Do Subsidies for Public Universities Favor the Affluent?

Democratic presidential nominee Hillary Clinton's plan to make public college free for students was a frequent topic at the Democratic National Convention this week. For the first time, higher education is a critical issue in the presidential election. 

Whether we decide to embrace new proposals to dramatically reshape American higher education requires an objective understanding of who benefits from the current policy framework. A major component of the current higher education financial model is the direct subsidies that public four-year colleges receive. These subsidies allow public colleges to discount students' tuition, so that students pay less than the full costs of their education. 

Some have assumed that, because the cost of college is higher at more selective publics and more affluent students attend more those schools, the benefits of direct subsidies disproportionately favor students from affluent backgrounds and thereby perpetuate class-based inequities. However, the data fail to bear that claim. 

In a paper released yesterday, we analyze who benefits from direct subsidies to public four-year colleges by family income and selectivity. We do this by comparing the tuition colleges charge students to what it costs colleges to educate a student. 

We find that, in fact, students from low-income families receive $1,000 more than students from upper-income families public four-year colleges. Students from upper-income families pay $6,300 less than the cost of their education while students from low-income families pay $7,300 less. 

What's more, low-income students who attend the most selective colleges receive more than $11,000 in indirect subsidies, the largest benefit across the public four-year college sector. In fact, selectivity matters more than family income when it comes to predicting how much a student will benefit from indirect subsidies. In other words, students who attend selective colleges receive a larger benefit than students who attend less selective or open-admission colleges, regardless of their income level. 

Understanding the current allocation of resources is critical to an informed debate around college affordability. The thousands spent annually to offset tuitions costs for students from upper-income families may be money better spent on their more disadvantaged peers. At the same time, additional investments from states could offset the need for tuition increases, making college more affordable for everyone. As we grapple with various proposals to improve higher education finance, our understanding of the current system should be based on evidence, not assumptions.