The High Cost and Social Inequality of Higher Ed in Virginia

Source: 2017 State of the Commonwealth Report

Everyone knows that the cost of attending college in Virginia has soared in recent years, even as family incomes have stagnated. A good way to visualize the divergence between cost and affordability is to calculate the number of hours it takes for a family earning the Virginia median hourly wage to pay for a year of average tuition & fees. That’s exactly what Paul M. McNabb and James V. Koch have done in their 2017 State of the Commonwealth Report. The results can be seen in the chart above. The number of working hours required to attend a four-year college has increased 82% since the 2001-02 academic year, while the number for a two-year college has increased 67%. (These numbers don’t include room, board, textbooks and other miscellaneous costs.)

Higher education is the most inflationary sector of the U.S. economy, with cost increases outpacing that of the inflation-prone housing and healthcare sectors. In their analysis of Virginia’s higher-education system McNabb and Koch explain the causes of runaway tuition increases and explore the impact on Virginians. (Note: Koch, a former president of Old Dominion University, serves on the board of Partners 4 Affordable Excellence @ EDU, a sponsor of this blog.)

The question naturally arises whether Virginia’s colleges and universities are pricing state residents out of higher education. Pointing to the declining head count in the state’s public institutions — nearly 6% between the 2011-12 school year and the 2016-17 year — the authors say yes. “Simply put, increasing numbers of students have decided that our public colleges have become too expensive compared to the benefits they generate in return.”

The sticker price of college tuition & fees is not the same as the actual price that many students pay. The federal government dispenses Pell grants to low-income students, the state operates its own financial-aid program, and higher-ed institutions themselves extend financial aid. Consequently, the net price paid by students often is considerably lower than the advertised price.

Colleges and universities raise much of the money for financial aid by raising the sticker price that students from affluent families pay. In effect, the authors write, “the pricing policies of most colleges and universities today … administer a collegiate version of a steeply progressive income tax, taking from the more wealthy and giving to the less wealthy by means of the net prices each group pays.”

Despite their redistributionist tuition policies, universities remain economically and socially stratified. While some of Virginia’s elite public universities do offer steep discounts to low-income students, high admission standards mean that, as a practical matter, only a small number make it in.

If the denizens of the bottom 60 percent of the income distribution can be fashioned as “common people,” then one might say that at least five Virginia public institutions (University of Virginia, William & Mary, Virginia Tech, University of Mary Washington, and Christopher Newport University) have relatively few common people in their undergraduate student bodies.

Source: 2017 State of the Commonwealth Report

McNabb and Koch raise the question of whether the General Assembly should financially support colleges and universities whose pricing policies imitate that of private universities.

Is it appropriate for the citizenry to subsidize institutions that increase social and economic inequality rather than provide the traditional ladders of opportunity that diminish differences?

Tough question. Virginia’s elite universities are unlikely to change their policies. Programs designed to increase the presence of lower-income students at the elite institutions might endanger their coveted Top 25 rankings if they eroded SAT score, ACT scores and on-time graduation rates.

Rare is the president of a top-ranked institution who wants to preside over a noticeable decline in his or her institution’s rankings. What member of an institution’s board of visitors will brag about the lower national ranking that came about because more Pell Grant recipients were admitted?

The authors point to the University of California system as an alternative model that Virginia might emulate. At the University of California at Berkeley, for example, 30% of undergraduates were Pell Grant recipients in 2015-16, while at UCLA the number was 35%.

But Virginia institutions are moving the opposite direction. At least a half-dozen Virginia public four-year institutions appear to have pursued policies that had the effect of restricting access of lower-income Virginians, say McNabb and Koch. “Is this a trend that the citizenry should support? We do not have the answer to this question, but it is easy to observe that what is perceived to be good for an individual institution’s national rankings may not be synonymous with what is good for Virginians.”

Bacon’s bottom line: That’s where the authors leave it. They don’t carry their thinking to its logical conclusion: that Virginia should cut off state funding and turn its elite public universities loose, letting them be free to be what they want to be — like, say, Duke or Dartmouth — and then redistribute state funds to institutions that appeal to a broader cross-section of the population.

