At least 15 states have explicit policies under which some of the revenue from students who pay tuition at public universities goes to others who can’t cover the full cost, according to the State Higher Education Executive Officers, or SHEEO. In Arizona, for example, public universities channel about a quarter of tuition revenue into discounts, grants and other forms of financial aid. In North Carolina, at least 25 percent of money generated by any increase in tuition goes to such subsidies, while in California it is one-third of each tuition increase.
Donna Rosato of Money magazine talks about how to cut costs on college tuition and the strategies parents can use to make their child’s bachelor’s degree more affordable for the family.
Critics say this penalizes not only full-tuition-paying, high-income parents and their students, but also middle-class families already being squeezed by escalating costs. In June, the Iowa Board of Regents ordered the practice to end in that state within five years. There, some $144 million a year in financial aid is redistributed to low-income students — as well as high-achievers who don’t qualify for federal aid — from the tuition their classmates pay. The regents called for the portion of tuition that now goes to truly needy students to be replaced by contributions from the universities’ fundraising arms.
Similar appeals have come from the governor of Virginia, Arizona legislators and members of the University of North Carolina Board of Governors.
Since universities are also offering more scholarships to students with high grade-point averages and SAT scores, which elevates them in the all-important U.S. News World Report college rankings — and since many of those top students come from affluent families and don’t qualify for federal aid, Gillen said another trend is at work. “Rich, dumb kids,” he said, “are subsidizing rich, smart kids.”