Thoughts of an American Centrist

Wednesday, June 01, 2005

Affording Harvard: A Case Study

The previous discussion based on David Brook's semi-satirical rant on educational costs has inspired me to think out the problems involved in paying for top-notch university education on a budget. Here is what I have found.

The Problem

Harvard’s website pegs the estimated cost of attendance at a mind-boggling $42,450. Of that sum, $27,448 is the cost of tuition. That is a lot of money, and Harvard could certainly afford to lower its admission.

Rensselaer Polytechnic Institute, my own alma mater, clocks in even higher, at over $45,000 (including the purchase of a $2,300 laptop), of which $31,000 is tuition alone (a one third increase since I enrolled just 7 years ago). We can decry the price all we want, but I also know from my days as a student fundraiser that tuition collected covers less than two thirds of the school’s annual operating budget (hence the need for student donation solicitors).

What would it take to fund everyone? Obviously, we taxpayers cannot afford to pay the tuition of every student that enters the system. Fortunately, we don’t have to.

Even with generous financial aid packages and years of college savings, students who graduate will be saddled with debt. I have no problem with this. Educating our students is expensive, and I have no problem with the people who gain from this education paying for the opportunity to learn the skills we’ll need to be successful in the world. The problem is that there are people who cannot afford college even with grants and loans. Even attaining $20,000 in aid, and living in cheap off-campus housing, eating cheap food with many roommates, and taking a part time job may not be enough for a student with no savings and no expected family contribution. Let’s see if we can make this work.

Case Study
Let’s take the most melodramatic case of a graduating high school senior who is raised by a single mother who earns $20,000 / year, has two younger siblings, and no savings. Obviously, the expected contribution of this student is $0 on the FAFSA. Now, let’s say our senior is admitted to Harvard (hey, I warned you I was using the most melodramatic case). How can our student pay the tab?

First off, let’s get a bare-bones room and board case. Harvard estimates $9,280 / year for room and board on campus. Scrap that. How cheap can we get if we move off campus? Well, I know from personal experience that Cambridge, MA is not a cheap place to live. However, after a 30 second search on, I found the Homer Avenue Apartments, where a two bedroom, 1100 sq ft apartment goes for as little as $1200 / month. You can (uncomfortably) fit four college students into a two bedroom apartment. That brings each student’s rent down to $350 / month (shared rent + utilities), or $4200 / year ($774 less than Harvard charges for 9 months of student housing). A student can live not-so-meagerly on $50 / week of food (again, I know this from personal experience). That brings a total yearly food cost of $2600 / year. So our total room and board for the year comes to $6800. If we amortize this to the 9 months for which Harvard provides room and board, we get $5,100 per school year: a $4,180 savings.

Now we need to tackle tuition, fees, and “personal expenses,” which Harvard estimates at $33,190, bringing our total cost of attendance to $38,290 per school year.

For starters, high priced schools routinely give out need-based grants that top $15,000 per year or more. Let’s give our student $15,000. We still need to cover $23,290. There are many private scholarships available to students (see “Success Story” below). Let’s say our student is diligent in pursuit of private scholarships, and gets $2,000 / year in aid. We still have to fund $21,290.

Time for a part time job. A college student can find work that pays over $10 or $12 per hour, if he’s lucky. Let’s give our student a job that pays $9 / hour during the school year bartending or some such, and a more lucrative full-time position in the summer involved in construction, or other labor intensive job. Let’s assume a summer break of 15 weeks. Assuming a 20 hour work-week during the school year (I did it), our student makes $180 / week during the school year, and $600 / week during summer break. This gives us a total working income of $15,660 / year. Now, our student will have to pay some taxes, but not much because of his income. Let’s round his yearly income to $15,000. Subtract that from total cost of attendance, and we get $6,290 still uncovered.

In order to give our student at least the threads of a safety net, the federal government should be able to provide him with $8,000 / year in low-interest subsidized loans, covering the remaining gap in expenses, and saddling our student with only $32,000 in debt upon graduation. This loan would result in a payment of only $180 / month, given a 20 year repayment plan and a 3% interest rate.

Of course, our student will not have a comfortable 4 years. He will be poor. He will be uncomfortable. He will be tired. He will be working without the benefit of a safety net. He will be one step away from disaster. Not only that, but we’re assuming an awful lot of contingencies (securing need based scholarships, finding part-time work, getting three roommates, etc). But despite all the problems, he will be working very hard to ensure his future. If he is willing to endure all the uncertainty and hard work, then we should provide him with a chance. Tuition is an attainable goal.

