$5.3 billion in aid goes to well-off students

Colleges and universities give $5.3 billion a year in financial aid to students from affluent families.

To avoid default, consider technical college, say investors in bonds backed by bundled student loans.

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  1. From http://hechingerreport.org, “Such money, called ‘merit aid,’ is typically given to students based on academic or extracurricular achievements in high school, not based on demonstrated financial need.”

    So the complaint here is that colleges give scholarships that aren’t means tested, and we are to be appalled that institutions of higher learning try to recruit top students?

    • we are to be appalled that institutions of higher learning try to recruit top students?

      Yes, I think we are supposed to be appalled 🙂

      • I’m appalled that taxpayers’ money is being spent on grants and (taxpayer-backed) loans to large numbers of students who don’t belong in college because they lack ability, preparation and/or motivation. I’m also appalled that taxpayers’ money is subsidizing all kinds of programs, services and classes to keep such kids on campus and pretend they’re students. Colleges should admit only those kids capable of doing real college-level work (SAT/ACT scores) and should not offer remedial classes. Even CCs should have some admission standards, possibly real 9th-10th grade achievement, for those entering directly from HS.

    • Note that the study defines “rich” as between making $100k to $180k per year. Given that private colleges today are charging over $50k per year, I think it’s a HUGE stretch to call this group “rich”. These aren’t the 1% so vilified today. A family making $100k per year would only have an income at 120% of the median for a 4 person household in my metro region. Hardly “rich”…

  2. I’m not clear on what the real cost of college is. Is it the “sticker price,” which (apparently) only one in three students actually pay? (http://thechoice.blogs.nytimes.com/2011/11/15/economix/) Or is it the cost per student, averaged out over the student body?

    If you discount an item by 50% for most customers, but hardly anyone pays the asking price, is that discount a scholarship? Even if you would not be able to fill that seat without cutting the price? Or is the high asking price a way to inflate the cost paid by a few?

    Also, my opinion of what someone else is able to afford might not match his opinion of what he can afford.

    • Cranberry – the FAFSA is a good starting point for the discussion. It’s kind of like the USRDA – some people get good nutrition and some don’t. Your mileage may vary. I believe a big part of the debate is how much a family can really afford in relation to the FAFSA number. If you can’t make your 401K or IRA contribution, you’re not likely to be able to set aside money for college either. I’ve never seen a rigorous study on that, but I’d bet theres a link waiting to be explored. I wonder how much of the rise of private loans is driven by the “FAFSA gap”?

      Higher ed is darn good at price discrimination. The high price is classic econ 101. Suck all the marginal dollars from the consumer you can. Thankfully, the government will step in with aid and plug the gap if you can’t afford it! (I can’t find the Sarcastica font on this machine …)

    • However, the aid that is given most students is mainly in the form of loans. I question whether those amounts should be subtracted from the sticker price in order to determine the “real” price. Loans are merely deferred payments, augmented a lot by interest due.