Brookings: State College Subsidies Benefit Low-Income Students Most

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July 28, 2016; Atlantic

A new analysis from the Brookings Institution may show that, contrary to longstanding interpretations of America’s public university systems, use of state funds to support indirect subsidies from public universities benefits lower-income students more than higher-income students.

Indirect subsidies fund the gap between public universities’ tuition and the actual cost of education. While these dollars, coming from state, local, and other sources, account for a huge (and rising) amount of educational aid in the U.S., their effects aren’t particularly well understood. The outcomes of direct subsidies, such as grants and scholarships given directly to students, are tied to their recipients; the impacts of indirect subsidies, which may fund university-wide programming or maintenance, are much more convoluted.

Brookings’ analysis of data from four-year public universities challenges the convention that indirect subsidies favor high-income students. The belief in the wealthy-but-well-subsidized student stems from studies of per-student expenditures at elite public universities: More selective schools receive more state appropriations and spend more per student. Lower-income students disproportionately attend less selective schools, which receive smaller appropriations and spend less. However, Brookings measured two datasets (the National Postsecondary Student Aid Study and the Integrated Postsecondary Education Data System, for those interested in some light surfing) to create a different measurement.

Instead of measuring per-student spending, Brookings defined an indirect subsidy as the difference between a student’s tuition and what the university spends on education. The authors of the analysis point out dividing a university’s total state appropriations by its total number of students offers a very incomplete picture of the money educating each student, as total university spending may include research, athletics, hospitals and other non-educational expenditures.

Under this definition, among in-state students, indirect subsidies are actually shared equally among students of all incomes. When state residency is not a factor, low-income students actually receive a higher proportion of the subsidy. More selective universities do, indeed, receive more indirect subsidy per student, and enroll students with higher average family incomes. However, those high-income students pay more tuition, more than offsetting the higher expenditures of the competitive schools. And, at every level of selectivity, low-income students pay significantly less than high-income students.

Another surprising finding is that low-income students were represented in more-selective schools at a higher rate than researchers expected. Students with a family income below $30,000 made up 25.1 percent of students in very selective schools and 30 percent of students in selective schools.

So, what should be the policy implications of this study? Its authors are unsure, and the knowledge that high-income students do not disproportionately benefit from indirect subsidies may not placate those who believe that low-income students should receive more benefits, based on higher need.—Lauren Karch