NYT: Is Private School Not Expensive Enough

sshecaw · 08-24-2012, 10:48 AM

Today's NYT opinion piece makes for an interesting read. What do you think, should tuition be means based?

Could it be implemented? How to test the means of many overseas families whose income and wealth are sometimes difficult to measure?

Other pros and cons?

Is Private School Not Expensive Enough? - NYTimes.com

GMTplus7 · 08-24-2012, 11:26 AM

Tuition is already, more or less, means-based. Poorer families pay less out of pocket because they are eligible for FA.

Wealthy families are already pressured to donate the gap between tuition and cost. It's a better deal for families to make a donation than to formally raise the tuition, because a donation is tax-deductible and tuition payments are not.

Overseas families are almost always full pay.

kidsparent · 08-24-2012, 01:21 PM

The real question is what is driving the cost curve? Is it like many colleges with more and more lavish facilities?, highter ratios of faculty or admin or support staff to students?, higher pay levels, either absolute or in relative terms? more ancillary services?, etc

Ultimately costs rising faster than revenue is not supportable, but until customers (parents) are given an explanation of why this is happening they can't effectively choose to either pay the higher (full) price or find another option.

zobroward · 08-24-2012, 01:24 PM

so,silly...why not make everything means tested. one person would pay 12.00 a night at the ritz and somebdoy else 12,500 a night for the same room? or for cars, movie tickets etc...

JonLaw · 08-24-2012, 01:40 PM

@kidsparent:

"The real question is what is driving the cost curve? Is it like many colleges with more and more lavish facilities?"

The same thing that's driving the college price tag.

Unrestrained systemic credit expansion leading to massive cost increases.

Effectively inflation that is loaned, rather than printed, into existence.

See the dot-com boom and the housing bubble for details.

Charger78 · 08-24-2012, 01:52 PM

More buildings and maintenance. Even if (some of) the funds for building are often solicited first.

Higher salaries, especially administrative, and expansion of development staff are obvious, but I seriously doubt that the aggregate touches the expenses for bricks and mortar over time.

(Consider that in the past, teachers worked for next to nothing and heads were paid two or three times that. Development was one or two persons. That's growth, but aren't we talking about a "construction race", plus amenities, on most campuses?)

Periwinkle · 08-24-2012, 05:54 PM

I have to think about this proposal to come up with a thoughtful response. Off the cuff reaction?

You'd reduce the schools to the Mega-wealthy and the most appealing of FA candidates. The schools would lose everyone in between. See the definition of HENRYs in this Chronicle of Higher Education article: Bubble Update: More Helium, Part 1 - Innovations - The Chronicle of Higher Education.

How can we know what someone can "afford" to pay? Before the crash, Frank Rich noted in Richistan that significant numbers of the families he chronicled were spending money at a rate which was incompatible with maintaining wealth. I seem to remember expensive watches, jewelry and club memberships featured prominently.

Frank Rich has a new book out, The High Beta Rich. I heard his NPR podcast about the book. He apparently points out that the wealthy have become the economy's gamblers, and their net worth can change drastically in short periods of time. So, they might be able to afford to pay Extra Full Whack (EFW) today, but will they commit to paying it tomorrow?

If a few schools were to institute Mr. Asen's plan this year, wouldn't the other schools become much more popular? I'd have to think schools sticking by the traditional model of development would be deluged by wealthy families, if only because they'd not demand families disclose their holdings. After all, if the financial picture's in the hands of a school, couldn't a divorce lawyer or bankruptcy trustee demand the school reveal it at some future time?

Mr. Asen states,

Quote:

Given the strength of the educational product offered by these prestigious schools, not to mention the prestige itself, I think that for every affluent family scared off by the new policy, there would be another of equivalent means — with an equally desirable child in tow — willing to pay full cost.

I don't agree. I think giving up the ability to select the students they want would have deleterious effects on the student body as a whole. We would, however, discover how much families value prestige.

Here are alternates. (Not fully in jest.)

1) Auction off the last 5 - 10 spots in the class. (Of course, you'd have to agree to refund the "extra" payment if the school kicks the kid out. Guaranteeing no consequences for teenaged bad behavior is also a bad idea.)

2) Let wealthy families know a family's demonstrated commitment to philanthropy in their current communities will be a factor in admissions decisions. (You'd have to ban donations to the school in the current year from pending applicants' families.) If nothing else, it could encourage generosity.

If I'd had more time, I would have written a shorter letter...

JonLaw · 08-24-2012, 07:33 PM

"Frank Rich has a new book out, The High Beta Rich. I heard his NPR podcast about the book. He apparently points out that the wealthy have become the economy's gamblers, and their net worth can change drastically in short periods of time. So, they might be able to afford to pay Extra Full Whack (EFW) today, but will they commit to paying it tomorrow?"

You can charge the hedge fund financiers EFW all you want to and it's not going to bother anyone.

The massive credit mania has created random allocations of wealth, which is almost certainly what's driving the swings of the High Beta Rich. You can make a ton of money in the Wall Street casino betting on red or black (John Paulson). Charge them EFW. Gamblers can pay. It's not like they are actually doing anything that adds value.

