Taxpayers subsidize elite colleges

The most selective colleges with the fewest low-income students receive the most taxpayer subsidies, concludes Cheaper for Whom?, an American Enterprise Institute Outlook report by Jorge Klor de Alva and Mark Schneider.  However, high drop-out rates at less selective colleges drive up the taxpayers’ cost per bachelor’s degree granted, they write.

College graduates usually go on to make more money and pay higher taxes, they write.  Taxpayers get a return on their investment in most cases — but not all.

. . .  in the non-/less selective schools, public institutions are in the red. Although both for-profit and not-for-profit private campuses have strong payoffs to the taxpayer, high dropout rates mean these public campuses are costly, even as they receive the lowest tax subsidies. On the other end of the selectivity continuum, the most competitive public campuses also generate net losses to the taxpayer. In contrast to less selective campuses, these public flagship campuses have low dropout rates. Their losses to taxpayers, therefore, are generated not through the lack of student success but rather through the higher costs associated with research institutions, such as higher-paid faculty teaching fewer courses.

If the “completion agenda” is successful, taxpayers will get more degrees for their money and a positive return on the subsidies at less-competitive colleges, the study concludes. However, the public flagship universities will continue to be costly.

To promote college completion, states should link funding to performance rather than enrollment and participate in Complete College America,  Klor de Alva and Schneider write. In addition, Pell Grant eligibility should be “subject to periodic performance reviews.”

. . .  if the country is to retain its competitive edge, it must reverse the current policies that result in providing the lowest levels of taxpayer support to the institutions that enroll the highest percentage of low-income, nontraditional, and minority students—the fastest-growing segments of the population.

The study endorses the Lumina Foundation‘s call for  states to help expand and strengthen “lower-cost, nontraditional education options.” That should include “more radical departures from business as usual, such as StraighterLine or Carnegie Mellon University’s Open Learning Initiative,” Klor de Alva and Schneider write.

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