HESA

Higher Education Strategy Associates

October 21

Operating Budgets

So, yesterday I said it was pretty easy to show what’s going on in university budgets just by looking at operating grants, tuition, and salaries – and so I thought, perhaps, I should practice what I preach.  So here goes:

Between 2004-5 and 2012-13, operating grants from provincial governments rose from $8.27 billion to $10.9 billion (all figures inflation-adjusted, expressed in 2012 dollars), an average increase of 3.5% per year.  But this encompasses two very distinct periods.  Up until 2009-10, the rate was about 5%, whereas since then the average has been 1%.

Tuition income has been rising by 5.3%, but here again we see a two-period effect.  Between 2004-05 and 2008-09 the increase averaged about 3% per year, after inflation; since then it’s been about 7%.  And this when actual tuition rises have only marginally outpaced inflation – the growth has mostly come from increases in fee revenue from international students and professional Master’s degrees.

Put all of that together and you get Figure 1, below, which shows that operating grants increased 4.4% per year, after inflation.  And you thought there was some sort of crisis.

Figure 1: Operating Income at Canadian Universities, 2004-5 to 2012-3, in Millions of $2012 (Source: CAUBO Financial Information on Universities and Colleges)

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So much for income.  What’s going on with compensation?  Well, here’s the simplest way of showing the data.

Figure 2: Operating Budgets and Total Salaries & Benefits at Canadian Universities, 2004-5 to 2012-3, in Millions of $2012 (Source: CAUBO Financial Information on Universities and Colleges)

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In 2004-5, staff compensation was 72%, and while it bounced around between 69% and 74%, by 2012-3 staff compensation was still exactly 72%.  And although the portion of this which goes to academic salaries fell slightly (40.8% to 39.2%), it was offset by a rise in benefits.

Now, it’s tempting to look at all this and say “what the heck is all the fuss about”?  Institutional income and salaries are rising at the same rate, meaning pay rises are affordable and, by implication, staff costs have not increased faster than non-staff costs.  But this is looking backward to a time when institutional income was rising 4.4% per year.  The question is: how likely is it we’ll keep hitting that mark in the future?

Tune in tomorrow for some scenario planning.

October 20

Talking About Money

As I go from campus to campus across the country, one of the things that truly astonishes me is the poor quality of conversation about money.

There are far too many campuses where the administration insists everything is fine, until it comes time to negotiate collective agreements (especially with faculty) – at which point everything is suddenly disastrous.  As a result, faculties are naturally suspicious of these claims.  If everything really is disastrous, they reason, why are we only hearing about this now?

When administrations present claims ham-handedly, this scepticism is fair.  Where problems arise, however, is when faculty unions decide to play on this scepticism, and start spreading (what are essentially) falsehoods about university finances.  “They’re diverting operating budgets to the capital budget!” goes one oft-told story – which seems to be born of unwarranted jumping-to-conclusions about “unrestricted” and “restricted” funds in institutions’ annual financial reports (the unions assume they are equivalent to operating and capital, which they aren’t).  So one major problem we now have is that there is simply no common set of understandings on campus about the financial situation institutions face.  It’s getting to the point where some schools practically need a Parliamentary Budget Office to set out some common ground.

Though people like to make university finance out to be hugely complicated, it’s not.  You can more or less ignore everything going on in the capital and research budgets: for most purposes, the operating budget is what matters.  On the income side, well over 90% of operating budgets come from government operating grants and tuition fees.  On the expenditure side, salaries and benefits make up 75% of operating expenditures.  If salary mass is growing more slowly than operating grants and fees, a pay raise (or some new hires) might be in order; if operating grants and fees are growing more slowly than salary mass, you’ve either got to rein in salaries or find some other stuff to cut.  Many people out there want to complicate this, but that’s really all there is to it.

What institutions need to do is constantly inform their communities about what’s happening to those three things, and invite everyone to think through scenarios for the future.  Think we should all get 3% raises?  How likely is it that government income will rise to match?  If not, is everyone prepared to take on more international students to keep the appropriate amount of money coming in?

Institutions could be publishing something on this every month in their house newspapers.  If they wanted to, they could send something out to all staff every week.  They could invite faculty to help them find better ways to communicate budget information.  Then there would be some shared understanding of financial situations, and the atmosphere on campus would get a lot less tense.  I’d cite McGill here as something of a leader: I’m a big fan of their budget infographics and budget books.  Not coincidentally, McGill seems to be one of the places that has adjusted to declining revenue with the least amount of fuss.

Most faculty know times are tough, and want to be part of the solution rather than part of the problem.  But their goodwill can’t be tapped so long as institutions aren’t more open about finances and financial projections.

October 17

North American Fachhochschule

When trying to make big-picture comparisons between Europe and North America, one big difference always shows up: the existence in Europe of large, Bachelors’-degree-delivering institutions, which are nevertheless not universities.

These go under various names in various places – ammattikorkeakoulu in Finland (which the government translates as “polytechnics”, but which institutions themselves choose to translate as “universities of applied sciences”), Hogescholen voor Hoger Beroepsonderwijs (or HBOs) in the Netherlands, or Fachhocschule in Germany and Austria.   Because they are all “not-universities”, and because they all describe themselves as being in the business of providing a more “applied” type of education than traditional universities, the easy temptation is to compare them to our own “not-universities” – i.e. community colleges.  But this is simply wrong.

The first way it’s wrong is that these European Non-University Higher Education Providers (or NUHEPs, to steal a phrase from my Australian colleague, Andrew Norton) deliver all of their programming at the Bachelor’s level, or higher.  They do not, for the most part, get involved in trades training via apprenticeships.  And – in some countries at least – they also dominate the “continuing education” market for short-course professional post-baccalaureate training.

But while we don’t have Fachhochschule sectors, per se, it is nonetheless true that North America is gradually developing institutions that look a great deal like Fachhochschule.  The most obvious examples are in the United States, where community colleges are starting to deliver 4-year Bachelor’s degrees. (e.g. Florida).  In Canada, some of our newer universities (e.g. Mount Royal and MacEwan) look somewhat like Fachhochschule, though it’s not a comparison either would likely accept.  More eager to claim that mantle would be the colleges that actively refer to themselves as “polytechnics”, which, like their European counterparts, engage in a fair bit of applied research (this is not unknown at American community colleges, but it’s rarer).

What’s interesting about the way this phenomenon is emerging in North America is that it’s piecemeal in nature.  It’s not happening because governments are saying “hey, we need some more professionally-oriented Bachelor’s level programming – let’s create some new institutional forms to deliver it”.  That was always unlikely to happen over here because our universities are considerably less sniffy than European ones about delivering professionally-oriented programming – after all, most of the new programs universities have added in the last fifty years, such as nursing, business, journalism, etc., have been in professional areas.  Instead, what’s happened is that community colleges have taken advantage of universities’ inherent disciplinary conservatism by trying to pick-off new fields of work that are being professionalized (e.g. construction management) and offer degree programs in these, before the universities can get to them.  And by and large, they’ve been pretty successful at that, though in no case are these institutions’ Bachelor programs anything like the dominant credential they deliver – for the most part, they remain providers of sub-baccalaureate education.

Will we ever reach the point where any of our non-university institutions, like European Fachhochschule, are fully engaged in Bachelor’s level education?  My guess is no.  Once institutions reach a certain level of intensity in terms of Bachelor’s degree provision our governments’ instinct will be to “promote” them to universities, as happened in Alberta and British Columbia over the last ten years.  And indeed, that may still happen in Europe – even the Finnish Polytechnics are agitating for legal recognition as universities.

The prestige pull of the word “university” is mighty hard to resist.

October 16

Osgoode’s Income-Contingent Experiment

There’s an interesting experiment developing at Osgoode law school involving the creation of (what is being called) an income-contingent loan system.  Dean Lorne Sossin outlines the plan a little bit in his blog, here.  There are some fairly big details missing from this description, for the quite good reason that the Dean is leaving a number of design features open, pending discussions with the faculty’s students.  But one crucial thing about this program is being obscured by the term “loan”: namely, that no money actually changes hands.

The language of “income-contingency” can make things a bit confusing.  Canada, as I’ve argued before, already has a system of student loans that is substantially income-contingent – but they are income-contingent loans.  What Osgoode is considering is an actual Australian-style income-contingent fee.  This is quite different.

In North America, the way student aid works is that an institution charges students a fee.  A student asks the government for money via student aid.  The government gives the student money, and the student pays the institution.  Technology makes this little money circle move pretty quickly, but the basic point is the money moves through the student’s hands (legally, if not in fact) before it goes to the institution.  The fee is immutable, and the loan contract is between the student and the government.

In Australia, the Higher Education Contribution Scheme works somewhat differently.  There is a HECS “charge” – that is, an amount a student notionally owes.  But there is no loan that goes through the student’s hands.  When the student is admitted, there is simply an agreement that the student will pay that notional amount down over time through his or her earnings.  Most do so, and relatively quickly; others never do because their incomes never reach the necessary threshold to trigger payment (re-payment is not required below about $51,000).  But as the title says, it’s a contribution, not a fee.  The contribution is conditional on future income, and so there is no “loan” in the sense that we understand it.  This is effectively what Osgoode is trying out.

You can see why this idea might be attractive: for those people who are put off by the sticker price, the idea of waiving up-front tuition seems like a pretty good deal.  But there are some legal/administrative issues that might make this more complicated that it appears at first glance.  The most obvious is how to manage repayment.  In Australia, the government monitors graduates incomes and collects repayment through the tax system.  Osgoode, to state the obvious, does not.  If there’s an Achilles heel here, this is probably it.

But that’s not the only problem to solve.  The other issue is how the waived tuition will be reported to the government.  If it is reported as zero, it will reduce a students’ eligibility for loans and thousands of dollars’ worth of tax credits.  Some reduction in public loans probably makes sense since they have less immediate need for liquidity; however, if the students don’t get the tax credits *and* they repay their entire tuition, they would actually be worse off over the long-run.

Hopefully, some solutions can be found to these problems.  Because its nice to see institutions innovating in making professional education cheaper for a change.

October 15

Free Tuition in Chile

Last fall, Michelle Bachelet was once again elected as President of Chile, on a considerably more radical platform than that which propelled her to the same position eight years earlier.  One of her many campaign promises was to make higher education completely free.  This is a Big Deal.  It’s not like Germany, where tuition was only ever a derisory sum; in Chile, tuition payments are equal to 2% of GDP, a larger percentage than anywhere else in the world, outside Korea.

So, ten months on from re-election, how are they getting on with things?  The quick answer is: slowly.  But not for want of trying.

The heart of the problem is a constitutional provision, dating from the Pinochet era, which guarantees Chileans the freedom to make a living however they want.  Effectively, this prevents the government from compulsory nationalization.  In higher education, where the vast majority of institutions are private (though some of them receive public funds), this makes effectuating the Bachelet promise difficult.  So the government has gone down the route of trying to buy private institutions’ obedience by paying student fees on students’ behalf.

Now, the government isn’t stupid; it’s aware that private universities are likely to respond by raising fees.  That’s why they intend to rely on something called a “reference tuition fee”.  This is an invention of the Chilean student aid system, which is the only one in the world that takes the Bennett Hypothesis (i.e. that student aid encourages cost inflation in higher education) seriously.  Basically, Chilean loans programs don’t provide 100% of tuition – they only cover a “reference” fee, which ranges from about 80% to 100% of the actual fee.  The problem is that reference fees vary significantly: the fee for a law program at one institution may be vastly different than at another.  So the first task to make this work is to create a “standard” reference fee – but this is causing enormous problems.  Set it too high and you risk getting fleeced by the institutions; set it too low, and institutions will opt out of the system.  It’s not clear that the government will be able to find such a not-too-hot-not-to-cold fee.

Although the government claims to be able to fund the one-time cost of transferring 2% of GDP from the private to the public sector via new taxes, some independent observers question whether it will, in fact, be able to fully replace the tuition income institutions will lose.  Even if this money can be replaced, it’s not exactly clear where money will come from to fund future system growth or system quality improvement.

More generally, there’s a question about value-for-money in this policy.  Even the proponents of free fees don’t dwell on the promise that the system will become more equitable.  Access to higher education and stratification in Chile are already reasonably good: indeed, their access outcomes look a lot like Canada’s, despite significant fees in both the public and private sector, and the fact that Chile’s (mostly private) system of secondary education creates enormous inequities in outcomes, meaning room for improvement is not great.

Mostly, what proponents of free fees in the Chilean system believe is that “the market should not decide” in higher education.  Which, you know, fair enough.  Only two problems: i) historically, the state tends not to be so hot as a master, either; and ii) in a country that has as many challenges as Chile, is such a goal worth 2% of GDP?  Honestly?

October 14

Free Tuition in Germany

A few years ago, Germany’s Supreme court declared that tuition fees were constitutional, thus paving the way for some states to experiment with fees.  Seven of them (containing over half of all students) did so: Baden-Wurttemburg, Bavaria, Hamburg, Hesse, Lower Saxony, North Rhine-Westphalia, and Saarland.  The fees varied a bit from place to place, but most settled on a modest €500 (Hesse was €1000) – though in some places waiver systems meant that as many as a third of students paid nothing at all.

Gradually, the Länder have reversed their decisions, and this fall the final Länder (Lower Saxony) got rid of fees.  Hence a raft of stories in the last couple of weeks about Germany “going tuition-free”, and questions from some quarters, asking: “could Canada do the same”?  To which the answer is: of course we could.

It would be trivially easy for us to eliminate tuition.  Heck, we already pay net zero tuition, in that what we charge domestic students is more or less equal to what we spend on various forms of non-repayable aid.  If we got rid of all our student aid and scholarship programs we could have free tuition.  It would be a bit rough on low-income students, students with dependents, and college students (who for the most part would lose money on the deal); it also would be a windfall for wealthier kids who go to university, but I’ve yet to meet anyone in the free-tuition camp who seems to care about that.  Of course, that too would make us more like Germany, where direct funding for living costs is pretty meagre: only about 20% of students there qualify for student aid, and it tends to be for far less than what our students get.

At another level, of course, it would be even more trivially easy for us to “do a Germany”.  All we need to do is stop spending so much public money on higher education.  Their expenditure on higher education is about half of what ours is: per-student funding to institutions in Germany is about $10,000 (€7,000); in Canada, it’s about $15,000.  And that has impacts as well: professors there, on average, only get paid about 60% of what ours do.  When education costs are so low, it’s not difficult to keep tuition down.

German participation rates in higher education are also lower than ours, in part because they have no money to accommodate more students.  They could have kept tuition fees and directed institutions to use that money to expand access, but they preferred not to do that.  And so, as a result, the German student body is much more socio-economically selective than ours is – indeed, it is one of the most selective anywhere in Europe, and was so before fees were introduced.

So ask not if we could become like Germany, ask why we’d want to be more like Germany.  Why would we want to spend less public money on higher education?  Why, when the private returns to education are so high, would we want to exempt the beneficiaries from paying for the privileges they receive?  Why would we want to give a windfall benefit to children from wealthier families who quite clearly have the capacity and desire to pay?  Why would we spend all that money when the benefits to the poor – whose net tuition is already close to zero – would benefit barely at all?

Warum, indeed.

October 10

A Miracle in Melbourne

Today, I want to tell you about one of the most amazing stories in recent higher education history.  It happened at the University of Melbourne about eight years ago, and it involved having the country’s leading university completely up-end its entire curriculum – every single degree program – in the space of about 24 months.  Ladies and Gentlemen, I give you: the Melbourne Model.

The basic story is this: A decade ago, Melbourne – like all Australian universities – had a three-year undergraduate study degree, with law and medicine being direct-entry first degree programs (a bit like how Quebec allows direct-entry to these programs for select CEGEP grads), and with a fourth-year acting as an honours year for those wishing to pursue graduate (mainly doctoral) studies.  Then in 2005, a new President (Glyn Davis) came to office, vowing to make Melbourne a more research-intensive kind of place.  In the first draft of a widely-circulated strategic plan, Davis suggested it might be time to “examine the possibility” of moving to, what he called, a “US graduate-school model”, with a much more generalist three-year undergraduate program, followed by graduate/professional studies (it was referred to internally as a 3+2+3 system, which implied a much larger role for Master’s programs).  The proposal was seen as useful both because it might increase research-intensiveness and because a major re-design might force the Melbourne community to think harder about graduate outcomes and what it actually meant to be a “Melbourne Graduate”.

The professional model was by no means the centrepiece of the strategic plan, but it generated curiously little comment, and eventually ended up in the final version in February 2006 without having been subject to much debate.  Having got that far, Davis and his team went for broke: all faculties were told to re-design their curricula in time for implementation in January 2008.

It was at this point, of course, that people freaked.  Much of the Arts faculty thought it was going to be sold down the river – until then, many of their students took joint courses with professional programs (e.g. law/history) and many reckoned that without the professional link, they’d be sunk.  It took a while for it to sink-in that with law now inaccessible for direct entrants (a fact that enraged many parents), more students had time to take three years to study something purely for interest.  History – and most of the rest of the Faculty – in fact did just fine.

One of the most interesting decisions was to limit the number of Bachelor’s degrees being offered to just six – Arts, Science, Bioscience, Environments, Music, and Commerce, and to some extent de-link the degree from the faculties in which professors resided (there were 12 faculties).   These degrees were also designed to have common elements between them regarding program depth and what they called “knowledge transfer” (what we could probably call experiential learning).  They didn’t achieve this goal perfectly, but then, when you’re trying to re-vamp every single degree in a university with 40,000 students in the space of under 18 months, you can tolerate the odd imperfection.

