I love the economic confusion in Inside Higher Ed.

On Wednesday, Stanford University announced such a change, and while they have not gone public until now, leaders of a group of elite private colleges confirmed that they too had recently changed the way they consider home equity. In both cases, middle class families could find themselves paying several thousand dollars less than they do now to have their children attend some of the most prestigious colleges in the country.

Officials who are making these changes say that they represent much-needed relief for middle class families, especially those who bought homes 15 or more years ago and have seen their values skyrocket to make them millionaires on paper, but not necessarily with incomes or bank accounts to match.

Newsflash: There is a technical term for someone who is a millionaire on paper; It’s “millionaire.” And, yes, the “group of elite private colleges” is the 568 group, our friendly neighborhood colluders.

Economics Professor Gordon Winston comments:

Why is home equity attracting so much attention right now? “I think it’s an effort to extend up the income distribution level some of the consideration for the customers that colleges have increasingly been giving high-ability, low-income students,” said Gordon C. Winston, director of the Williams College Project on the Economics of Higher Education.

Notice how Winston pitches this a moral choice by the colleges involved. They just woke up one day and said, “Hey! Those poor middle class families with million dollar houses need our help!”

Perhaps. Do-gooding runs deep in the bones of college administrators. Yet I think that the main explanation lies elsewhere. Competition lowers prices. What was it that Williams taught me 20 years ago. Oh, yeah.

It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.

Want college to be cheaper for your children? Don’t count on the benevolence of Stanford and Williams. After all, the benevolence of senior administrators at elite schools wasn’t any less 20 years ago. But, for some reason, poor kids back then ended up tens of thousands of dollars in debt.

Winston noted that elite private colleges have made a series of announcements in recent years, ending the need for low-income students who attend their institutions to borrow to do so.

In some of those announcements, one college has topped another, not wanting to be seen as less generous. Asked whether the moves by Stanford and the 568 colleges would lead to similar competition, Winston said “hell yeah.” But he added that it was “more than a calculated price reduction.” Rather, he said that colleges have put in place good aid policies for low-income students and need to do more for those students not by changing aid policies, but by recruiting and admitting and graduating more of them. The middle class student, on the other hand, needs new policies, Winston said.

In this context, “good aid policies” means “cheaper,” depending on how clever you and your parents are about hiding funds. EphBlog’s advice? Ask: What would Morty’s parents do?

Anyway, back in the day, when people like Winston (a former provost) ran Williams, there was no need to compete for students on a financial basis. Overlap ruled all. Colleges colluded and students, especially highly desirable students, were screwed.

Don’t believe the hype about “new policies.” This is a targeted price reduction, pure and simple. The competition for elite students is so intense, and growing more so each year, that schools like Stanford find that they need to lower prices (even to families with a million dollar home!) or else the students that they want will go elsewhere.

The comments to the article (other than that first one by an obvious troll) are the best part.

I just wanted to mention that since 2001 Princeton has completely excluded home equity from the consideration of family assets in our aid formula for all aid applicants. This was one of the initiatives announced at the same time as our groundbreaking “no loan” program, so it received less attention at the time. But as concern over how middle-income families fare in the aid systems at elite colleges grows, I think it’s worth pointing out that Princeton has been out in front on these issues for a number of years.

And this is from the director of financial aid at Princeton. I love the moral preening! Princeton has been “out in front” on this topic. Is that because Princetonians have such fine ethical sensibilities that they saw, ahead of people like Winston and Schapiro, that college was too expensive? Hah!

Morty told a great story at the Boston Alumni Society meeting last April about the origin of Princeton’s generosity. Princeton is perhaps the richest school in the country, on an endowment dollars per undergraduate basis. But, much of the endowment is restricted, it must be spent on financial aid. At some point, Princeton just got so rich that it ran out of poor kids to spend the money on. It ended loans and excluded house equity, not because it is more moral, but because it had to spend the money somewhere. Princeton has no choice but to decrease its effective sticker price. (Harvard has been similarly generous about home equity.)

And, guess what? Stanford is tired of having so many students who it wants go to Princeton and Harvard. How can it gets those students? Hmmm. How does a baker steal customers from the bakery across the street?

Look not to the “benevolence” of administrators like Winston if you want a cheaper elite college experience for your children.

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