Success Story
In order to close this post on a note of hope, I’d like to point towards the story of Rebecca Perez, the brilliant daughter of immigrants who managed to fund her college education through her diligent pursuit of private scholarships. I realize that stories like Ms. Perez’s are the exception rather than the rule, and indeed could not be applied on a large scale due to resource constraints, but I do want everyone to realize that even in the most dire of situations, there is hope.


  • Has anyone considered that the financial aid packages themselves is driving why college costs are now outstripping inflation? When colleges know that there is a federal government guarantee of some sort, they will jack up their prices accordingly.

    By Blogger Shay, at 11:36 AM  

  • Now that is indeed a good question.

    The system, as it is implemented now, does stand as a quasi-wealth redistribution program resembling the income tax code. The more money you have, the more money you pay. I believe this stratification is directly proportional to tuition. The higher the tuition, the more those in the upper income brackets will pay for their children's schooling. The higher the tuition, the greater the amount of financial aid given to the lower income students. The lower the tuition, the less the upper class students pay, and the less financial aid received by the lower income students.

    Actual tuition price has nothing to do with the Expected Family Contribution (EFC) calculated on the FAFSA, so (in theory) lowering the tuition of a school would save upper income students considerably more money than lower income students. It makes the system fairer, but does not address the root problem.

    Overall, the school would still see a net loss in revenue upon any tuition decrease regardless of the amount of aid cut, so I'm not sure one can necessarily blame financial aid for rising tuition. If raising the tuition did not increase revenues, a school would never raise it.

    By Blogger Jonathan C, at 12:01 PM  

  • I've always felt that for those who are really serious, anything is possible in America. But how many people from a low-income, broken home have the test scores to get into Harvard?

    I think, while it's educational to look at the melodramatic situation, we're doing ourselves a diservice because it's so rare. What we really need to consider is all the students from low-income homes in bad neighborhoods who never go to college at all because 1) their schools are horrid and 2) the social conditions in which they grew up are not supportive of education or lack the guidance, incentives, culture, etc. to make educational success anything but difficult.

    The rich will always have more advantages and I'm ok with that. After all, we need the rich to set the bar for the rest of us to strive towards. But I think, at this point in America, the poor don't just have fewer advantages, they have too few opportunities. Yes, those that work really, really hard can climb out. But we have to do something to improve the schools and the social conditions that are creating an entrenched underclass.

    It's not about oppression. This is not an active choice by the wealthier among us. And the poor aren't victims. But all of us deserve a more fair society with better opportunity. Whether this comes through government or community action, I don't know. I believe it will have to come from a combination of both with the community leading the way.

    As a side note: Molotov, have there been studies analyzing the effect of financial aide on tuition costs? And what do you think could replace financial aide, given that some students would be unable to afford college no matter how cheap the tuitiom? It's not an issue I've thought about much and would love to hear your thoughts.

    By Blogger Alan Stewart Carl, at 11:13 PM  

  • I absolutely agree that the quality of the educational system in {buzzword alert} disadvantaged communities is a bigger stumbling block to higher education that the associated costs, and I hope to post more on that particular subject shortly. My goal in this post was merely to familiarize us with some of the hard financial truths students have to deal with in affording the priciest schools, even if they do manage to overcome their environmental deficiencies.

    Your second point concerning the lack of an Educational Culture, if you will, intrinsic to city life goes hand in hand with horrid schools. Time and time again we've seen that the only variable in determining whether or not is student enthusiasm. Some of the worst schools in the country have the highest per student spending ratios. Again, I hope to address the topic of changing the culture of our failing schools in future posts, so stay tuned!

    By Blogger Jonathan C, at 12:55 AM  

  • Here in DC we have some of the highest cost-per-student expenditures and yet some of the worst test scores. More money is not the answer, I think. Although, less money probably isn't the answer either. It's a complicated problem and there are a lot of good ideas.

    As for affording Harvard, you are absolutely right. Even if someone rises out of a "disadvantaged" situation, it doesn't get any easier. We need a series of solutions that address both public schooling and college.

    By Blogger Alan Stewart Carl, at 12:22 PM  

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