College Admissions Decoded

Fit, Finance, and Equity: Two Economists Discuss College Affordability

Episode Notes

How does the ticket price on higher education impact access, and what should families be paying? Two economists tackle these questions with the CEO of NACAC Angel Pérez. Together, they explore what financing constructs can increase equity, and what advice they have for those making difficult decisions about what they can afford.

Guests: Sandy Baum, non-resident Senior Fellow at the Urban Institute, Phillip Levine, Katharine Coman and A. Barton Hepburn Professor of Economics at Wellesley College. Moderated by NACAC CEO Angel Pérez.

Episode Transcription

Angel Pérez: Hello, and welcome to the College Admissions Decoded Podcast, an occasional series from the National Association for College Admission Counseling, or as we call it, NACAC. NACAC is an association of more than 25,000 professionals at high schools, colleges, universities and nonprofit organizations, as well as independent counselors who support and advise students and families through the college admission process. I'm Angel Pérez, NACAC CEO and the host of today's special edition. College Admissions Decoded covers topics that are important to students and families who are considering next steps in the college admission process.

Pérez: Today, I'm here with two experts on the economics of higher education. They are change makers in the field of higher education, and I'm honored to have them here today because I've known them for a very long time. With me today is Sandy Baum. Sandy is a non-resident Senior Fellow at the Urban Institute, a nonprofit research organization that provides data and evidence to help advance upward mobility and equity in the United States. Her most recent book, Can College Level the Playing Field? Higher Education in an Unequal Society, examines how we can address the root causes of social injustice and level the playing field for students and families before, during and after college. Sandy, welcome. So excited to have you here.

Sandy Baum: I'm very happy to be here. Thank you.

Pérez: With us today is also Phillip Levine, who is the Katharine Coman and A. Barton Hepburn Professor of Economics at Wellesley College. His new book, A Problem of Fit: How the Complexity of College Pricing Hurts Students and Universities, analyzes the system of pricing and affordability in higher education. His work applies statistical methods to address social issues, like college access, abortion and births, early childhood education and gun violence. Phil, wonderful to see you.

Phillip Levine: Thanks. I'm glad to be here and I'm looking forward to the discussion.

Pérez: Great. Well, let's get started. There's so many questions that I would love to ask you, but I really want to start by talking from a personal perspective. Phil, in your book, you start by talking about your own experience in the college admissions process and that of your children. So this work is really personal to you. And I know that you didn't set out to be an economist of higher education. And Sandy, I know that you didn't either. So why has this particular segment of economics become such a passion for both of you? And Phil, maybe I'll start with you.

Levine: I've been a professor at Wellesley College now for 31 years. It's a small liberal arts college and faculty form strong connections with their students. Some of my students come from lower-income backgrounds. I learn about the struggles that they face getting to Wellesley and then I see them succeed at Wellesley and go on to graduate. And then they go out in the world and do great things. They make a good living, help their parents, provide for their children and give them many of the advantages that they didn't have. Their lives and the lives of everyone else in their family changes. All of that happened because they received substantial financial aid. We need to be able to do that for more people. It's just as simple as that.

Pérez: Very powerful. How about you, Sandy?

Baum: Well, as you know, I was also a professor at a liberal arts college, Skidmore College, where Angel was one of my students. And so watching students who come from less advantaged backgrounds and succeed has also been very important to me. But I will tell you that the way I got into this field was because I was interested, I mean, I started in graduate school in economics being interested in income distribution and public policy. And so I was thinking about public policy in a variety of areas and their impact on income distribution. And higher education was an obvious area. And when I started working in this field, people in higher education were so interested in learning more and in talking to economists who would help them think about it, that it just drew me into this endeavor for the rest of my career.

Pérez: Well, and I'm glad the both of you have because you really have made a huge contribution to the field. So let's dive into some of the content of your latest work. And Sandy, I'd love to start with you. In your book, which is coauthored with Michael McPherson, you argue that higher education can and must play a role in addressing inequality, but that it can't do it alone. And I want to read a quote from your book. You write, "The inequalities that we see when young people reach the college crossroads have been developing since birth, or even before. Understanding the potential for higher education to provide opportunities for upward mobility and to reduce inequality requires understanding the circumstances facing young people in the earlier years of their lives." Can you expand a little bit on that?

