By Catharine Hill
Increases in college costs and concerns about student debt have led to a variety of proposals for free tuition across American higher education.
Several alumni hoping to be elected to Harvard University’s Board of Overseers are now campaigning on a platform of zero tuition for Harvard students. Other proposals focus on community college tuitions, which are already relatively low compared to other types of colleges and universities. And U.S. Rep. Tom Reed (R-N.Y.) is going after the country’s selective private colleges with large endowments. His draft legislation would require these schools to increase spending from their endowments in an effort to hold down tuition and reduce student debt burdens.
But who will actually benefit from these proposals?
Reducing tuition at the well-endowed schools would primarily benefit students from the top 20 percent of the income distribution, students and their families who can already pay much or all of the tuition. To help lower- and middle-income students and their families, it makes more sense to focus on expanding need-based financial aid, rather than lowering tuition levels.
Starting with data in the Department of Education College Scorecard, we can find net prices at colleges across the country by family income. The net price is the actual amount that families at different income levels are asked to pay, after grants are taken into account.
At the selective colleges and universities with large endowments, the net price differs significantly from the sticker price for families with incomes in all but the top 10 percent of the income distribution, because of financial aid grants that are tied to family income. Families with the lowest incomes are asked to pay the least (in some cases zero), and only the highest-income families pay the full sticker price.
The College Scorecard does not include the shares of students at these top schools by income level, because these data are not reported to the federal government. It does include the share of students that receive Pell Grants. Pell Grant recipients are students with household incomes approximately below the median in the United States, around $54,000.
At the selective privates, at most about 23 percent of students receive Pell Grants, suggesting that at least 77 percent of students at these schools come from the top half of the income distribution. Earlier work of mine on 30 highly selective private nonprofit institutions reported on the distribution of students by income quintile, and suggested that in 2008 almost 70 percent came from the top 20 percent of the income distribution.
A policy to use endowment resources to reduce tuitions to zero would primarily benefit those families in the top 20 percent of the income distribution. Those who would benefit the least would be lower- and middle-income students. Those students are already receiving significant need-based financial aid, so the net price would be lowered by significantly less for them than for higher-income students. And there aren’t as many lower- and middle-income students attending these top schools.
A better strategy would be to allocate greater resources to need-based financial aid, rather than to reducing tuition levels. By increasing need-based financial aid, we could either further reduce the net price facing lower- and middle-income families, increase the share of these students attending schools with large endowments, or both. We could lower the net price even more for low- and middle-income students by substituting additional grants for loans in students’ financial aid packages, also helping to reduce their loan burdens.
All of these are good outcomes for students who most need our help.
Catharine Hill is the president and an economics professor at Vassar College and the former provost of Williams College.