Financial Aid Is Funny…

Yesterday U.S. News & World Report released its famous best colleges list. This year the publication included supplementary “best buy” schools.

The best buy colleges, based on the percent of students receiving need-based financial aid, and the total reduction from the sticker price, were,

1) Harvard University
2) Yale University
3) Princeton University
4) Stanford University
5) Massachusetts Institute of Technology

The top five colleges in the U.S. News general ranking were

1) Harvard
2) Princeton
3) Yale
4) Columbia
5) University of Chicago

University of Chicago and Columbia ranked 11th and 6th, respectively, in the value list. What? Who knew “value” meant a Princeton education. It’s the Wal-Mart of colleges!

Not really. The problem with this value list is that it doesn’t really have much to do with affordability or accessibility, largely because there are so few poor people who attend such schools. As Lynn O’Shaughnessy explains over at CBS News:

Even though the cost of attendance at these elite schools is at or near $60,000 per year, many students are too wealthy to qualify for any need-based aid. At Princeton, for instance, 41 percent of students in a recent freshman class were too rich to obtain financial aid, according to federal figures. And that statistic is misleading because plenty of students who by ordinary standards would be considered wealthy qualify for need-based aid at the Ivy League school.

These schools do provide very good financial aid. This is because colleges with very large endowments, and a lot of rich students, can provide a lot of financial aid, even to reasonably affluent people who wouldn’t quality for financial aid at most institutions.

O’Shaughnessy did the math and found, using Princeton’s financial aid calculator, that a family with a gross annual income of $300,000 would get nearly $26,000 in Princeton grants a year.

That is generous, and it really does make Princeton a good value for that $300,000 a year family. The trouble is that value is irrelevant to most people anxious to find a cheap education. No one in the last 20 years has ever applied to Princeton or Columbia as an undergraduate because the school was a “good deal”; they applied because these were some of the most prestigious colleges in the United States.

If a school admits a tiny proportion of applicants, and most of those students are very rich, the fact that it also provides its marginally less rich students with a lot of financial aid money is nice, for sure, but it’s not doing the world much of a service.

The important point here, from a sense of equity and talent development, is not how much value colleges offer for the rich but how much, and how frequently, they offer good value to the poor and middle class. The reality is that at the schools such people really attend, state colleges and universities, the costs are getting higher and higher for students every year.

And yet Yale is a good value for someone from a family where both parents earn six figures. Wow, the rich really do win at everything, don’t they?

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer