In the first three parts of this series, we initially looked at a report from Moody’s regarding the growing separation by wealth between a small number of extraordinarily rich colleges and universities and the very large number of institutions that are heavily dependent on tuition to fund their annual budgets. Subsequently, we reviewed the history of wealth acquisition by the very rich campuses and noted that it was a relatively recent phenomenon. Then we examined the consequence of this imbalance in wealth in terms of the long-term viability of tuition-dependent colleges and universities.

Now, in Part 4, we will consider the relationship between historic patterns of public and private financial support for higher education, and the current very high level of frustration, on the part of parents, politicians and pundits, regarding the diminishing opportunities for young people to receive a college education that is both excellent and affordable.

At certain points in our nation’s history, public opinion has held that higher education is a social good, whereas at other times higher education has been perceived as a private benefit. Those swings in opinion have had profound effects on public policy, and, as we shall see, have contributed to the very significant economic challenges our country is facing today.

Examples of times when there was broad public support for the use of taxpayer dollars to subsidize educational costs include:

1. 1790, and the advent of public institutions of higher education (the Universities of North Carolina and Vermont);

2. 1862’s Morrill Act, establishing land-grant universities for the purpose of creating expertise in agriculture and engineering (“Justin Morrill, the man behind America’s higher education,” The Boston Globe, June 21, 2015);

3. 1944’s G.I. Bill, which opened the doors of higher education to more than two million returning servicemen and women;

4. The period from roughly 1950 to 1980, when a dramatic expansion of state and community colleges resulted in a quadrupling of the percentage of American adults with a college education.

During the last 35 years or so, however, the prevailing view in America has been that higher education is primarily a private benefit, and therefore the responsibility for paying for higher education rests with the individual. Reflecting this belief, state appropriations to public higher education have dropped precipitously, leading to dramatic increases in tuition prices at public institutions, and a sharp reduction in affordability on the part of prospective students and their families.

A few statistics:

1. The average list price for tuition and fees at public four-year colleges and universities in America in 2014-15 was $9,138; with room and board included, the price was $18,943.

2. The average list price for tuition, fees, room and board at private, nonprofit, four-year colleges and universities in America in 2014-15 was $42,419.

3. The median family income in America in 2013 was $51,939.

4. Measured in inflation-adjusted dollars, between 1985 and 2010 the list price for public universities increased by 157 percent, and by 137 percent for private colleges and universities.

5. On the other hand, median family income between 1985 and 2010 increased by just 8 percent.

(To be sure, the prices cited above are list prices; the actual price paid by most students, especially at private colleges, is much less. Even so, there is no disputing the fact that the average family must pay a much larger proportion of family income to send a child to college today than was the case 30 years ago. That fact alone accounts for much of the concern of parents that a college education has simply become too expensive, and may no longer be “worth it.”)

How does this shift in public policy regarding the funding of higher education relate to the subject of this blog: wealth inequality among colleges and universities?

To the extent that people actually expected that philanthropic dollars would somehow replace the dollars that the states took away from public institutions, they must be terribly disappointed. In the first place, there aren’t enough philanthropic dollars to substitute for the missing public dollars, and, in the second place, philanthropists are obviously free to follow their own wishes regarding the target of their gifts – and since many of them are graduates of wealthy and prestigious private colleges and universities, those are the institutions that have been most favored, a point made emphatically in the Moody’s study that is the subject of this series.

As a consequence of losing state dollars and of rising costs, over the past 35 years all colleges and universities, public and private alike, created, or expanded, offices of “development” or “advancement” (read: gift-seeking), in order to remain competitive with their peers – and some have been far more successful than others (see Part 2 of this series). Highly uneven success in fund raising resulted in the enormous wealth inequality we now see among the nation’s more than 2,000 four-year colleges and universities. In addition, lack of significant philanthropic success has forced the great majority of private and public colleges and universities to raise their tuition prices to cover their costs – and since median family income has not kept pace with rising college prices, more and more families are finding it very difficult to pay for a college education. The growing inability of American families to afford to send their children to college threatens the overall American economy because we are falling farther and farther behind other countries in the percentage of adults with a college education (“Take a trip abroad, see the US in decline,” The Boston Globe, June 21, 2015).

Somewhat paradoxically, the richest (and therefore the most prestigious) colleges and universities have had no trouble enrolling large numbers of students whose families are both able and willing to pay full price – and full price at these schools is generally around $60,000 per year – even as less well-known colleges struggle to attract a full class of students where the discounted price averages less than $30,000 per year. The paradox is explained by the growing wealth and income inequality in America today (see particularly my blog post on Sept. 30, 2014): wealthy individuals can afford to send their children to these rich and prestigious colleges and universities, and are only too happy to do so because their children will be surrounded primarily by children from equally wealthy families, and because of the presumed status of the elite brand name that will appear on their children’s diplomas.

The current path our nation is on will ensure that the problems I have been discussing will only become more severe, resulting in an even more stratified society and a national economy that continues to weaken. But does our nation’s economic future depend solely on society once again deciding to embrace the notion that there is great public benefit from having a highly educated populace – or are there steps to address the growing stratification of colleges by wealth that would, if taken, once again expand affordable access to a quality education?

Next time, Part 5: A New Course Heading for the Ship of State.

