to NoVa! Aghg. No more snow.

        “let’s be honest. The 20% who do not graduate from K-12 and then the next 10-20% who have symbolic diplomas.. are not the folks getting “handouts” to go to college…. and that covers a good number of the “poor” whose parents themselves never went to college ..”

        I certainly agree. And they are not the children of poor families who get into UVA.

        As for who was getting handouts …

        http://www.businessweek.com/articles/2013-08-08/uva-tells-low-income-students-to-borrow-for-school

        Teresa Sullivan is taking a principled stand by insisting that the adults enrolled as students at UVA borrow and pay back loans for college rather than simply be given funds. It is these adults students who are, ” … on the path to being among America’s highest paid people …”.

        The fact that these adult students have poor parents is irrelevant. What is relevant is whether these adult students are expected to remain poor. They are not expected to remain poor. Therefore, insisting that they are loaned the money to go to college is right. Insisting that they pay back those loans is also right.

        • re: airport – well I wondered where you were lately but then remembered you are actually still a productive person compared to some of us!

          I hear what you are saying about higher Ed and UVA in particular but if we go look at K-12 and who actually ends up graduating with sufficient rigor and grades to get into a place like UVA – most poor students come from disadvantaged demographics and the disadvantaged usually don’t excel in academics of the type rigor necessary to get into top flight higher ed institutions so I question the idea that the “adults” from poor families are much of a number anyhow.

          the “adults” of families who have parents who did not go to college and have incomes of 20-40K probably are probably not a significant percent of the “adults” from poor families in UVA… and I think such assertions to the contrary are weak on the evidence.

          with respect to the wider assertion made by Jim Bacon and the “poor” receiving transfer payments and entitlements – I offer this to further illuminate and inform :

          entitled: ” Distribution of Selected Major Tax Expenditures, by Income Group, 2013″ on page 19 of

          The Distribution of Major Tax Expenditures in the Individual Income Tax System

          http://www.cbo.gov/sites/default/files/cbofiles/attachments/43768_DistributionTaxExpenditures.pdf

          where one can confirm that of the trillion dollars in tax breaks that the lower income folks get a pretty small slice of the pie (see page 6)

          almost half of the trillion dollars in tax breaks go to tax-free employer-provided health care and 401K pensions – things that the working poor usually get neither of.

          People who do not get employer-provided health insurance and retirement contributions usually are not highly educated and their kids usually are not top students in the schools and usually don’t go to college.

          so the question again is – when you’re talking about the “poor” getting grants and credits to go to College – what demographic are you really talking about – more specifically did we change the definition of poor ?

  6. re: ” Our society is riddled with other means-tested programs.

    ….. And let us not forget private philanthropy, which underwrites thousands of community programs across the country. (See the list of programs, most of which are focused on poverty, supported by the United Way of Greater Richmond and Petersburg.)”

    Good Freaking LORD – Bacon!

    you’re equating govt programs targeted to helping the poor – to community-oriented programs such as the Boy Scouts and YMCA and American Red Cross paid for by citizens?

    GOOD GRIEF!

    ;-o

  7. I don’t know exactly when brother Rippert “worked his way through” UVA but when I was in a state university 40 years ago the vast majority of the cost was paid by the taxpayers and only a small portion was covered by tuition and fees. Kudo’s to him for working for his (while my father paid mine) but I suspect both of us owe the largest thank you to the state leaders who approved the budgets in those days…

    And I’m still quite comfortable with that. The subsidy I received did lead to a middle class and then upper middle class income, and the state has taken its cut out of every paycheck since. My problem with what is happening today is the state is taking the same cut, but along with the taxes the graduates are also paying the debt and paying the padded costs for a bloated administration at places like UVA. Or for Division I sports at Longwood or a palatial practice building for Shaka Smart”s kingdom at VCU.

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