There still remained the trick of selling the idea to government and students.  The former was important for financial reasons because Australia doesn’t fund non-research graduate degrees, so the switch to a “professional” model theoretically put money for all those students at risk – but since allowing the switch didn’t cost the government anything (it would spend what it had always spent on those students) it was a relatively quick sell.  A more serious issue was convincing students that this was a good idea.  After all, students bent on law or medicine would now have to go through three years of undergraduate study first, while other institutions could still offer it to them straight out of high school.  Partly through effective marketing, and partly because of the institution’s own brand power (Melbourne is essentially Australia’s U of T) this fear never materialized.  Applications from top students held up, and in some fields the institution was able to become even more selective.

Try, if you will, to imagine a Canadian institution that could re-jig all of its curricula from top to bottom in less than 24 months, not because a government told them to, but simply because it seemed like a good way to make the university a better place.  I can’t, but I wish I could.  What Melbourne achieved here is proof positive that universities can change, and at speed, if they wish to do so.  And that’s news everyone needs to hear.

October 09

How to Prepare for a Punch in the Mouth

Universities and colleges love their strategic plans.  Plans beget task lists.  Task lists beget work agendas.  Work agendas beget Targets.  Targets beget Annual Evaluations.  And all of it provides a serene sense of control: a belief that we can control the future simply by planning our future work flows.

The thing is, it’s mostly nonsense.

To see why, consider Dwight D. Eisenhower, who famously said “In preparing for battle, I have always found that plans are useless.  But planning is indispensable”.  Or boxer Mike Tyson, who once said “everybody’s got a plan… until they get punched in the mouth”.

There are a lot of punches in the mouth lurking out there.  What happens when you build your strategic plan on providing teacher training, and then the government changes the funding formula?  That’s a punch in the mouth.  Build out your law faculty just as the industry shifts and student demand tumbles?  Also a punch in the mouth.  Give out a 2% faculty raise just before the government decides to impose a 7% cut?  You’d better believe that’s a punch in the mouth.  And no strategic plan protects you from that.

But if strategic plans are bunk, strategic planning still makes a great deal of sense.  As Lawrence Freedman says in his rather excellent Strategy: A History, strategy is about employing whatever resources are available to achieve the best outcome.  As resources change, so do strategic options.  Hence Eisenhower’s comment about the importance of planning, even in the absence of plans.  As situations change, it’s important to think through new ways of getting to the desired objective or – if resources get scarce enough – to entirely redefine the objectives.  The best strategies are thus ones that are open-ended.  This is why plans – things that attempt to set the future in stone – can sometimes be the antithesis of good strategy, especially in turbulent times.

All you really need to guide an organization is: 1) a sense of where you want to go, 2) some ideas about how to get there, and 3) a set of metrics to know whether you’re getting there.  The real problem most universities have is being able to articulate where they want to go.  Partly, this is because institutions often describe goals in mindless and nebulous ways (e.g. “we will achieve excellence”).  But it’s also partly because many professors have almost no interest in the collective success of a university, seeing it merely as an administrative platform for their own research interests.  Colleges, which have a much more inclusive sense of institutional purpose, have an enormous advantage over universities in this respect, which makes their plans and their strategy much more cohesive.

In short: planning is important to keep a sense of direction.  But plans?  They take up a lot of time and are often out-of-date by the time they are implemented.  More of the former and less of the latter, please.

October 08

The War Between Universities and Disciplines

From the outside, universities look like a single united entity, with many administrative subdivisions – kind of the organizational equivalent of the United States.  However, the closer political analogy is actually early 1990s Yugoslavia: at a very basic level, universities are the sites of permanent civil wars between central authorities and the disciplines whose interests they purportedly serve.

Disciplines – which, except for law and theology, mostly started their existence outside universities – allowed themselves to be subsumed within universities over the course of the early 20th century.  They did so for administrative reasons, not intellectual ones; bref, it seemed like a good bargain because universities offered a way for disciplines to obtain much larger amounts of money than they could get on their own.  Governments (and to a lesser degree, philanthropists) found it easier to do business with universities than with, say, random groups of anthropologists or chemists.  Similarly, banding together within a university made it easier for disciplines to attract the ever-growing number of students and, with them, their tuition dollars.  The deal was that the anthropologists and chemists would lend their prestige to universities, and in return the university would take care of raising the money necessary to meet academics’ need for space, students, and steady pay cheques.  The idea that the university had any corporate interests that superseded those of the disciplines at an intellectual level was simply a non-starter: disciplinary interests would remain supreme.  As far as academics were concerned that was – and is – the deal.

