“High-Tuition, High Aid” Hurts Low-income Students at Public U’s

[The New America Foundation's Education Policy Program recently released "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind," a report that presents a new analysis of little-examined U.S. Department of Education data showing the "net price" – the amount students pay after all grant aid has been exhausted – for low-income students at individual colleges. This is the fourth in a series of posts related to the report's findings.]

For generations, states made college affordable for all of their citizens by keeping the prices of their public higher education institutions low. But with more and more states divesting from their public college systems, those days are increasingly in the past.

There has long been a debate in the higher education policy world about the effectiveness and efficiency of states’ historic low-tuition model. Some student aid experts have advocated against this approach, saying that it doesn’t target subsidies effectively because it lowers the cost of higher education for the rich and the poor alike. They have argued that low-income students would benefit more from a high-tuition, high-aid model, in which states and schools devote their subsidies exclusively to those who couldn’t afford to go to college without the help.

The net price data analyzed in Undermining Pell don’t bear this out. In fact, they clearly show that the lowest-income students fare much better in states that have kept the costs of attending their public institutions relatively low.

Take, for example, North Carolina, which prides itself on its low-cost public higher education system. In the Tar Heel State, in-state public four-year college students with family incomes of $30,000 or less paid an average net price of just $5,361 in the 2010-11 academic year — an amount they could cover without even having to take out the maximum federal student loan for which they were eligible.

In contrast, the most financially needy students attending public four-year colleges in Pennsylvania paid an average net price that was more than double that amount: $12,305. And while not a single public college in North Carolina charged the lowest-income students an average net price over $10,000 (the highest being $7,217 at the University of North Carolina at Asheville), more than two dozen public colleges in Pennsylvania did, with 10 charging more than $15,000.

At the state’s flagship university, Penn State, the neediest students pay an average net price of about $17,000.  At the same time, about 6 percent of the school’s first-time freshmen received an average of $3,800 in so-called “merit aid” in 2010-11.

In addition to North Carolina, other low-cost states that stand out in keeping their public colleges accessible and affordable for the lowest-income students include: Wyoming ($5,046), Hawaii ($5,296); Louisiana ($5,549); Florida ($5,979); California ($6,331); and New Mexico ($6,403).

Meanwhile, low-income students who attend public four year colleges face average net prices over $10,000 in 15 states, including high-tuition, high-aid ones such as Illinois ($10,508), New Jersey ($10,599), Ohio ($10,756), South Carolina ($11,476), and Vermont ($10,532).

So while moving to a high-tuition, high aid approach is certainly appealing in a theoretical sense, the net price data show that the policy isn’t even coming close to working as intended.

Check out the map below to see the vastly different amounts that the lowest-income students are paying to attend public colleges in each state: