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Financial Aid Confusion

Sexton Commons, Saint John's University

Among the complexities of higher education, the private college financial aid model is often the least understood, as it varies among schools, and many schools, like Saint John’s and Saint Ben’s, offer both need-based and merit-based aid.

Below is a column written to try and clarify some of these issues, written in response to an earlier opinion piece in the Minneapolis Star Tribune that was critical of the Minnesota private colleges for their financial aid policies.

Counterpoint: Yes, ‘The Price is Right’ for higher education – and it’s not at all unfair*

For typical Minnesota private colleges like Saint John’s, there’s no “cross subsidization” among students. Still, it’s a tough balancing act.

The economics of higher education are quite complicated. College leaders struggle with these issues every day, including by trying to make them understandable to students and families. “Are you the next contestant on ‘The Price is Right?’ ” touched on these important and complicated issues but in ways that were ultimately misleading.

The article focused on private, nonprofit schools in Minnesota. As an economist by training and president of Saint John’s University in Collegeville, an institution typical of hundreds of small, private, liberal arts colleges around the country, I hope to bring some clarity to this confusing topic.

At Saint John’s, we are selective, but not elite. Our students generally come from the upper quarter academically of their high school classes. We have 1,700 students and a very typical campus with dormitories, classrooms, laboratories, athletic facilities, administrative buildings and, atypically, a world-famous church set amid the lakes, forests and prairie of central Minnesota.
We are, alas, not particularly rich; nor are we especially poor. Our endowment is in the middle of the pack among small, private, liberal arts schools.

At one level, our economic story is very simple. Our revenues come from tuition, alumni gifts and endowment income. Our economic costs are, foremost, compensation for faculty and staff; annual operating costs such as energy, books, journals, copying, etc.; and capital expenses including the costs associated with buildings, land, equipment and technology.

Comparing revenues and costs results in an important, possibly surprising, and little understood fact about our economic model. If every single one of our Johnnies paid our full tuition of $43,000 a year, which almost none do, we would still not have enough revenue to cover the full cost of providing our students the exceptional education they receive.

The economic reality is that every one of our students receives a subsidy, regardless of what they pay. That subsidy comes from Saint John’s alumni and friends, past and present. It does not, as some believe, come from higher-paying classmates.

At Saint John’s, as is true of virtually every higher education institution I know, there is no “cross subsidization” between students. Every additional dollar necessary to cover the true cost of the students’ education beyond the sticker price comes from nonstudents: either from many decades of investment in our campus facilities and endowment or annual fund gifts in the current year or through future fundraising that will cover wear and tear on facilities used by current students.

Quadrangle Building, Saint John's UniversityThis fact may be hard to believe, but the compensation of highly educated faculty and staff and the capital embodied in extremely expensive and high-tech buildings that makes the American model of higher education so exceptional also explains the high per-student cost of America’s best-in-the-world education.

The second part of the economic model for schools like Saint John’s is much harder to navigate and understand. The reality is, of course, that most of our students cannot pay our full tuition without financial aid. Then the question becomes how to use our limited financial-aid resources and discounts to further subsidize the tuition costs for our students.

There are two basic choices. If the school is what might be called an elite institution, enjoying excess demand for the limited number of seats in its entering class, it is very likely to provide only need-based financial aid. Families submit financial-aid forms and then, using federal government formulas, an expected family contribution is calculated. Those students whose families have the economic resources to pay the full sticker price are asked to do so and those families who demonstrate financial need in order to cover tuition receive financial-aid packages commensurate with their need. These elite schools are very limited in number but include the usual suspects such as Harvard and Stanford.

The second financial aid model is the one Saint John’s and the vast majority of private schools use. When we package financial aid for each of our students, we consider both financial need, as described above, and student merit, which is based on the applicant’s academic record.

Why would we choose to use some of our precious financial-aid dollars and limited discounts to reward students from well-off families who could pay our sticker price? Because, for non-elite institutions like Saint John’s, it is valuable to all of our students to maintain a certain academic standard. By attracting a stronger overall academic class through the use of merit aid, the educational experience for all of our students is enhanced.

This is what economists refer to as a positive externality. Stronger students will raise the overall academic level for their peers and improve the performance of the whole cohort.

It is certainly true that every dollar we spend on merit aid is a dollar we cannot spend on need-based aid, so there is most definitely a trade-off. A further complexity is that many students get both kinds of aid.

Because of this trade-off, one can debate the equity of a financial-aid system that includes both need-based and merit-based aid. Yet for non-elite schools — like the vast majority of Minnesota private colleges — that don’t have multiple equally qualified applicants vying for every spot in an entering class, it is certainly a defensible choice to offer somewhat less need-based financial aid in exchange for the benefits to all students of attracting a stronger overall academic class.

This difficult balancing act, however, does not result in a subsidy from financially needy students to academically strong students — neither of those students pays the full cost of their education, as described above, but the amount of subsidy each individual student receives does depend on how a school chooses to allocate need-based and merit-based financial-aid dollars, both of which discount the cost of tuition.

It would be great if every school had the financial resources and applicant pool that elite schools have, but that, of course, is why they are elite.

At Saint John’s, as a selective but not elite school, we work hard every day to provide an exceptional and affordable education for students from a full range of economic circumstances, subject to our resource constraints. We also strive to honestly educate students and families about the complex economics of higher education that are understandably confusing.

I can also say with complete confidence from having worked with and competed with my Minnesota private college peers for years, every Minnesota private, nonprofit college does the same.