In Part 1 of this series, I examined a recent report from Moody’s that predicted growing economic separation between a handful of the wealthiest universities and the rest of higher education. Media coverage of the report did not examine the consequences to either higher education or the American economy, should Moody’s prediction prove true, nor did the coverage assess the accuracy of the analysis, something that I sought to address.

In Part 2, I noted that extreme wealth in a handful of famous universities was not true historically, but is, instead, a relatively recent phenomenon.

Now, in Part 3, we look at the other side of the story: What does it mean to higher education in general that wealth is so unevenly and inequitably distributed across the 4,000-plus colleges and universities in this country? And why isn’t there greater concern about this extreme inequity on the part of the American public?

Well, one reason is that we Americans are a competitive lot. We love sports at least in part because they separate the champions from the also-rans. We love the story of Bill Gates, or Warren Buffet, or Steve Jobs because we applaud the heroes of the free market system. And, in the world of higher education, we love those institutions that have risen to the very top of the pecking order.

But we generally don’t love failure. We don’t love our sports teams when they disappoint us by not winning. We are less affected by the fall of corporate titans, since we don’t know them personally, but we certainly don’t admire them when their hubris topples them from their corporate thrones. And, in the world of higher education, we have become skeptical of the inherent value of institutions in the “second-tier” (code for not being wealthy), if only because they are not “first-tier” (that is, wealthy). It’s a variation of the old question, “If you’re so smart, why aren’t you rich?”

For years, many universities and colleges vied to be seen as the next best thing to an Ivy League university. They tried to position themselves to be desirable to students who were almost good enough to be admitted to the Ivy League – but not quite. They reasoned that if they charged almost as much as an Ivy League school, they would be seen as almost as good.

That strategy has fallen apart of late, for several reasons:

1. Increasingly, in recent years, families have proved unwilling to pay very large sums for anything but an education at a nationally ranked and famous institution. They expect to pay much less at a second-tier college or university, not a little less.

2. While families in the so-called “one percent” have continued to see their wealth accumulate, the rest of the population has generally still not recovered from the Great Recession of 2008. Fewer families have the financial capacity to pay the published tuition prices at second-tier institutions – and they are increasingly wary of taking on even modest amounts of debt.

3. Higher education is overbuilt. In many parts of the country, because the number of high school graduates is falling, there are more college seats in total than there are students to fill them. As a result, a price war is under way among all but the wealthiest institutions – and the problem is that very few of these colleges and universities, because they lack large endowments, can afford to wage this price war. There is a real danger that, in their quest to enroll a full class, some colleges will overspend their financial aid budgets, damaging their financial stability, and potentially forcing them to close their doors. In the meantime, prospective students and their families, sensing a buyer’s market, are bargaining even harder for a still lower price.

4. The deck continues to be stacked against students in the lowest economic quartile. The high prices at many institutions discourage them from even applying. Lower-income families often find themselves in communities with underperforming schools, lessening the likelihood that their children will be accepted at highly selective (and wealthy) institutions that generally offer admission only to the most qualified applicants. Ironically, these are the very institutions that can (and do) meet full financial need of the students they admit – so high-achieving, low-income students who are admitted to such institutions can actually afford to attend them. The problem is that very few institutions have the financial capacity to meet full need, and thus there are effectively very few seats for even the highest achieving low-income students. Sadly, the price of the second-tier institutions is often still too high for these high-achieving, low-income students. As a consequence, they are commonly relegated to open admission institutions, such as community colleges, which they can afford, but at which they are overqualified.

Taking these four factors together, it is readily apparent that the trends in higher education we see under way today will not only continue, but also become more pronounced. That is, wealthy institutions will accumulate still more wealth, even as they raise their prices (and their exclusivity), and, in so doing, they will become even more attractive to the “one percent.” On the other hand, most colleges and universities will find themselves caught in the squeeze of rising costs on the one hand, and an inability (or unwillingness) of families to pay more than a fraction of what a quality education actually costs.

When families are faced with choosing among institutions of similar reputations that claim to offer the same education but at different prices, most will choose the college with the lowest price. As colleges attempt to meet the cost expectations of families, they will be forced to change the very things of which they are most proud: they will replace retiring full-time faculty with adjuncts; they will increase class sizes; they will eliminate low-enrolled majors that don’t pay for themselves; they will streamline the curriculum and minimize elective courses and options; they will put more courses (and programs) online. They will be forced to offer a lower quality educational experience as they endeavor to survive.

The “one percent” will continue to receive the best education money can buy. But most of the remaining 99 percent will receive an education that is increasingly inferior to that received by the one percent – and there will continue to be precious little social mobility between the huge underclass and the tiny aristocracy.

This outcome would be terrible for America and hugely ironic for a country that was founded on the notion that “all men are created equal,” and that emphatically rejected the notion of a monarchy and a ruling class. Moreover, we are, in effect, wagering that our country’s economic future will be assured because sufficient business leadership and innovation will somehow come from providing a high-quality education to less than three percent of our college students (that is, those attending the wealthiest 100 private colleges and universities). In numerical terms, we are putting all of our chips on fewer than 100,000 of the 3.1 million students who enter higher education each fall.

Not many people would argue that the path higher education is on will lead to good outcomes. So how do we find a better path?

Next time: Part 4: How Did We Get into This Mess in the First Place?