Baum: Sure. We wrote this book because as part of the ongoing discussion about higher education and inequality, we were struck by how often people tend to focus narrowly on what colleges can do. I mean, the most common thing is to suggest that if only elite colleges like Wellesley, and Skidmore, and Harvard, and Stanford would admit more low-income students, then we would make a big dent in inequality. And the fact is that a very tiny share of students go to selective colleges. Most students, and certainly most students from low-income backgrounds, go to broad-access institutions. And it's those institutions that students are going to keep going to. Those are the institutions that really have to make a difference. And they enroll students who haven't, by the time they get to college, already crossed the barriers to learning how to learn, to excelling in an academic way. So they face much bigger challenges.

Baum: And we have to do more to help those institutions face the challenges. Students come to the door as they are. And that challenge is one that we have to meet. That said, colleges and universities could do much more if students had grown up in more equal environments. So unless you pay attention to neighborhoods, to K-12 institutions, to preschool education, to healthcare, you're never going to get to a point where 18 and 19 year olds come to the door really ready to take advantage of the opportunities that colleges can offer. So we need both. We need to help students as they are. But we really need to, as advocates for higher education and college success, do more to change the environments in which children grow up.

Pérez: What would you add, Phil?

Levine: I just want to start out by saying that I 100% am fully on board with Sandy's arguments. We live in a society where there's considerable inequalities in our K through 12 education system, in our system of early childhood education, and in other dimensions of life that children experience well before they get to college. If we truly are going to improve social mobility in the United States, we have to address those issues. From my perspective, though, there still are a number of students from lower-income backgrounds who somehow manage to overcome those obstacles. And they make it to the point where they're college ready. My feeling is that for those students, we especially owe it to them to receive a college education and take advantage of the significant benefits that go along with that. Making it too expensive for them to attend is just adding insult to injury.

Pérez: This is actually a perfect segue to my next question, because in your books you both argue that a huge part of the challenge in increasing opportunity for low-income students is the complexity of the financial aid system. And Phil, you actually dive deep into the issue of pricing transparency. You remind us that most students don't pay sticker price and that making the system more affordable does not help anybody if nobody knows about it. So I'm wondering if you could elaborate on this issue and since it was your quote, I'll start with you, Phil.

Levine: Sure. So here's what we know. 13% of students, 13% of students who attend four-year residential colleges pay the full sticker price. Everyone else is receiving some form of financial aid. Even ignoring loans and work study, 75% of students are receiving grant-based financial aid. People just don't know that. Parents of college age students overestimate college costs by 50 to a hundred percent, depending on whether we're talking about public or private institutions. Half of all students approaching college age only know the sticker price. This does not mean that we don't have affordability problems, even if everyone knew the actual prices that they would face. We do. But how can we expect students to make good educational decisions if they have no idea how much college is going to cost? This is a problem that we have to fix.

Pérez: I absolutely agree. And I just want to say that again for the audience, particularly the students and the parents. Only 13% of families who are at four-year institutions are paying the full price. I mean, so clearly a majority are not. So it's a huge issue. And Sandy, I know you feel passionate about this topic as well.

Baum: Certainly. I totally agree with Phil. I mean, we happened to have written books about different aspects of the problem. But I don't think you're going to get us to argue. And you can't choose one aspect of this problem over the other. You have to be thinking about the short term and the long term. You have to think about how to solve the problems for today's students. And that means fixing many of the problems that Phil is addressing. I think that there's a real problem with communication and with information. But there's a tendency to think, well, we'll make another website that will have all the relevant information on it. And that's just not good enough, because the students about whom we're most concerned, don't go to the website, don't know how to interpret the information on the website. We have to get down to a much more personal level.

Baum: And another issue, I think, that's really important that I want to make sure we don't forget about is that it's not college tuition so much as living expenses that create problems for many students. A lot of students are getting grant aid, as Phil says, that pretty much does a good job of helping them pay the tuition, covers it for many students. But then they still have to live. And it's very difficult to work full-time and go to school full-time. So grappling with that is, I think, a much more difficult problem.

