Making something free or inexpensive for some people often makes it more expensive for others:
http://online.wsj.com/news/articles/SB10001424127887324049504578545884011480020More Students Subsidize Classmates' Tuition
By DOUGLAS BELKIN
Wall Street Journal
Jan. 9, 2014 10:32 p.m. ET
Well-off students at private schools have long subsidized poorer classmates. But as states grapple with the rising cost of higher education, middle-income students at public colleges in a dozen states now pay a growing share of their tuition to aid those lower on the economic ladder.
The student subsidies, which are distributed based on need, don't show up on most tuition bills. But in eight years they have climbed 174% in real dollars at a dozen flagship state universities surveyed by The Wall Street Journal.
During the 2012-13 academic year, students at these schools transferred $512,401,435 to less well-off classmates, up from $186,960,962, in inflation-adjusted figures, in the 2005-06 school year.
At private schools without large endowments, more than half of the tuition may be set aside for financial-aid scholarships. At public schools, set-asides range between 5% and 40% according to the Journal's survey.
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Most public and private universities pool their financial aid from a variety of sources, including endowments, taxes and state scholarship funds. Additionally, public universities have a host of formal and informal subsidies: humanities students subsidize science students, for example, and out-of-state students subsidize in-state students.
The subsidies are taken by public schools nationwide, but there are no figures on the total and very few by campus. The lack of transparency inside university balance sheets makes it difficult to calculate how much one student is subsidizing another. But at least 13 state universities now list the full amount students pay in tuition set-asides.
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Seeking to expand their student body, schools have increased the amount of funds they funnel to poorer students. In the 2011-12 academic year, public and private U.S. universities gave away $33 billion in scholarships, up from $23 billion in 2006-07, adjusted for inflation, according to the College Board.
Enrolling more students at schools charging higher tuition has led to an explosion in student debt, estimated at $1.2 trillion. Per-student borrowing climbed 55% in inflation-adjusted dollars between 2002 and 2012, according to the College Board. Students with debt now owe, on average, nearly $30,000.
"We used to believe that public higher education benefited all residents of a state, not only the people who were attending, because the more highly educated workforce meant more economic growth," said Ronald Ehrenberg, director of the Cornell Higher Education Research Institute. "But now our society has moved toward the notion that the people who are paying are the ones who will benefit, so they should pay."
Higher-income public university students in California are taking on debt faster than others. Among students from families earning between $125,000 and $150,000, 39% now graduate with loans, up from 28% in 2005. The average loan amount increased to $19,310 from $13,470.
By comparison, 66% of students from families earning from $25,000 to $50,000 graduated with loans in 2012, down from 68% in 2005. The loan amounts increased to $18,071 from $15,081.
