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Fred Hiatt: College handouts to the rich

States across the country subsidize higher education for their residents by paying the difference between in-state tuition rates and what a college education really costs. This is so much a part of the American fabric that few stop to think about its regressive aspect.

“We are subsidizing affluent people,” says Sandy Baum, an expert on higher education finance and a senior fellow at the nonprofit Urban Institute. “Young people from affluent families are much more likely to go to college, and more likely to go to four-year colleges, and more likely to go to the flagship colleges.”

And flagship colleges are where the subsidy is largest. Wallace Loh, the thoughtful president at the University of Maryland at College Park, recently said that in-state tuition plus fees at College Park (now $9,400) are well below the median of peer research universities. Meanwhile, the state appropriates $19,000 for each Maryland student to help pay for their education, he said. Does this represent sound policy?

“I think that is the million-dollar question,” Loh responded. “Maryland has the highest median income in all the nation, and we give proportionately the least amount of financial aid. We have a model of low tuition and low aid. So the state is subsidizing those who can easily pay higher.”

I have been asking governors and state university presidents about this for years, and usually they don’t want to touch the issue. Taxpayers believe they are owed a bargain in return for the taxes they pay, and politicians don’t want to disappoint them.

Advocates fear that legislatures, which are already reducing support for higher education, would turn their backs on it altogether if their middle-class and upper-middle-class constituents felt spurned. Then, as Baum warns, you might end up with the worst of both worlds: high tuition and low aid. Even if that didn’t happen, some chancellors say that, in practice, a high “sticker price” for college frightens off poor families before they can even find out how much need-based aid is available.

Loh was careful to say he is not proposing a change in Maryland’s model, which he said is the province of its politicians. But he was less skittish than many of his counterparts in laying out the stakes.

“Should we do a little more redistribution in order to make this opportunity available to all people, which is the great equalizer in a democracy?” he asked. “I think the country is at risk if it doesn’t apply opportunity to its talented kids regardless of their income . . . especially when the face of the country is changing, when there are so many people who have come from abroad.”

Loh may have a special appreciation of this as someone who was born in China, moved as a child to Peru and came to the United States alone as a teenager. He has done well – but he knows there is nothing easy or automatic about success for the first generation to attend college.

College Park has a special program for such students, one that graduates them at a rate not far below the school’s average. But the program, which includes summer sessions, tutoring and extensive financial aid, is expensive, so there are only 98 in the program right now.

The subsidy for the rich hidden within in-state tuition mirrors other entitlements that are defended by both parties as lifelines for the struggling middle class. Billions of dollars in tax deductions for mortgages, charitable giving, and state and local taxes, for example, go to the wealthy, and people from President Obama to conservative economist Martin Feldstein have proposed targeting those more sensibly. Congress hasn’t wanted to touch them, either.

The mortgage deduction wouldn’t have to be eliminated to make the policy more rational, and the same goes for subsidized in-state tuition – which, as Baum argues, serves the vital public purpose of encouraging broad access to higher education. When I asked Loh whether he worried the university would lose public support if it modified its approach, he said, “I don’t see why.”

“Upper-middle- and high-income families would be able to absorb some increase of tuition – I’m not talking about going through the ceiling – and you use that to expand opportunities for other Marylanders,” Loh said. “It’s a win-win.”

Fred Hiatt is the Washington Post’s editorial page editor.

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