Pérez: Absolutely. So I would love for you to grapple with an issue that is controversial, which is free college. And oftentimes the public believes maybe that's the answer to solving the inequity issues in our country and the equity gaps. And I know that the both of you had addressed the issue of whether or not college should be free in your books, from a bit of a different perspective. So maybe, Sandy, I'll start with you. Tell us how you feel about free college.

Baum: So the issue is not that I think people should have to pay more for college. The issue is that I don't think free college is a solution, or the solution to the problem. I mean, one issue is that free college, the words free college, are very helpful. To the extent that what we have is a communication problem, that people think it's too expensive, telling everybody it will be free will, and maybe, make more people enroll in college. But the fact is that it still won't be free, because they still face living expenses. We are talking about free tuition and nobody's talking about private colleges being free. People are talking about tuition being covered at public colleges, sometimes only two year, sometimes two year and four year. No one's talking about graduate school being free. So we don't solve the issue that way.

Baum: But the other issue is that many free college programs spend a lot of money giving discounts to students who can afford to pay. If you think about federal and state need-based grant aid, for community college students, many of the lowest income students, the majority of them, have their tuition covered. So these programs don't give them extra money. They only give extra money to the students who were going to have to pay, because they were too rich to get Pell grants and state need-based grants. So it's a very expensive way of solving the problem when low-income students already need more money than they're getting.

Pérez: You bring up an interesting topic. And it reminds me, I spent many years in higher education as a Vice President for Enrollment. And I still remember the conversation about increasing tuition every single year. And there was always the argument of we should keep it flat. But then there's also the argument of, well, there are students and families who can afford to pay more, who can then subsidize the other students who can't. And so it's actually a really complicated formula that most of the public doesn't understand. Phil, how do you think about this issue of free college?

Levine: I think it's probably not a surprise at this point that Sandy and I agree on most of these things and certainly this is one of them that we agree as well. I strongly support making college affordable for everyone. For students from low-income families, college should be free. Free means not just free tuition. Free means full cost of attendance, because they have living expenses as well. We need to be able to make college affordable for everyone means that they need to be able to pay what they can afford. What they can afford is not necessarily free. If you're from the higher income family, you can afford to pay more. The greatest benefits, the financial aid system should be accruing to lower-income families. That just seems logical to me. That is not what free college does. Free college largely provides the biggest benefits to higher-income families. That doesn't necessarily make sense to me. Why would we want to do that?

Pérez: Fascinating. I don't think most people think of it that way, of the fact that we're actually subsidizing higher-income families through this model. So again, you can probably tell why it's such a complicated issue. Sandy, I want to pick up on something you talked a little bit about earlier that is always on my mind. And part of it is because I did work at highly selective institutions most of my career. So I want to talk a little bit about the "elite" or as I like to call them, well-resourced institutions. I'm always struck by how much pressure the public puts on them to diversify. And of course, they should. But it won't solve the problems of inequity across the nation. And Sandy, you pointed out that the majority of students don't attend these institutions. So what should we actually be focusing on? And Sandy, maybe I'll start with you.

Baum: Well, I agree with everything you said. You described the situation quite well. These elite colleges do have a lot of resources. And some of them much more than others. I mean, it's sort of a problem that people think the institutions that you worked at, for example, are as rich as the institution that Phil works at. There's a big gap there. So they don't have the money to do everything they want. But institutions with the resources should obviously, be thinking about how to give more and easier access to students from low-income households. And that means not only generous financial aid programs, which most of them have. The cheapest place for low-income students to go to college is actually the colleges that are the most selective have very high sticker prices, but very generous financial aid programs. They make it really free for low-income students.

Baum: But those institutions could do more. They can work with their communities. They can get involved in supporting students who are never going to get into these selective institutions, but do have the potential to go to college and get a good education, but they're going to under-resourced institutions. And if these very wealthy institutions make it part of their mission to help the communities around them and the students around them, they could make a difference. But really for most students, what we need to do is make sure that the public institutions, the community colleges and the broad-access public four-year institutions are better funded and have the resources to help students succeed. State funding formulas are problematic in the sense that they tend to underfund those institutions for political reasons and for reasons of the visibility of the flagships. And it's not easy to say what the right amount of funding is, but they need more resources.

Baum: One of the risks of free college is that if the first priority is to make sure students don't pay tuition, then making sure that the community colleges have enough money to really function well is not the first priority. And it should be.

