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Making Sure Colleges Remain Engines of Opportunity Not Inequality

Published:  February 4, 2013

Do colleges still provide a gateway to opportunity for low-income and working class students? Or are they perpetuating inequality in this country by limiting opportunity to only those who are rich enough to be able to afford it?

That question, which came up during a podcast conversation between my colleague Kevin Carey and New York Times journalist and New America Foundation Schwartz fellow Jason DeParle [author of this riveting article on the subject] last week, is central to proposals we have offered that aim to ensure that colleges use their institutional aid resources to keep higher education affordable for low- and moderate-income students.

Unfortunately this is often not the case. Colleges are, in fact, increasingly raising the barriers to higher education for low income students by redirecting their institutional financial aid dollars to wealthier students.

With the exception of a small group of the most selective colleges in the country, this is nearly a universal practice in the private college sector.  In an analysis we conducted of 479 private colleges, we found that only 54 schools, or 11 percent, charged the lowest income students an average net price – the amount of money students and their families pay after all grant and scholarship aid is taken into account -- below $10,000.  In comparison, 291, or 60 percent, charged the poorest students a net price over $15,000, and 105, or 22 percent, charged $20,000 or more annually.

The news is not as bad in the public four-year college sector, where the majority of schools still charge the lowest income students an average net price under $10,000. But as states move towards a high tuition, high aid model, more and more public colleges and universities are parroting the worst private college practices. (In our analysis, we found that more than 150 public four-year colleges charged the lowest income an average net price over $10,000, and that nearly two dozen charged over $15,000.)

Low-income students who face high levels of unmet need have little choice but to take on significant amounts of debt or engage in other activities that lessen their likelihood of completing their degrees, such as working full-time while attending college or dropping out until they can afford to return. This is assuming, of course, that they enroll at all.

College leaders are fully aware of how unfair and destructive the financial aid arms race is, and some have been calling on their colleagues to put an end to these “merit” aid and tuition discounting policies. But colleges are not going to be able to change these practices on their own. No one wants to “disarm unilaterally.”

A federal solution is needed. And we have proposed one in our Rebalancing Resources and Incentives in Federal Student Aid report that takes both a carrot and stick approach.

The carrot is to help schools that simply don’t have the resources to keep down the net prices of the low-income students they serve. Our plan would offer Pell bonuses to financially-strapped public and private four year colleges that serve a substantial share of Pell Grant recipients (more than 25 percent) and graduate at least half their students school-wide – with the aim of having these schools use this money to boost their institutional aid budgets and therefore reduce the net price charged the neediest students. Colleges could also use this additional money to create support programs to further increase the retention and graduation rates of low-income students on their campuses. In addition, we would provide similar bonuses to community colleges that serve low-income and working-class students well.

The stick is for wealthier colleges that have chosen to divert their aid to try to buy the best students so they can rise up the U. S. News rankings. These schools, which generally enroll a relatively small share of low-income students but charge them high net prices, can afford to match at least a share of the Pell dollars they receive.

Together these proposals are aimed at ensuring that colleges continue to serve as an engine of opportunity, rather than as a perpetuator of inequality.

Tomorrow we will explain in greater detail how our Pell matching proposal would work.

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