Thus, there is little that drives academics crazier than the idea that a university might deign to choose between the various disciplines when it dispenses cash.  If an institution, in response to an external threat (e.g. a loss of government funding), says something like, “hey, you know what?  We should stop spending so much money on programs that lose money, and redistribute it to programs that might attract more outside money”, they are immediately pilloried by academics because who the hell gave the university the right to decide which disciplines are more valuable than others?  When you hear people bemoaning universities acting “corporately”, this is usually what they’re on about.

This attitude, which seems so normal to academics, provokes absolute bewilderment from the outside world (particularly governments and philanthropists), who believe universities are a single corporate entity.  But they’re not.  As ex-University of Chicago President Robert Hutchins said, universities are a collection of warring professional fiefdoms, connected by a common steam plant.  A more recent formulation, from the excellent New America Foundation analyst Kevin Carey, is that the modern university is just a holding company for a group of departments, which in turn are holding companies for a group of individual faculty research interests.  In other words, Yugoslavia.

But the actual point of a university, the reason for its existence beyond sheer administrative convenience, is that it serves the advancement of knowledge by getting the disciplines to act together to tackle problems in ways they would not do so independently.  And that means that the university’s raison d’etre is, in fact, to continually make choices on resource allocation across disciplines, to the areas that make the most sense, both financially and intellectually.

Yet there exists within universities a substantial and determined constituency that claims it is immoral for institutions to make such choices.  Much of the incoherence, idiocy, and sheer weenieness of university “strategy” documents come from senior managers trying to square this circle: appearing to make choices, while acting in deference to the autonomous disciplinary republics, to avoid actually making any.

In short, strong disciplines are necessary and important to insure academic quality.  But letting them run the university is madness.

October 07

Do the Poor Really Pay More?

There’s a trope out there that goes something like this: “Loans are unfair because interest on the loans means that needy students pay more in total to go to school than students who don’t need a loan“.  If it were true, this would indeed be problematic.  But the thing is, for the most part, it’s not.

Let’s follow two hypothetical students: Claudia and Eveline.  Claudia can manage to pay $25,000 for her four years of tuition, upfront; Eveline cannot, and she borrows $25K from Canada Student Loans and her provincial student aid program over four years.  Assume that inflation is a constant 2%, and that interest during the repayment period is 6.25% (over the last few years, real interest rates have floated between 400 and 450 basis points above inflation).

Student loans carry zero interest during the in-study period.  This means students actually make money while they’re borrowing because inflation eats away at the value of the loan before they’re required to pay it back.  In Eveline’s case, she effectively makes $1,125 between the September she starts and graduation day.

Then, of course, things start to work in the other direction.  Assuming Eveline takes eight years to pay off her student loan, she ends up making $4,321 in interest payments (figure is net of inflation).  Take away the $1,125 that Eveline “made” during the in-study period and the net interest cost comes to $3,196.

If that were the end of the story, the people who claim loans are “unfair” would be right; we would be discriminating against the poor.  But that’s not the end of the story because people who get loans usually also get grants.

If you’re an independent student making less than $38K per year and you apply for aid, you are nailed-on for an extra $2,000 per year – that’s $8,000 over the course of a degree.  Ditto if you’re a dependent student and your parents make less than $38K.  If you’re a dependent student and your parents make less than (roughly) $76K, you’re nailed-on for another $800/month – or exactly $3,200 over four years, which wipes out the interest cost of the loan.  Plus, of course, you get 15% of all interest paid as a tax credit – which means you actually come out ahead by a few hundred dollars.

Are there borrowers who don’t come out ahead?  Yes.  Those who borrowed but had family income high enough that they didn’t qualify for the middle-income grant likely wouldn’t receive a grant to offset the loan interest amount.  Borrowers who take more than eight years might end up with higher interest charges not covered by their grants (and possible remission).  There are enough variables here that it’s hard to say how many people this might include.  But remember – the base population that doesn’t get sufficient offsetting grants consists of dependent students with family incomes over $80K, that’s *maybe* 20% of all borrowers (and not the poorest 20% by any means).  Or to put it another way: probably something like 80% of borrowers are receiving more in subsidies than they pay in real interest over the life of their loan.

That’s a good thing – an outcome of our generous, if opaque, student aid system.  We should acknowledge it, celebrate it, and most of all get the usual suspects who adore this talking point to shut up about it.

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