tuition

How colleges are complicit in raising tuition

October 28, 2013: 2:10 PM ET

We're all worse off when only the wealthy and privileged can afford a higher education.

By Matthew Segal

120820050628-college-student-debt-monsterFORTUNE -- You might be an honor roll student, varsity athlete, and great humanitarian, but if you're not the son or daughter of an affluent person, good luck getting off the wait list. At least that's what George Washington University just confessed by revealing it gives preferential admissions treatment to applicants who need less financial aid. It's the latest in a series of "affirmative action for the wealthy" cases.

For years, GW claimed to be "need blind," in other words, unbiased in factoring one's financial status when deciding between two similarly qualified candidates. But earlier this month it retracted that position despite touting it as recently as the previous weekend in an admissions information session. GW's new status is "need aware," meaning the university can shift applicants from the "admitted" pile to "waitlisted" if they depend on getting financial support.

"I would love to see us become a need-blind institution. As matters stand today, however, we believe that our current practice is the best way to meet the financial need of as many students as possible while recruiting an academically strong and diverse student body," University President Steven Knapp told GW's student newspaper The Hatchet.

The paper also reports that the university's endowment of $1.37 billion "pales in comparison" to peer institutions that are need-blind, citing Northwestern's $7.1 billion endowment. But let's be honest, GW is really part of an unremitting arms race, in which they're vying with competitor schools to entice wealthy students (who can afford to pay face value for their education). Why? Because in the world of college endowments, the size of your proverbial war chest equates to your amount of prestige.

Look no further than the notorious US News & World Report rankings for guidance. The rankings reward colleges on their financial resources per student (in essence how much they spend), and it just so happens that the five top universities on its list all have endowments bigger than $7.5 billion. This is where the interest of colleges and their students are no longer aligned.

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For example, GW just built a new $130 million "super dorm" and $33 million textile museum. It is not alone. The University of Pennsylvania's gym recently underwent a $10 million renovation to include an Olympic-sized swimming pool, co-ed sauna, juice bar, golf simulator, and climbing wall. Kenyon College, a liberal arts school, has a $70 million athletic center with similar country club features.

While these amenities are definitely an attractive proposition to prospective students at face value, what they really end up doing is spiking tuition costs, further contributing to America's $1 trillion student loan debt crisis. Additionally, these facilities are inconsistent with the core competency of higher education institutions. To be quite literal about it, the mission of GW is to "commit itself to excellence in the creation, dissemination, and application of knowledge." Are super dorms inherent in this thesis?

To offset the costs of their cozy amenities, colleges are also more dependent than ever before on tuition money, which now accounts for half of public university revenues, up from a quarter 25 years ago. And while tuition costs are rising, federal spending on college aid is decreasing. Researchers at Georgetown University have found that at the most competitive colleges, only 14% of students come from the lower 50% of families by income, a figure that has not increased over more than two decades, which indicates that university pledges to diversify have not materialized.

In light of growing income inequality, it's time for Americans to realize we're all worse off when only the wealthy and privileged can afford a higher education; this is because studies show that college graduates will earn about $1 million more over the course of their lifetimes.

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There are some excellent proposals in place to ameliorate our system of college financing, but first, it's important for students to recognize that they also must be smart consumers. President Obama's latest plan to reduce higher education costs calls for a "college scorecard" that will rate colleges based on their debt levels and job placement statistics as opposed to prestige and marketing allure. This is a great first step, but the Administration also said it won't start rating colleges until 2015 and will not hold them accountable until 2018. This is much too late, and who knows whether the next President will implement this plan or whether college lobbyists will ultimately destroy the measure.

It's time for students and their parents to organize in favor of bold measures such as Oregon's Pay It Forward program, which would eliminate tuition at state public colleges and universities in exchange for students paying 3% of their income back to the schools over the course of 24 years after graduating. Massive Open Online Courses (MOOCs), which open curriculums to thousands, are another promising measure to lower costs that some colleges are embracing. Approaches like this and Oregon's will help curb the booming business of college, and ultimately end their complicit role in engendering a system that favors the kids of the wealthy.

Matthew Segal is co-founder and president of OurTime.org, a nationwide non-profit organization that leverages online organizing, new media, and popular culture to enhance the political voice of young Americans. He can be followed on Twitter @OurTimeMatthew 

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