*Published in the Minneapolis Star Tribune on May 21, 2018

 

Do Clever and Kind Go Together? *

Welcome to faculty, staff, parents and especially to the 2018 candidates for induction into the  Theta of Minnesota Chapter of Phi Beta Kappa, the nation’s oldest and among its most prestigious academic honor societies.  I am delighted to be with you here on this gorgeous spring day in Collegeville to celebrate your academic successes.

I’d like to share with you a quote from the Polish-born American Rabbi and philosopher Abraham Joshua Heschel that I think is very appropriate for this academic occasion at our Catholic and Benedictine institutions.

Near the end of his life Heschel said, “When I was young, I admired clever people. Now that I am old, I admire kind people.”

Now that I am well into at least early middle age, I have lived long enough to find that I agree with Rabbi Heschel’s observation—to a point.

Ever since I came to Saint John’s in 1977, I have lived almost entirely in the academic world, either as a student, faculty member or administrator.  In this world it is completely natural and appropriate to admire people who are academically successful—intelligent, creative, quick, insightful—“clever people” in Heschel’s phrasing.  I too admired these people and still do, but I also came to realize, even during my undergraduate days, there were other human traits that were at least as admirable as intelligence.

As Heschel describes his changing views, his quote suggests, at least implicitly, a juxtaposition between clever and kind.  Is Heschel possibly suggesting the two can’t go together?  Villains in literature and film are almost always clever, while the good souls are often at least naïve and sometimes even simple.

As we are here today to honor our most academically successful students, I think it is important to recall that one of the incredible strengths of our Catholic and Benedictine academic institutions is that while we absolutely celebrate academic rigor, we also honor and try to live by Benedictine values—with an emphasis on respect for individuals and commitment to community.

In my experience, clever and kind very often do go together.  In my 40 years of association with SJU, I have found the vast majority of the most exceptional individuals I have met at Saint Ben’s and Saint John’s are both clever and kind.  Being one in no way diminishes the other.

At CSB and SJU we believe in the importance of both cleverness and kindness, and that is what we are celebrating today as we honor you as the newest members of the only Benedictine PBK Chapter among the 286 institutions that host a chapter.

I encourage you to take all that you have learned and developed at Saint Ben’s and Saint John’s with you as you leave our institutions.  I wish you the best as you use your cleverness and kindness for your future success and for the good of the world.

*A version of these remarks was given at the PBK induction ceremony on April 25, 2018.

Demographic Reductionism

Brooklyn Museum via wikimedia common's user Cm300883A recent article in the New York Times examines a controversy at a New York art museum.

The article by Maya Salam describes criticism the Brooklyn Museum is receiving for hiring Kristen Windmuller-Lund as the curator of the African art.  Windmuller-Lund appears highly qualified on paper.  The story notes that she “has Ph.D. and M.A. degrees from Princeton, and a bachelor’s degree in the history of art from Yale. She has worked at the Metropolitan Museum of Art, the Princeton University Art Museum and the Neuberger Museum of Art in Purchase, N.Y.”  She is also white.

Critics of the decision “on social media and from an anti-gentrification activist group…argue the selection perpetuated ‘ongoing legacies of oppression.’ ”  Another activist group wrote that the museum’s choice was ” ‘tone-deaf’ and said that ‘no matter how one parses it, the appointment is simply not a good look in this day and age.’ ”

The Brooklyn Museum is pushing back against the criticism, releasing a statement praising Windmuller-Luna and including a reaction from Okwui Enwezor, the renowned Nigerian-American curator, scholar and arts leader, who called Dr. Windmuller-Luna,

“…formerly a brilliant student of mine.  The criticism around her appointment can be described as
arbitrary at best, and chilling at worst,” he said. “There is no place in the field
of African art for such a reductive view of art scholarship according to which
qualified and dedicated scholars like Kristen should be disqualified by her being
white, and a woman. African art as a discipline deserves better.”

The story caught my eye because of its potential implications for higher education.  There are at least two major concerns with a world view that suggests subjects, disciplines or topics should be limited to certain individuals or groups.

1. Educational breadth.  A broad-based liberal arts education is the foundation of most of the finest universities in the United States and is part of every institution that has general education requirements.  The underlying philosophy is that every student benefits from studying things that are outside their experiences in order to stretch and challenge them.  Such study makes students better able to understand the experiences of others and more empathetic.  It might even introduce them to a topic that could become their academic major and even a lifelong passion.  Faculty do not discourage certain students from studying topics based on their background, gender, economics, religion or any other demographic characteristics.  In fact, on the contrary, students are often encouraged to try subjects that are distant from their previous experiences.  This may well be how Windmuller-Lund got interested in African art.

2. Demographic constraints on professors.  Beyond the limitations this narrow world view would impose on students’ educational choices, consider how the logic of the Brooklyn Museum’s critics could play out when taken to its logical extreme.  Only white men teach Shakespeare?  Christians only research Christianity?  Women only teach Middlemarch and Virginia Woolf?  Latin American or Asian or European historians must have appropriate genetic/family roots?  Jews only explore the meaning of the Holocaust?

To reduce individuals to the collection of demographic characteristics they might check off on a census form is deeply reductionist.  It suggests that an individual is simply a collection of traits rather than a person capable of synthesizing their many attributes into a complex irreducible human being.

If a liberal arts education teaches anything, it is that we are all capable of transcending mere genetics and history.  Ideally we can discover and live out a shared humanity in which we have much more in common with each other than the differences that are sometimes given too much weight.