When Articles Collide

Friday’s edition of Inside Higher Ed had two stories that really should be read next to each other. Each makes more sense when read in light of the other.

The first was about current high school seniors applying to college in unusually low numbers. I was struck by this paragraph:

“Carnevale said that applications for the top 200 colleges in the U.S. had actually risen; the decline in enrollment is mostly hurting two-year colleges and nonselective four-year colleges, where low-income and minority students are concentrated.”

The implications of that are still largely flying below the policy radar.

The “top” 200 colleges tend to be much more expensive than community colleges and regional public colleges. But their application numbers are rising. That suggests first of all that discussions of the “tuition cost spiral” driving students away are getting something wrong. If schools that charge $60,000 per year have increases in applications while schools that charge a 10th of that are seeing applications drop, then the straightforward narrative of “pricing students out” doesn’t quite work.

Yes, there are some caveats. For example, schools with high sticker prices are sometimes capable of discounting them, so lower-income students don’t pay the full amount. Which brings me to the second story.

That story glosses a recent paper by Zhifeng Cai and Jonathan Heathcote on the impact of wealth disparity on college tuition. As rendered in the Inside Higher Ed piece, the finding is that increased financial aid for students with low income but high ability drives up institutional costs. Those costs, in turn, are passed along to those who can pay through higher sticker prices. The higher prices are paid by those who can, effectively subsidizing those who can’t.

(It’s worth defining “low income” in this context. For example, according to Yale’s website, the total cost of attendance for an undergraduate at Yale this year is $81,575. That’s higher than the median annual household income in the U.S. For present purposes, “low income” means anyone who couldn’t afford to plop down $81,000 cash on the barrel annually for four years, which is most people.)

Both stories seem correct, as far as they go, but they’re better understood as symptoms of something much larger.

The second story explains, correctly, that discounts are an institutional cost. But it doesn’t explain why applications at elite schools are up, or why applications at more affordable schools are down.

The effects of income and wealth polarization go beyond any particular institution. Both colleges and applicants live in a political economy. That political economy forms the background conditions within which they make decisions. Among other things, it informs the decisions that prospective students make. The rewards accruing to the top are greater than they used to be, while the potential downside of an expensive-but-not-elite degree is worse than it used to be. On the community college side, we’re competing with entry-level jobs, the market for which is the hottest it has been in years. Put differently, for our students, the opportunity cost of college has gone up.

The sudden boom in entry-level jobs strikes me as unlikely to be the new normal; over time, I expect that some students who’ve chosen to put off college will find their way back.

Over the longer term, though, an economy with extreme rewards at the top and a slippery slope in the middle is likely to remake higher education in its own image. It has already started.

Whether the political economy continues to develop that way is, at least in part, a social choice. Higher education has a role to play, but its various sectors also need to recognize that the economy of the 1960s, or even of the 1990s, isn’t coming back. Adaptation requires recognition. And good policy requires recognizing when a simple story isn’t as simple as it looks.

Anyway, thanks to Inside Higher Ed for putting those two articles in the same day’s edition. Sometimes happy accidents shed light.