A Middle Class Financial Paradox

They had it good back in the day. Historically, financial aid has been calculated at UC schools with the intent of “normalizing debt.” This means that aid is given out so that, roughly speaking, every student graduates with the same amount of debt. Middle-class families pay a bit more, lower-income families pay a bit less.

Throughout the ‘70s and most of the ‘80s, normalizing debt worked very well. According to statistics compiled by the Rodda Project, UC students graduated with a debt between $3,000 and $6,000, depending on the campus and year. Middle-class students, defined by the study as those whose families made between $50,000 and $150,000 per year, graduated with roughly the same amount of debt as students from low-income families. For years, the difference in mean debt level did not exceed a few hundred dollars. The Rodda Project found that in the early ‘70s, the UC system was subsidized heavily by the California state government — 60 percent of the annual budget was covered by state funding in those years. However, this number declined steadily throughout the ‘80s and again during the 2000s. Of course, things have changed. Today, tuition at any given campus costs nearly $14,000 — largely because the government has slashed funding year after year, providing just 10.1 percent of the cost of running the university.

Now here’s the interesting part: state tuition subsidies are flexible, but need-based financial aid is not. Middle-class students were the chief beneficiaries of the state tuition subsidies that kept fees down in the past, but which have been cut every year by the California legislature: It’s simply a matter of tweaking the annual budget. In fact, in recent years, the state’s tuition subsidy has frequently been the first thing cut. Need-based financial aid, on the other hand, is much harder to cut. Statutes like the Higher Education Act of 1965, under which the Pell Grants were initiated, require full-congressional approval to modify. Cuts to these statutes are unpopular, difficult and regularly discussed, but rarely done.

For these reasons, the failure of AB 1500 has led us to a peculiar paradox: It’s now less affordable for a middle-class student to attend a UC school than it is for a student whose family makes below $50,000 per year. According to a fact sheet released in Nov. 2010 by the UC Newsroom, the average graduating debt for 2009–10 was $12,787 for low-income students and $15,806 for middle-income students.

It’s a uniquely weird situation. In the United Kingdom, tuition is capped at $11,543 for all students at all colleges, thanks to a heavy government subsidy. Loans are available, but students whose families make more, graduate with less debt.

In China and India, subsidies are even heavier: Tsinghua University, China’s best, charges just $4,773 per year for the students that get in. At IIT Gharakpur, India’s highest-ranked college, tuition is even less — $3,912 per year. As in the UK, government subsidies were never intended to normalize debt, as they once did in the UC system. In difficult economic times, poorer students graduate with greater debt because they are able to pay less. The concept of financial aid that is based on need, rather than merit, is non-existent in these countries. In China, for instance, government scholarships are only given to the top scorers on the gaokao, the national college entrance exam.

In these other countries, funding is simplified because it comes solely from the state. In a budget cut, tuition increases for everybody — as it briefly did at Tsinghua in the 1990s. For the UC’s, in contrast, funding comes from a patchwork of grants and subsidies, each intended for a different kind of student and each with a set of protections and clauses that differs from the others. The result is that changes in California state funding affect some UC students more than others — a phenomenon unique among the great public universities of the world.

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