Tuition Enigma

You are the parent of a two year old. Although your child still teeters with each step and thinks lunch is a face paint, you are already beginning to navigate the financial shoals of saving for a college education. How much will it cost?

Imagine you are shopping for groceries. You look through the window and see attractive displays of fruits, vegetables and packaged goods. The prices are clearly posted, but many are extremely high. You swipe your ID as you enter the store and the prices suddenly begin to jump like the scale on Biggest Loser. The grocery store has just checked your credit rating and repriced its inventory based on your ability to pay. If you are well off, the prices don't move at all. If you are poor, most of them drop substantially, with the expensive items, the elite private schools, those Fillet Mignon of the collegiate grocery, dropping the most and a few staples, the community colleges, the oat meals of academia, barely budging.

Harvard, Williams and their ilk could fill their entering classes with the children of the rich, who would be more than willing to pay the full posted price, but, after a century or two of offering scholarships to the extremely talented few, elite schools like these decided that in the event of class warfare they did not want to be on the side with fewer troops. Thus a policy of financial aid based on need developed. The elite would offer admission based on "credentials" (credentials could still include things like the ability to run with the football or the fact that the applicant's father was an alumni and head of the CIA) and, if the applicant's family could not afford the tuition, the school would provide financial aid to offset tuition and room and board bills by just enough so the applicant could attend while his parents stayed (barely) out of the poorhouse. The Ivy League, in collaboration with MIT (someone had to do the math), actually set up a trade association to determine the financial need of applicants on a collective basis.

The US Justice Department, taking the view that the true price of a college education was the posted tuition less financial aid, attacked this collaborative evaluation as a form of price fixing. College education is not a simple commodity. Some students will gladly pay twenty times as much to go to Harvard as to Boston College, others pick State U over Harvard without regard to the price. Tuition, even the net or effective tuition after deducting financial aid, is just not the key factor in their decision. Despite the fact that the market for college educations has some unusual features, As Good As News belatedly concedes the Justice Department had a point. First, a better aid package might make a difference to a student choosing between Harvard and Yale, even if the same student would spurn Boston College at any price. Second, the action by the Justice Department foreshadowed, and may have contributed to, a change in the student aid climate.

A network of colleges built to serve a baby boom size population suddenly found itself with a shrinking universe of applicants. Meanwhile, the grown up boomers put greater emphasis on the prestige of the colleges their children would attend. The result? Colleges, especially private colleges, needed students, preferably students with high SATs and GPAs that would enhance the reputation and rating of the college itself. To attract students they began offering merit scholarships on a widespread basis. A lucky few would get the coveted full ride, joining the athletic royalty, but for many an award of five or ten thousand dollars a year in scholarship money would make a difference in selecting a college.

Returning to our collegiate grocery store, for the last ten or fifteen years the prices have moved twice. Once, based on need, when we enter and undergo the credit evaluation. A second time, based on merit, when we approach the check out counter with our child's report cards and test scores in hand. The Fillet Mignon price is not moving very much on checkout because of merit aid, because Harvard and Williams don't need to lower prices to get quality students. The oatmeal price is not moving either, but the lamb chops, the fresh vegetables and even some very nice roasts and salmon fillets are sold at a discount, because even some good schools will compete to get the students they want. Sometimes it's an across the board cut, like the University of Vermont with its formulaic merit awards. Sometimes it's a negotiation with the admitted student playing two financial aid offices off against one another. Either way, the posted tuition means less than ever and even Richie Rich can get a discount if he's a good student.

Very recently some of the Fillet Mignon has been marked down to new lower prices in a trend that may spread, a little. Harvard and Yale have both announced that they will make more aid available to more admitted students. In Harvard's case the poverty line for aid qualification will now include families with a six figure annual income. This is still need based aid, these institutions do not need to discount to get quality students and would not admit it if they did, but, in addition to any possible covert competition for quality students, there is a new factor at work. The endowments at Harvard and Yale are producing so much income the schools need to spend it.

Charitable foundations are generally required to spend at least a certain percentage of their income on charitable pursuits or lose their tax exemption. After all, they are supposed to be charities, not hedge funds. College endowments are not subject to this rule, but they could be if Congress gets mad at them. Harvard and Yale, thanks to smart investing and bull markets, have posted tremendous gains in their endowments for several years. They have been slow to spend this money, probably because any use of endowment income for a recurring expense becomes a permanent commitment, one that would be tough to maintain if the endowment's investments decline in value for a few years in a row. The spectacular returns and resulting growth in endowment principal has attracted attention lately, some of it unwonted attention from politicians who are always looking to capture tax revenue without losing votes. Harvard and Yale have decided to fight preemptively by spending some of their endowment wealth on a populist cause, financial aid. As a result, the Fillet Mignon price is moving to a bigger discount for more people when they first enter the tuition grocery store. These two schools have the largest endowments of any colleges. Other colleges have also improved their returns on investment in recent years, but Harvard and Yale are leaders in performance as well as size of endowment. A few schools with elite reputations may expand aid to compete with Harvard and Yale for middle class scholars, but very few will do so as a political strategy.

So, how much should you save for your two year old? Thanks to expanding merit and need based aid, the frightening numbers on the ever increasing cost of a college education are overstated, but the answer is still: a lot, preferably in a 529 plan and/or education IRA.

