This Just In: Harvard is Really Affordable!

Students protesting in Sacramento. Copyright: Rich Pedroncelli/AP

Things are so bad with California’s financing of its public higher education that Harvard now costs less than Cal State East Bay for some students. This leaves students only one choice: to pack their bags and head to Cambridge in the fall.  But first, all they have to do is get accepted. While Harvard might have generous financial aid policies, there is the small problem of its miniscule 6 percent acceptance rate. It might be a good idea to apply to another university that has a similarly robust financial aid program—might I suggest Princeton? They were the first ones with “no loan” financial aid policies, and with an 8 percent acceptance rate, it’s easier to get into than Harvard.

While the temptation to compare net price at Harvard and CSU is strong (it does grab your attention and make headlines), it’s completely unhelpful and out of touch. It’s like comparing donuts and tires: both are circles with holes in the middle, but that’s pretty much where the similarities end.  Tuition is going up in California largely because of rapid disinvestment of their state government.  Net price is going down at Harvard largely because they are using some of their $32 billion endowment to compete with the financial aid practices of other elite institutions like Princeton.

But there is one good consequence of this bad comparison—it’s shedding some very (tangential) public light on two issues normally reserved for higher education policy wonks: tuition discounting and the competitive use of financial aid.

Tuition Discounting and Net Price

Although sticker (tuition) prices have been increasing, only about a third of students actually pay sticker price. Institutions discount their tuitions through use of federal, state, and institutional aid—what students actually pay is the “net price.” This reduced “net price” varies widely depending on student characteristics such as resident status, income, and high school GPA. All institutions are required to have net price calculators on their websites to help students to better understand how much they are likely to pay.

Presumably, net price calculators were used to conclude that CSU East Bay costs more than Harvard for middle class students.  But this conclusion is misleading. The “middle class” family used in the calculation is a family of 4 with a household income of $130,000. While the cost of living in California may be high, California’s median income is $59,000—less than half of the hypothetical “middle class” family. If you plugged in this median California household income, CSU East Bay’s estimated cost of attendance drops $7,000 to $17,000. But when you input the same information into Harvard’s net price calculator, the tuition dwindles to $4,000.

Can CSU East Bay really cost $17,000 and Harvard only $4,000 for middle-income families in California? Probably, especially given Harvard’s financial aid policy, but it’s hard to know for sure. The problem is, net price calculators can vary widely depending on how they are formulated. Sometimes they are too conservative. Sometimes they are too generous. It’s a very complex calculation and students won’t actually know what they will be paying until they get their financial aid packages, oftentimes months after they’ve been accepted to a school. So, more realistically, if a student was choosing between CSU East Bay and UC Santa Cruz, both use different net price calculators, and there is no way of knowing how accurate the results are.

The Competitive Use of Financial Aid

Many prestigious institutions, like Harvard, Yale, and Princeton, offer the promise of an affordable education through “no loan” financial aid. These policies replace loans within a student aid package with grants. Theoretically, these policies are meant to increase access for low- and middle-income students. But in reality, students at these prestigious institutions are still overwhelmingly rich. Take Harvard, for example, where about 50 percent of students come from families with incomes over $200,000. Only 18 percent of students come from families with household incomes less than $62,000. If Harvard was truly looking to expand access, it could easily fill an entire class with low- and middle-income students. It certainly has the resources to do so with its $32 billion endowment. But it doesn’t.

In the end, colleges and universities, like CSU East Bay, who serve a more economically diverse student population (30 percent Pell versus Harvard’s 10 percent Pell) just can’t compete in the same realm because they don’t have—and never will have—the same resources.