Harvard's decision to drastically reduce tuition costs for "middle" income families has some observers gushing with praise for America's richest and most powerful university.
But it's not completely out of altruism that Harvard has slashed costs to families earning as much as $180,000 a year -- a "middle" income only in the rarefied world of elite college admissions. America's richest and most powerful university has cut costs for such families in order to preserve its dominance as America's richest and most powerful university.
Despite its market power, Harvard's Achilles' heel is the practical wisdom of certain upper-middle class American families. These families have a number of good college choices for their high-achieving children, particularly some flagship public universities that offer an equivalent or better education at a fraction of Harvard's cost.
All colleges want these certain students, the sons and daughters of affluent professionals who attend excellent schools, live in safe and attractive neighborhoods and -- most important -- score well on their SATs. They also boast extracurriculars that Mother Teresa would envy. It's a good thing because, in this rarefied world, even such high-flying students have to "walk on water" in the lingo of admissions professionals, to have any chance of being admitted to places like Harvard.
Colleges covet such students, not because the SAT is the final word on one's potential for college success. In fact, colleges know that the SAT is the proverbial emperor with no clothes. Rather, they love such students because they add prestige to the institution. That's because institutional prestige is largely a function of its selectivity, measured by median SAT scores, and that selectivity is a dominant factor in the U.S. News & World Report rankings game.
Colleges want these students so much that they're willing to pay for them -- bribe them, really, in order to entice them to enroll. Under the guise of "merit," colleges in recent years have drastically increased the amount of scholarship money they offer high-scoring students.
What's wrong with that? Nothing if your objective is to take limited scholarship funds from the truly needy students who wouldn't be able to afford college without financial aid. And nothing's wrong with that if you're a policy maker who isn't concerned about raising the overall college-going rates in your state. That's because the "merit" scholarships go most often to relatively affluent students who would be going to college regardless of the scholarship money. Still, as a policy maker you'd be happy with the transfer of wealth from the needy to upper middle class because they vote more often than poor people.
Many top public universities have been among the most aggressive in playing the merit aid arms race, and that's an irritation for the pricey privates like Harvard. If you happen to be among the pool of high- achieving students, then the elite public flagship campuses such as the University of Michigan at Ann Arbor, The University of Wisconsin in Madison, and the University of North Carolina at Chapel Hill st some price, Harvard's brand name just isn't worth it for these price-conscious families of high-flying students who, in effect, get paid to attend the less costly public institutions.
By limiting the attendance costs to no more than 10 percent of family income, Harvard's move will produce a windfall of savings to the select few upper-middle class families whose children are admitted. A family earning $180,000 would see its Harvard bill drop from about $30,000 to $18,000.
Depending on whether you consider a family earning $180,000 a year as "needy," then it's a matter of debate whether that windfall represents "need" based or "merit" based aid. If you believe that such a family ought to rethink the new Volvo or reconsider the kitchen remodel in order to pay for a Harvard education, then Harvard's bold move is but thinly disguised merit scholarship program for the upper middle class. (It's worth noting that, according to the Census Bureau, a family earning $180,000 puts it in the top 5 percent of household incomes nationwide.)
All this is great for Harvard. It's great for those few students who now choose Harvard over a public flagship university. Harvard's applicant pool and its admissions selectivity will bust through the roof, as families who previously thought Harvard was out of reach financially will now apply. Harvard's U.S. News ranking will surge.
But this is potentially bad news for American higher education. Other universities will respond with their own versions of "middle class" tuition relief. They will jockey for market position, and the merit-aid arms race will escalate.
That's all to the detriment of truly needy students and their families who will see a fall off in need-based financial aid programs, as colleges increasingly target the very students who already have high rates of college attendance.
At stake is the nation's economic future. Policy makers are struggling to find ways to increase college attendance among families in the bottom half of the income distribution. We know that more college degrees mean better jobs and a more productive citizenry. If Harvard wants to help something other than itself, it would find ways to contribute to that project.
Peter Sacks is an economist and the author of Tearing Down the Gates: Confronting the Class Divide in American Education (University of California Press, 2007)