I’m not sure how I stand on the issue, but I do see the logic.

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15 responses to “The High Cost and Social Inequality of Higher Ed in Virginia”

  1. Steve Haner Avatar
    Steve Haner

    Perhaps they do not reach that conclusion because it would be a travesty, truly an abandonment of the whole purpose in creating and sustaining those institutions for all these years with all those tax dollars. I don’t think Koch thinks that a good outcome, although you clearly do.

    1. I don’t think Koch thinks that a good outcome, although you clearly do.

      Steve, note the words, “I’m not sure how I stand on the issue.”

      That means I’m not sure how I stand on the issue.

  2. On a related topic [], I suggested the time has come to stop ameliorating the cost of higher ed on lower income families through the tuition “tax” we impose on those paying full freight. “We don’t even pretend to justify this tax on the basis of the public benefits of having an educated, employable workforce; we only extract this tax from the OTHER PARENTS seeking to educate their children, based on their ability to pay. A straightforward funding of, at least, community college higher education through tax dollars paid by everyone enjoying the benefits of a thriving economy would make so much more sense.”

    Jim, I sense you are confronting the same question. Should our universities require this redistributive payment from those applicants (or parents) who can pay it merely because the school has leverage to extract it as a condition of admission — or is providing the opportunity for higher education a broader, social and economic benefit that helps everyone in our democracy and is properly funded by tax dollars? I submit, if it’s the latter, let’s get on with it, and the place to start is through free tuition at community colleges.

    You say above, “The [authors] don’t carry their thinking to its logical conclusion: that Virginia should cut off state funding and turn its elite public universities loose, letting them be free to be what they want to be . . . and then redistribute state funds to institutions that appeal to a broader cross-section of the population.” I agree that’s the logical conclusion, and again I say the “institutions that appeal to a broader cross-section” are the community colleges, where residence remains an option and the focus is on academic offerings, not research or athletics or whatever. And, based on the example of the way we fund public secondary education — free, through high school, along with mandatory attendance — we should offer free community college as well.

    Izzo asked, “Are you saying community college should be funded just like secondary school (even though it is not compulsory)? How about 4 year college?” I’ve thought about that — whether free is too far, and in going there we’d simply make things more arbitrary not less. The short answer has to be “no” for residential college but “yes” for community college: not because post-high-school education ought to be mandatory, but because the business community is telling us, through its hiring practices, a college degree already is mandatory for so many jobs today, particularly for the ones we want to encourage here in Virginia to increase domestic productivity and remain competitive overseas.

    Why else would so many families who can’t afford it go so deeply into debt to get that post-high-school education for their children? Why else would so many families who can afford it, pay the college’s full price plus its “tuition tax” for redistribution to others, without a whimper, simply because that’s the unavoidable price of getting a complete education for theirs? Mr. Trump hasn’t persuaded me that all his talk of withdrawal from the global economy will revive the Rust Belt or make a dent in the problem of declining factory employment and despair in small town America.

    1. [WordPress wouldn’t let me edit the above so let me do it here: ‘The short answer has to be “no” to a free ride through our elite residential colleges, but “yes” to free community college: . . .”]

    2. TooManyTaxes Avatar

      ” the place to start is through free tuition at community colleges. ” It makes my point. Some of you are for more and more spending on everything. How high do you want taxes to go?

      But as Larry said, none of this addresses the reality that many youth would be better served by vocational and technical education.

  3. Steve Haner Avatar
    Steve Haner

    Withdrawn. Although you looked at the facts and wondered why they didn’t reach that conclusion, so perhaps your protests of neutrality escaped me. I look at the facts and would never reach that conclusion, but heard enough discussion of the idea during my time on SCHEV to know powerful forces are behind that approach. The taxpayers own much of the real estate. Still waiting for somebody to come up with the cash or the mortgage to buy the Lawn at UVA or the Old Campus at W&M. The fair market value of the Rotunda and the Wren Building might solve VRS’s problems….

    I would much rather that UVA and W&M push up that percentage of middle class kids. At least they are not quite the bastions of the 1 percent that U of R and W&L are, not yet. The trend can be arrested and perhaps reversed.

  4. “At least a half-dozen Virginia public four-year institutions appear to have pursued policies that had the effect of restricting access of lower-income Virginians, say McNabb and Koch.”

    I wonder which ones and how?

    I think UVA and W&M have tried to move more toward the high tuition, high aid model which is more like the private universities. However, they may do it more to be able to capture more qualified, lower income applicants from other schools. (This is in contrast to the UC schools, which appear to put less emphasis on optimizing selectivity statistics and more on providing more access to lower income groups.)

    It is interesting to see that private UR has a higher percentage of students from the bottom 40% than public UVA, W&M, UMW, JMU, VT, and CNU. (W&L appears to be comparatively the true domain of the rich.)

    I also wonder how they got the income numbers. I see the NYT is cited, but when you get to a number of Virginia state schools, only thirty percent or so are applying for financial aid, where they would have to give income on FAFSA.

  5. Steve Haner Avatar
    Steve Haner

    Two thoughts that might mesh into the germ of an idea:

    As much as they hate it, all state schools have a deal with Virginia 529 where a fixed price is set well in advance, and if the family coughs up the cash in advance the student has all mandatory expenses for four years covered. May be some wrinkles now, but we did it for our daughter. Same price covers any school, right? If that changed, I missed it.

    I have long thought that the state’s direct support should be converted to a voucher system, where the money is directed by the student – not given to the school. Say every HS grad with certain credentials got a grant, and if you want to means test something, means test that. But I think there should be some level of support for every student ready to move on – whether a community college or Mr. Jefferson’s school. (And of course there is now, just not as a voucher.) But like the VA 529 plan, the schools HAVE to take it. For low income kids with promise – at least some of them – I very much believe there should an almost free (some skin in the game) path through the high prestige schools. For the rest is has to be affordable and not a path to 20 years of debt.

    1. Vouchers have a lot of appeal. If the amount were keyed to the tuition charge of a community college, the students going to those more expensive ‘high prestige schools’ would definitely have skin in the game there, and the schools themselves would be under competitive pressure to keep not only academic but total costs down.

  6. LarrytheG Avatar

    re: re-distributive tuition …. one could argue that the state funding is intended to be targeted to those in need – not those of means and a means-tested voucher system would do just that and further it would let the students decide what had more value to them – an on-campus residential experience or off-campus with the money going purely for instruction and the food and lodging being a different thing… that’s what many folks think “free tuition” means – just the instruction – not the other.

    I understand the importance some feel toward the “college experience” but that ought not be the focus of taxpayers and certainly not a contest between those who get the total college experience at taxpayer expense and those that just get the instruction.

    The goal of taxpayers is an educated and employed taxpayer not some kid to get that “college experience”. That ought to be on his and his parents dime not taxpayers.

    1. Very much agree with that last paragraph.

  7. If there is any post-secondary education subsidy, it should be available for vocational and technical training options in addition to higher education.

    If I were designing the system from scratch, I would have the subsidy attach to individuals in the form of a voucher or grant, not flow directly to the state institutions. We would not be public schools in the sense we have them today. I realize this is not going to happen any time soon.

    1. Steve Haner Avatar
      Steve Haner

      The state provides operational and capital support to both the four years and the community colleges, so plenty of that is directed toward vocational programs (including at the 4-years of course). Perhaps not the right share. And just recently the state started offering financial aid to non-degree certificate programs, which has proven highly popular.

  8. LarrytheG Avatar

    The problem with direct aid to the institutions is that they play a big role in how some of it is directed – as opposed to state policy that could fairly specifically direct things like vouchers with specific rules and goals and means-testing.

    And to give a for-instance – ” A disadvantaged black male’s exposure to at least one black teacher in elementary school reduces his probability of dropping out of high school by nearly 40 percent”

    This is from the Bookings folks which tends left politically…

    but if the State wanted to help financially disadvantaged blacks not only get a college education but become a teacher – specially in those low-performing neighborhood schools with lots of one-parent kids – as a condition of the voucher… that would probably have a more focused effect than giving money to the various higher ed institutions and letting them each decide how to accomplish that goal.

    1. Vouchers give the aid to the qualified student (or his parents) not to the institution. All the more reason to like that mechanism.

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