Pérez: Powerful. What about you, Phil? How do you think about this issue?

Levine: So in some sense, this is what led me to write my book, which has the title, A Problem of Fit. And what's the goal that we're after here? The goal is not to get everyone into Harvard. Not everyone can go to Harvard. Not everyone is well suited to go to Harvard. The goal is for everyone to go to a school that is a best fit for them. So if you're incredibly academically gifted, Harvard might be a perfect opportunity for you. Some students will just thrive at a public institution. Others do great at a community college. For some students, it may even be the case that college isn't the right answer at all. What we should be after is a higher education system that enables everyone to go to the institution that is the best fit for them. Our current higher educational system does not accomplish that. And that's what led me to the title of my book, A Problem of Fit.

Levine: There are certainly a lot of obstacles in the way that prevent that from happening. Fixing all of them are really difficult. My focus in my book is not fixing all of them. It is thinking about the pricing system, because the pricing system certainly contributes to these problems. It should turn out to be the case that students know the prices they need to pay. And those prices need to be affordable. We're not going to be able to get to the point where students are going to the "right" institutions for them until we can solve the pricing problem.

Pérez: It's interesting. I've always thought about how odd it is that higher education is one of the few products, "products," if you will, that consumers will purchase that they don't fully understand. Unless you're paying the full tuition and sticker price, which as we know, most people don't, that you don't fully understand what you're actually going to pay. The only other one I can think of is healthcare, where you might go to the hospital and really have no idea what that's going to cost. But it is to your point, Phil, really important that we fix this issue in this country. So I like to have a little fun. And I know that we don't own magic wands, but I always like to dream that if I did, I could change the world. If you had a magic wand, what is one thing you would change to make college access more affordable and equitable, Sandy?

Baum: Well, I think in the short term, I would increase the federal Pell Grant Program, which gives grants to low and moderate income students. And it is what puts money in students pockets. And they need more money to get through college successfully. I mean, we always hear about hungry students, about students who don't have a place to live. That means they don't have enough money is what they need, more money. And the Pell Program is a very good way of getting money to them. But I have to return to the core argument of my book, Can College Level the Playing Field? If we really, really want to increase college access and success, we have to worry about putting more money and more resources into healthcare, K-12 education, early childhood, et cetera, because without that, it doesn't matter how big the Pell grant is, there will be many, many young people who simply are not prepared to succeed in college.

Pérez: Absolutely. How about you, Phil? You've got a magic wand. What will you do?

Levine: So my magic wand is the short-term magic wand that Sandy refers to. Not only would I argue that we need to increase the Pell grant, I actually report calculations in my book, that the right solution to this problem is to double the Pell grant. Doubling the Pell grant will exactly fill in the affordability gaps that lower-income students face, particularly at public institutions. Pell grants are focused on lower-income populations, but doubling its size will also increase its range in the income distribution, moving it a little bit more into the middle class. It's the right solution with the right amount of money targeted at the right population. The cost of doing so is in the vicinity of 40 billion dollars a year. That sounds like a lot of money, but the federal budget is 5 trillion dollars a year. So in the context of that, this really is not that much money. I think it is a solution that is doable in the short term and would help a lot.

Pérez: Well, we certainly agree with you here at NACAC and we're doing everything we can to advocate with federal officials on that particular issue.

Baum: Could I just point out putting the context again of doubling Pell grants into a larger federal context? The amount we're spending every year now on the student loan pause, that says people don't have to repay their loans, is more than the amount we would spend on doubling the Pell grant. And if we were to forgive outstanding student debt, instead of doing that, we could double the Pell grant for many years.

Levine: Also, I think, that using numbers like that, I think, something like doubling the Pell grant, we can double the Pell grant for 10 years for what it would cost to forgive student loans up to, Sandy, you know this better than me, something like $50,000, up to $50,000 worth of debt? Or is it $10,000 worth of debt?

Baum: Yeah, that's a small... Less than, probably whatever we're planning to do, we could double the program for about 10 years.

Levine: Right. That's much cheaper than that.

Pérez: Really, really powerful data. So I actually want to turn now to what I feel is our most important audience for a little bit, students and the counselors and parents who guide them. You're both steeped in this work, but you're also parents who went through the process yourself. So what advice would you give to those who are just starting to navigate this process? And Phil, maybe I'll start with you.

