Financing College Diversity: Is it a Case Of ‘Robbing Peter to Pay Paul’?

Financing College Diversity: Is it a Case Of ‘Robbing Peter to Pay Paul’?

Many readers may be shocked to learn that some of this nation’s colleges and universities practice price or tuition discrimination. They may be even more stunned to learn that it’s in the best interest of these institutions to adopt such a policy — which charges different students at the same university in the same academic program different tuition — as a strategy. The goal may be to achieve a maximum enrollment per year, generate funds for a specific program or reach a targeted student demographic. Private institutions have used these practices effectively for years to support programs such as athletics. And the number of public institutions using price discounting to fund specific programs is increasing.

It’s within this context that we should view the University of Wisconsin-La Crosse’s proposal to raise tuition fees to pay for diversity programs. The regents want to charge students an extra $220 per semester over three years to generate financial aid money for an additional 1,000 low-income students and to hire more professors. While the proposed pilot program has been derided as a “diversity surcharge,” students and the public at large are getting more out of the deal than they think.

Wisconsinites and others should ask themselves this: How much is higher education worth? How much would you pay for it? Our families, the local community, the state, the nation and the whole world benefit tremendously from the investment in higher education. This is because education serves both the private and the public good. But the question remains, how much is the public willing to pay for its share of the benefits? While the calculations of private/public returns on higher education investment are full of approximations, there is no denying the fact that colleges and universities exist to attract human talents, develop these talents and send them forth in service to society. However, human talents are randomly distributed among the population, not confined to one economic status, race or ethnicity, gender, nationality or religion. Therefore, the most important goal of colleges and universities is to provide access.

What happens when universities fail in this goal? Look at the negative correlation between educational attainment and incarceration rates. There is a reason why our prisons are not littered with people with advanced degrees and why a large number of high school dropouts are serving time.

In short, society pays a price for an uneducated citizenry.

Institutions within the University of Wisconsin system have the flexibility to charge different tuitions. Price discounting is the effect of a market system. Passengers on the same flight may not have paid the same airfare. Businesses give discounts for a variety of reasons: volume of goods purchased, forms of payment, referral to other potential customers, repeated purchases and even the ability to pay are a few examples.

Therefore, UW-La Crosse’s proposal makes good economic sense. However, the extent to which the proposal, as currently described, makes legal sense is debatable. While institutions may engage in tuition discrimination, it is doubtful they can do this solely on the basis of race, ethnicity, gender or religion. We know already that institutions may discriminate on tuition charges based on nationality (foreign students pay more than domestic students), on place of birth (out-of-state students pay more than in-state students), and on economic status (Harvard University and a number of other institutions offer free tuition to students whose parental income falls below the poverty level). What we do not know is whether institutions may charge different tuition rates to boost the diversity of the university.

Almost all of the legal pundits who have discussed the implications of the U.S. Supreme Court’s ruling on Grutter v. Bollinger, the case involving the University of Michigan Law School, have warned institutions to refrain from practices that are blatantly race-specific and that are not narrowly tailored to achieve a limited, temporary, racially relevant educational goal. Since then, race-conscious scholarships have been under serious scrutiny. My advice to university leaders is this: Continue to increase your need-based scholarships, but refrain from any reference to race.

Unfortunately, the discussion that UW-La Crosse’s proposal is likely to generate may mask the real problem the nation faces in trying to compete in the global marketplace. Among 29-year-old Americans, only 11 percent of Hispanics, 17 percent of Blacks and 34 percent of Whites have baccalaureate degrees. This should be unacceptable to public policy makers who understand the needs of a knowledge-based, conceptual economy and the competitive nature of globalization. Homogenized student populations, underdeveloped talents, overrepresentation of minorities in prisons and limited opportunities for the talented but poor are serious issues that threaten both the U.S. economy and its national security.

— Dr. Steve O. Michael is vice provost and professor of higher education finance at Kent State University in Ohio.

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