The Upshot Gets it Wrong on College Costs—Again

August 5, 2014 | Blog, News

I’m beginning to wonder who David Leonhardt is trying to help with his columns on college costs.  One thing is for sure: it’s definitely not students from low or middle-income families.

The other day I wrote about his column on the difference between sticker price and net price, where he mixed up costs and prices and ignored the impacts of sticker shock on student behavior while chastising the government for something it did not do.  Today he’s gone a step further and explicitly advocated for elite private colleges and their complex pricing schemes in an article focused on Amherst College.

Here are his basic points:

  • Amherst hasn’t become significantly more expensive in recent years.
  • Amherst works hard to recruit an economically diverse student body.
  • Amherst has grown its financial aid budget.
  • Amherst is more expensive for students from rich families and “nearly free” for those from low-income families.

Therefore, he concludes that:

  • Sticker price warps our impression of college costs.
  • Elite colleges are not presenting the real cost problem for poor and middle-class students.

There are several gaping holes between his evidence and his conclusions.

First, in order for elite colleges to present a “real cost problem for poor and middle-class students” they do not need to become significantly more expensive, have little financial aid, or fail to price discriminate between rich and poor families. Instead, they only need to:

  • Spend a lot of money (raised through tuition on rich people and endowments) on students and the campus, and claim that such spending is a marker of college “quality” effectively raising the bar for all other schools in the arms race to be the best.
  • Be expensive, period.  If Leonhardt had used an objective source for college prices like Tuitiontracker.org rather than referring readers to the Amherst website, he would have known that the net price of attending Amherst for students coming from families earning less than $30,000 a year is $3,614 (more than 10% of their family income).  Why isn’t it zero, given their large endowment? That figure grew by almost $3,200 between 2010-11 and 2011-2012, fyi.  The prices for middle-class students went up sharply as well.  No matter what, it’s hard to cast Amherst’s net prices as “inexpensive”—over $16,000 a year for families earning $75-100K annually means $64,000 in debt.
  • Be hard to get into. Despite efforts to recruit an economically diverse student body, Amherst educates a tiny number of students from low-income families partly because it still insists on using standardized test scores for admissions and keeping overall enrollment really low.  It admits just 14% of applicants a year!  It is definitely a “cost problem” for poor kids if the schools that offer them a high-quality education at a good price are not accessible.

Second, illustrating that there is a difference between sticker and net price does not mean that sticker price is an unimportant factor when it comes to the effects of college costs. Once again, Leonhardt says nothing about the importance of sticker price to the decisions of low-income people—other than implying that they are misinformed.  Ignoring the role played by elite institutions in putting on the table extraordinarily high prices to provide a college education (when are the rich families going to admit they are being taken advantage of by the way?) does not make their impact disappear.

On related notes, Leonhardt repeats his errors in over-stating the resources available to the middle-class, and in failing to recognize the role that government-financed aid plays in keeping college prices down. Given its endowment of more than $1.8 billion, taxpayers could reasonably ask why Amherst should be allowed to benefit from funds provided by the federal Pell Grant and federally-backed student loans? Those funds help the school first and foremost, and leave students and families far short of what they need to actually afford such a pricey institution.

Finally, I have to ask—if Amherst matters so little, then why do Leonhardt and his colleagues insist on continuing to write about it? Why in the world does Amherst need him to come to its defense?  Apparently, he perceives that need, and will do so even by attacking “less expensive colleges are where prices have been rising for people of modest means”—aka public colleges and universities.  An agenda indeed.

 

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