They're not industrialists. They're playing with credit that shouldn't even exist. It's not like they're the Milton Hershey of the 21st century.

Internists or people making a couple hundred thousand doing actual work? Give them a break.

JonLaw · 08-24-2012, 07:34 PM

So there you have my answer.

Don't use *means* testing. Use *value* testing. Was the money made in a value creation (physician) or a value transference area (hedge fund)?

GMTplus7 · 08-24-2012, 10:04 PM

Related article from the NYT earlier this year
http://www.nytimes.com/2012/03/27/ny...agewanted=all:

Quote:

Schools are mining online data for details about parents’ homes, luxury cars, private planes, stock holdings and donations to other charities...

...driving the effort is an increasing stratification of wealth, even in the private school population. In recent years, fund-raisers and school heads say, more revenue is coming from a smaller group of parents and what used to be the “80/20 rule” — 20 percent of the parents give 80 percent of the money — has become the 90/10 rule, or even the 95/5 rule.

GMTplus7 · 08-24-2012, 10:18 PM

Quote:

The real question is what is driving the cost curve? Is it like many colleges with more and more lavish facilities?, highter ratios of faculty or admin or support staff to students?, higher pay levels, either absolute or in relative terms? more ancillary services?, etc

One has only to read the posts by students/parents comparing different schools on the CC website, to understand what is motivating school administrations to engage in a facilities/amenities/services arms race.

Beliavsky · 08-25-2012, 08:35 AM

I am fed up with private schools and universities trying to effectively impose another income tax on me, which is what "need-based" financial aid is. When I go to the grocery store, I pay the same for milk as everyone else, and I think tuition should move in that direction.

The Groton web site says

"The aim of the School is to accept students on their own qualifications without regard to their family's financial resources. Accordingly, no student should be deterred from applying to Groton because his or her parents cannot pay full tuition. Of Groton's 370 students, 37 percent receive financial aid. The average financial aid award for 2011-2012 was more than $34,000.

...

Beginning in 2008, Groton decided to offer free tuition to all families whose gross family incomes were under $75,000 per year. The application process is the same as the process described above. You must submit the SSS form and your tax returns. Should you be accepted at Groton, you will receive free tuition and expense money for as long as your financial situation is unchanged."

Well, Groton could fill its class with full-pay students and stop giving some students a free ride. If that made its students richer and less "diverse", so be it. Private school is not an entitlement.

GMTplus7 · 08-25-2012, 09:32 AM

I fail to understand how a private school offering full FA to a few poor kids is a tax on you. It's not money out of your pocket.

The FA is financed by earnings on the school's endowment, not by your tax dollars.

How do you conclude that poor kids are regarding a private school education as an entitlement. It's not like a student automatically gets admitted into these schools by virtue of being poor.

Periwinkle · 08-25-2012, 10:44 AM

Quote:

Well, Groton could fill its class with full-pay students and stop giving some students a free ride. If that made its students richer and less "diverse", so be it. Private school is not an entitlement.

In visiting colleges this summer, I've noticed a positive correlation between a college's perceived prestige and the diversity of the student body. Limiting admission to full-pay students would cause an immediate loss of prestige. There are private schools which provide comparatively little financial aid. The student bodies are less diverse, according to Boarding School Review.

I also think socioeconomic diversity in the classroom is exceedingly important. In my opinion, it's most important for the children of the families at the top of the income scale.

There's also that whole nonprofit thing. Schools are not subject to property taxes because they provide a social good to the whole of society, not limited to those who can pay.

Mr. Asen criticizes those who could pay much more, but don't:

Quote:

This brings us to a troubling conclusion: To the extent that any family with the wherewithal is paying less than the full cost of the product it is buying through combined tuition payments and donations, that family is effectively being subsidized by other current and past donors. Not only is this ethically unsupportable, but ultimately, it is also financially unworkable.

How many families have "the wherewithal" to pay "the full cost?"

alliekinz · 08-25-2012, 06:37 PM

Means based? So if your family makes more money, you have to fork over more? I think that's absolute trash, and here's why.

More income generally means that your parents worked their own butts off during college, graduate school, and med/law/business school. They probably still have lots of students loans and whatnot on their hands, among others. On top of that, their mortgage is probably more expensive, as well as taxes in general. Those low income families that hit the financial aid mark either don't have hardworking parents or have parents that weren't good enough at their profession to keep a job. And the successful families are the ones that end up punished with shouldering $60000/year for their kids' tuition. For four years, that's nearly a quarter million!

I think tuition should be "need-based" based on financial situation, but not THAT kind of financial situation. Looking into how much debt the prospective student's family has, or how long the parents have been in a job, is more fair than thinking, "Oh hey, that URM's parents work at McDonald's. Let's pay for his entire ride." That makes me cringe. Obviously, that URM shouldn't be there in the first place. In all honesty (and this is making me veer off on a tangent now, and for that I apologize), I think only merit-based scholarships should be offered. Instead of investing in need-based scholarships, colleges can put that money to other purposes.

I'll probably get a lot of angry replies for saying this, but it's what I think.