Levine: So the affordability problems are issues that parents can't necessarily solve themselves, but the knowledge problem they can. It is not a simple problem to overcome, but doing your homework definitely can help. There are tools out there which aren't necessarily easy, but they can help you figure out what you actually will be asked to pay to attend college. And to the extent that you recognize and learn that this is less than you think it's going to be, that can potentially help you overcome that obstacle of the fear of the price. Because at the end of the day, a college education is an outstanding investment. It generates returns of lifetime incomes that's considerably greater than its cost. And to the extent that we're able to encourage people to make good investments and benefit themselves, that's something I think we need to be able to promote.

Pérez: Great advice. How about you, Sandy?

Baum: Well, I would just add that parents should understand that they should not have to pay for the information that they need. There are a lot of people out there willing to take money from the ill-informed parents. And this information is available. If your high school counselors don't have the information, go to a local college, go to their financial aid office and ask for information. Maybe there's a community organization who can really help you and give you personal advice. And don't pay for that advice.

Pérez: Absolutely. And I would also say to the families that are listening to go to our website, and we can help connect you and help you to begin to navigate this process. And the other thing, and I know we've spoken offline a little bit about this. I just thought I'd throw this piece of advice out there. I still remember being an Admissions Dean. And in the month of April, when students were making decisions, they had admission offers, sometimes the parents would come into my office and ask to speak to me privately and have the conversation about affordability.

Pérez: And I was always really sad by that conversation at that time of year, because I thought it's too late to have this conversation. We should be having a conversation as a family earlier in the process to talk about what we can afford and also what we are willing to pay. Those are two very different things. But I see that a lot in families, this anxiety about talking about money. Phil or Sandy, would you add anything about that?

Levine: I think this process of doing homework like I'm describing is one that should involve both the parents and the students. So thinking about from an early stage and the process freshman, sophomore in high school or whatever, and starting to think ahead about, am I going to be able to afford to go to college? Answering that question requires obviously, the student doesn't necessarily have all the information. A lot of times it's about the parents' income and resources. And starting that process of thinking about college costs requires having conversations between students and their parents about finances. That's a great way to start the education process and personal finance.

Baum: So certainly having conversations as a family is very important. Of course, for many students, the issue is they're older and their parents aren't in the picture. So it's just understanding their own finances or those of their own and their spouses finances. But I think another warning is to be realistic. So people may have heard of the Parent PLUS Program, which is a program through which the federal government lends money to parents to help them pay for college. And there's some really horrible stories about parents who just want the thing that their kid dreams about. And even though they can't afford it, they take these loans and they know they'll never be able to pay them back. And we have parents living below the poverty level, borrowing money through this program. And then it is just, they're not going to earn more money, because their kids go to college. Their kids, hopefully, will earn more money.

Baum: So it may be that parents and students have to have conversations about, you can go to college. Really anyone can go to college. They can afford to go to college somewhere. They'll be able to find that. But that doesn't mean they can go to whatever college they want to wherever it might be. And acknowledging that and making pragmatic choices has to be part of this conversation.

Pérez: Well, this is wonderful advice. And I wish I could speak with you all day, but I know that we all have other things that we need to get to. But I really want to thank the both of you for taking the time. I also want to thank you for writing your books. I would like to really encourage the audience to look for both books. Sandy's book is, Can College Level the Playing Field? Higher Education in an Unequal Society. Phil's book is, A Problem of Fit: How the Complexity of College Pricing Hurts Students and Universities. I know you'll be pleased when you read the book. And thanks to the audience for joining us for this episode.

Pérez: College Admissions Decoded is a podcast from NACAC, the National Association for College Admission Counseling. It is produced by LWC Studios. Kojin Tashiro produced this episode. If you would like to learn more about NACAC's guests, are organization and the college admissions process, visit our website at And please leave a review and rate us on Apple Podcasts. I look forward to seeing you again on College Admissions Decoded.

CITATION: National Association for College Admission Counseling. “Fit, Finance, and Equity: Two Economists Discuss College Affordability.” NACAC College Admissions Decoded, National Association for College Admissions Counseling, September 12, 2022.