Monday, July 4, 2016

The Gentrification of Public Higher Education - Part 4


Gentrification

Merriam-Webster defines “gentrification” as “the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents.”

This gentrification prototype arose in the context of the “urban renewal” of America’s inner cities, but can now be legitimately applied to public higher education—but without the ‘renewal’ and ‘rebuilding.’  That is, public higher education is not being renewed or rebuilt; but poorer students are being displaced.

The Gentrification of Public Higher Education

Only lately has the word “gentrification” been applied to public higher education, and for good reason.

Only lately has the gentrification process—the displacement of less-affluent students by more-affluent students in public higher education classrooms—been clearly observed and publicly documented as a growing national phenomenon since the 1990s.

Data from 420 institutions across America, including the 14 PASSHE universities, show Pennsylvania is well below the average of those institutions when it comes to combatting gentrification; that is, poor students are more likely to be denied a 4-year public education in Pennsylvania than in other states.

Tuition Discounting at Private Universities

The key to understanding the gentrification of public higher education lies first in understanding “tuition discounting,” a financial practice implemented by private colleges and universities many years ago that has more recently been introduced, to varying degrees, at public colleges and universities.   

Excerpts from a recent “Inside Higher Education” article by Kellie Woodhouse¹ explain how it works:

“Private institutions commonly discount their tuition—using institutional aid (often derived from tuition revenue) to offer students a discount from the sticker price—in an effort to entice students to enroll.”

“On average, private colleges’ discount rate—institutional grant dollars as a percentage of gross tuition and fee revenue—reached 48 percent for freshmen in 2014, up from 46.4 percent the year before.”

“Put another way, institutions awarded about 48 cents in institutional grants to freshmen for every dollar collected for first-year tuition and fees.”

Tuition Discounting at Public Universities

Four-year public universities across America generally fall into two distinct categories: 1) AASCU type institutions—i.e., institutions founded in the mid-1800s as “teachers’ colleges” that later evolved into “comprehensive” universities (including the 14 PASSHE universities); and 2) all other public universities, including “research universities” like Penn State, Temple and the University of Pittsburgh.    

A 2007 article² from the American Association of State Colleges and Universities (AASCU) entitled “Tuition Discounting at AASCU Institutions” contains the following quotes:   

“At 6.4 percent, the average tuition discount rate at [approximately 420] AASCU institutions is relatively low when compared to the 33.5 percent discount rate in the private four-year sector and the 14.7 percent rate for all public four year institutions.”

“This year, AASCU institutions awarded more than $653 million in need-based and merit-based institutional grant aid to their students.”

“Fifty-eight percent of all institutional grant aid at AASCU institutions is awarded to students without documented financial need. Only 42 percent of institutional grant aid is awarded on need-based measures, suggesting that institutions are using discounts to “shape” their cohorts in an effort to enroll students with high SAT scores, award scholarships to student-athletes, or provide tuition waivers to minorities and students whose family members are employed at the institution.”

How Gentrification Results from Tuition-Discounting Policy

As seen from the data for all AASCU type institutions, including the fourteen PASSHE universities, the total annual grant aid was $653 million, spread across 420 AASCU institutions.  That amounts to an average of $1.55 million in annual tuition discount aid per institution.

Note that on the average, only 42% of those grant dollars went to students with documented financial need.  I.e., AASCU institutions are already fostering “gentrification” by giving the bulk of their precious aid dollars on the basis of merit rather than documented financial need. 

Recall that tuition-discounting is only possible to the extent that an institution maintains a large-enough difference between a (higher) sticker price and a (lower) actual cost to educate one student for a year.

Tuition Discounting at the Fourteen PASSHE Universities

For purely political reasons, the PASSHE Board of Governors has maintained a “low-tuition-for-all” policy since 2002: The BOG sets tuition rates at or below the actual cost of educating one student for one year!

This Act 188-defying policy has totally disastrous consequences for the majority of PASSHE students:

1)      If tuition is set equal to the actual cost to educate one student for one year, there will be no excess revenue with which to fund tuition discounts—they simply become impossible to grant.  Pennsylvania’s least-affluent students will then get “priced out” of post-secondary educational opportunities, while the less-affluent but “lucky” students who can borrow enough money to meet PASSHE’s very high “bottom line” cost end up with years of crushing student-loan debt.

2)      If tuition is set below the actual cost to educate one student for one year, not only will there be no tuition discounts, but every PASSHE student will receive an education of declining quality each and every year, a situation that began in 2002 and continues to the present day.

Prior to the Great Recession, BOG policy did not allow for any tuition discounting whatsoever.  But in 2008 as the economy of the State worsened and many workers were thrown out of work, the BOG permitted a tiny amount of E&G funds to be granted to students in critical need of financial support.

At our university, we were permitted to grant about $100,000 in tuition discounts to PASSHE students, but first we had to prove that there was really a documented need for any tuition discounts.  Working with our financial aid staff, we were able to identify many PA families where at least one parent of a PASSHE student had lost his/her job.  We then provided some $100,000 in tuition discounts that year.

Recall that the AASCU annual average for tuition discounts was 6.4% of the tuition collected that year.  But at the 14 PASSHE universities, because of the BOG’s low-tuition-for-all policy, we could only afford to provide about 0.1% (i.e., one-tenth of one percent) of the tuition and fee revenue collected that year.  Note that the AASCU average is fifty times higher than the PASSHE figure!    

To be continued.


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