Robin Hood, Michael Bloomberg, and College Affordability

By Watson Scott Swail, President & Senior Research Scholar, Educational Policy Institute

Listen to today’s Swail Letter on iTunes and Soundcloud.

This week, it was announced that the 11th richest person in the world, former New York City Mayor, and potential Democratic 2020 Candidate Michael Bloomberg gave his alma mater, Johns Hopkins University, a record-breaking $1.8 billion gift for student aid to ensure that their admissions processes would be “forever need-blind.” To put this gift in perspective, it is almost double the previous largest gift to a university—in the world. It is massive.

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Any gift to higher education is hard to see as a bad thing. Many years of EPIGraphs, Swail Letters, journal articles, and reports have keenly illustrated the trends and challenges of college affordability on college going and college completion in the US. The cost of college remains one of two main barriers to postsecondary opportunity in America. The other is academic preparation, which can be argued is also related to college costs.

However, Bloomberg’s gift to one of the most selective colleges in the world—a college that accepts only 14 percent of applicants, keeping it within a stone’s throw of the Ivy Colleges—raises some questions. To be fair and accurate, Johns Hopkins University is an extremely prestigious institution that boasts one of the great medical research units in the world. It is an ungodly good college where three quarters of its students are in graduate studies, and most of whom in research-based disciplines.

But let us be clear. Johns Hopkins is not an average institution. In fact, it is the best-of-the-best by almost any measure. In addition to the low admissions rate cited above, its students boast a 3.9 entering GPA rate, an approximate 1550 SAT score (only a handful of questions off perfect), 33 ACT, mostly white (81 percent), mostly affluent (only 13 percent Pell), mostly full-time (91 percent) and mostly traditional age (94 percent). Almost all of their students graduate on time (87 percent) and an even higher percentage graduate within six years (92.4 percent). On top of that, they are already a very wealthy school, boasting a $3 billion endowment and offering extensive institutional aid to students. Even though total cost of attendance at JHU is over $65,000, the average net cost (after grants) is $27,000. Even after graduation, the median debt of its graduates (meaning, almost everyone) is a relatively insignificant $15,000. Let me put that last figure in a relative form. George Mason University, a state school in Virginia where I sent one of my sons, has a median debt of almost $20,000. UCLA has a higher debt load than Hopkins. Indiana State University graduates have, on median, $24,000 in debt. Thus, institutional aid at JHU covers an extraordinary amount of the cost of the college, and, given the ROI of the institution where graduates are employed and paid well, have a very small debt to pay compared to almost any other institution. And for those that do take on debt at JHU? Only one student in a 100 default on a student loan. A simply remarkable statistic.

So why this massive gift by Bloomberg? Mostly, because he can. Bloomberg has had a long association with the University as a graduate and former chair of Hopkins’ Board of Trustees. Thus, this is not a singular show of support for his alma mater. He has remained associated with the university for his entire post-college life. This latest gift is simply another expression of his commitment and loyalty. A good thing.

Again, all good if you have the money, the commitment, and the vision. But it sure seems like a lot of money for an institution that arguably doesn’t need it. It may make JHU a need-blind institution, but the statistics presented suggest that it already is, to a large degree. Is there really a financial wall in place that doesn’t allow the poor kids a place at Hopkins? The barrier to JHU isn’t money: it is academic preparation and competition. Remember, less than 1 in 8 students receive a Pell Grant, which serves as a proxy for financial need. Only 1 in 8. And, in this case, Pell is based on the very high sticker price of the institution, meaning that the Pell curve is higher than at other institutions, which makes that number even more telling.

Also remember that Hopkins is largely white and affluent. Its students score highly on various academic indicators because they come from the best high schools in the nation and beyond. One more fun fact: JHU students actually play Quidditch. Let that sink in for a moment. If you don’t get it, Quidditch is the “fictional” sport played by Harry Potter at Hogwarts. This is Johns Hopkins University. They play Quidditch.

I think I’ve made my point. JHU is an exceptional, exclusive university with an endowment that puts it in a class with New York University, Brown, the University of Virginia, and several others. Financially, it is not in the stratospheric level of Harvard, Yale, Princeton, and Stanford, and perhaps that is part of Bloomberg’s mission: to raise JHU to the highest level. For us on the sidelines, and with exception for the endowment, we think that Hopkins is already there.

The issue of college affordability is complex because cost depends largely on the return on the educational investment. The fact that many, if not most, students who attend college in the US end up with a higher debt load than at one of the most exclusive and expensive institutions in the world should be a shock to our understanding of the taxpayer-supported financial aid system.

It is fair to question whether JHU and other institutions should be privy to federally-funded (meaning, taxpayer supported) grants and subsidized loans. Perhaps, with this large gift from Mr. Bloomberg, Johns Hopkins and its brethren should be removed from Title IV programs, since it seems pretty clear that they do not need the funds to begin with. They already provide their own internal grants and tuition discounts. They can surely create their own loan system, too. Could they not create an income-contingent system with a revolving line of credit from their endowment?

But they don’t. And they won’t because Hopkins has the federal government cushioning their investments through individual and institutional subsidies.

The tale of Robin Hood is about someone taking from the rich and giving to the poor, although some suggest that Robin had more in common with a burglar and thief than anything else. Which version of Robin Hood do Bloomberg and his affluent peers more likely connect with? The person who gives much needed money to those in need, or someone who gives those who have very little need get more than necessary? I would argue that the federal government more accurately plays the role of Robin Hood in US higher education, by taking the collective power of taxpayer funds and redistributing to those with greater financial need. Yes, this is a form of socialism, folks. But that is what government does. It redistributes funds for the betterment of society at large. Federal financial aid does not just support the poor, but also the middle class and even those on the lower rungs of the upper class. And while Bloomberg and others have given millions and even billions to those with great need, they also tip their hat to the wealthy through gifts to alma maters and other organizations.

Without doubt, what Bloomberg did was good. But is it great?

 

 

 

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