Who Pays When the Cost of Public College Increases?

By now, everyone seems to know that the cost of attending public universities has increased quite a bit over the past couple decades. Less known is how these cost increases actually work. If you only read the popular press, you'd think that the cost of college works like the cost of almost everything else: when the price goes up, it goes up for everyone. But that's not true. In fact, public colleges (and private colleges for that matter) have become expert price discriminators. That is, they charge different prices for different students, generally based upon their ability to pay.

With that in mind, a worthwhile question to ask is: who has actually been paying for the last couple of decades of public college cost increases? The College Board has neatly summarized data from the National Postsecondary Student Aid Survey that answers this question:

The poorest quarter of students saw their yearly cost of attendance (which includes all costs) increase $307 from 1992 to 2007. In the same period, the second quarter of students saw their cost of attendance increase $1,864, the third quarter saw an increase of $3,093, and the richest quarter saw an increase of $3,305.

In percent terms, the poorest quarter saw their costs increase by 3.4 percent, the second quarter saw an increase of 17.2 percent, the third quarter saw an increase of 25 percent, and the richest quarter saw an increase of 24.4 percent.

So from 1992 to 2007, four year public colleges dealt with cost increases by heavily dumping them on the upper half of the income distribution, while sparing the poorest quarter of students almost entirely. The rich students saw their costs increase by 11x more than the poorest quarter of students measured in dollar terms, and 7x more measured by percentage points. As of 2007, the poorest quarter of students were paying just 55.7 percent of what the richest quarter of students were paying to attend public four-year colleges.

The effort by public colleges to spare the poor when increasing costs is certainly admirable, but it looks to be politically unworkable. As Joe Hines pointed out yesterday here at Policy Shop, research shows that the opinion of the poorest third of people has no real effect on the behavior of politicians, while the opinions of richer folks carry disproportionate sway. By dumping the bulk of the increase in college costs on the upper half of kids, public colleges have probably generated a far bigger backlash about college costs than if they had simply dumped the price increases on the voiceless poor.

Although the breakdown above rarely receives any mention, it should be good news for campaigners in favor of increasing subsidies for public colleges. If colleges continue to soak the rich every time they lose funding, you have to think that the richest half of people (and the politicians that largely represent them) will eventually say enough is enough. And once that happens, I suspect the public subsidies have a good chance of coming back. At minimum, the political fundamentals of that movement look really strong.

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