Decider Picks None of the Above

Bush Is Nearing A Choice To Lead The Justice Dept. - Let's not blow it again, W. Here are a few simple rules to follow, some of which you may actually like.

- Under no circumstances discuss this choice with Karl Rove, he's earned his retirement and he will only get you into trouble. What do you mean you already talked to Karl. No, you cannot name someone AG just because they want to prosecute Obama for loitering and remind Karl that there's no need for dirty tricks this year, you're not running for reelection. What? No, W, I know about FDR but it's in the Constitution now, didn't Alberto tell you that there are amendments too. I'm sorry W, you just can't run again.

-If anyone from Darth Cheney's office makes a suggestion listen carefully, then make sure that person does not become AG. I hear you W, and I know you really like Scooter Libby, but you just can't nominate the guy while he's serving time.

-When you finally have your short list, ask each candidate the same question. "What does the Constitution mean to you?" Now W, this is important, if anyone responds "What do you want it to mean" you have to send them home immediately. That's what got you into trouble with Mr. Yoo and Mr. Gonzales.

- Pick someone you trust. It's OK to pick a conservative Republican. Be careful though, a real conservative might actually care about Constitutional limits on executive power.

- Get a good manager. The AG has a big department to run, and it's already full of smart guys like John Yoo, smart guys with their own agenda, people that bear watching. The job demands people skills, the new AG will inherit a department that's been battered by Rove's political tampering and Darth's anything goes view of the Constitution. The gang that's left polishes their resumes from 9-5 then goes out for a beer after work every night to polish the lyrics to the new Justice Department theme song - Why We Hate W!

- Credentials are essential, especially with the mess you already made. Senate confirmation and respect from within the Justice Department will depend on these, but hey, you hired guys from Harvard (Gonzales) and Yale (Yoo) for jobs at Justice and they were disasters- Oh that's right - you went to Yale and Harvard, didn't you W - well, case closed. Why not try a Princeton undergrad, University of Texas Law grad with big-time government experience, someone who knows how to get along with a legislature - James A. Baker. Sure he's old and you blew off his Iraq report, but he cares about the country and he'll only be working for a year. With a little arm-twisting you can get him as AG and tell him to forget about that Azerbaijan-US Chamber of Commerce gig and make friends with Turkmenistan (As Good As News always stretching for an opportunity to plug Doc Gurby -it's not easy being the official blog of reclusive Turkmenistan.)

An Amazing Attic Has Harvard

- TAPPING OUR MUSICAL MUSCLE MEMORY - Two new television shows attempt to tap a mutant strain of American Idol fever as regular citizens compete to demonstrate knowledge of pop lyrics - singing in public required. Review generally positive on both Singing Bee and Don't Forget the Lyrics, although some ambivalence on whether the shows are camp or just plain fun. For years I have tortured my family by singing along to the radio on long car rides, often improvising malaprop lyrics. At my worst I have done this in the presence of non-family guests, leaving my children with permanent scars of embarrassment. At least one night of each show will be a must watch for As Good As News - may work as shock therapy to end car singing habit, at the very least should improve knowledge of lyrics. Based on the photo, Singing Bee seems to be recycling, possibly environmentally conscientious, possibly on very limited budget, also amazing that the dancer's outfits from Hullabaloo were still in storage. -----------------------------------------------------------------

-HARVARD'S COSMOS - For only $5 Million you can put your name on a digitized collection of astronomical observations, scanned from photographic plates created across 118 years and four continents. The scanner to convert photographic plates to computer memory required custom design for both hardware and software, but it is ready, all it takes is money and we can have the world's first time domain catalog - the night sky over more than a century with views from both Southern and Northern hemispheres - As Good As News sponsors The Stars Come Out At Night? Sorry, do not have spare $5 Million right now, try me next week after power ball drawing. The photo of the cupboards at the Harvard Observatory reminded me of the rows of specimen lockers I saw on a recent visit to the Harvard Herbaria offices. These plants were collected over centuries from every continent, and the specimens are already moving to digital as the actual plants are placed on the scanner. The "hard copy" libraries at the Herbaria are also extensive, I was lucky enough to get an up-close look at an illustrated plant compendium that was one of the first 50 books ever printed. Some thoughts for future study: 1. An amazing attic has Harvard; 2. What a revolution when this stuff goes digital - scientists all over the world get access to data that can now be organized and manipulated with ease; 3. The old originals, photo plates, illustrations in printed volumes, even pressed plants with diary entries - feel like art, soon to be a forgotten art. ------------------------------------------------------------------

- AS WAR ENTERS CLASSROOMS, FEAR GRIPS AFGHANS - Drive by shooting targets schoolgirls as the Taliban makes war on education in Afghanistan. These are the same Taliban who provided a home to Osama Bin Laden. They still believe the only way to practice Islam is to live in the stone age. They aren't happy to start a commune in the mountains, they insist that the rest of the world join them in the stone age and they will go to any lengths to achieve this. Those who were around in the early 60's will remember that Barry Goldwater had a very direct approach for getting North Vietnam back to the stone age, might work for Taliban. Cheney-Rove-W regime should have finished the job in Afghanistan before getting preoccupied with Saddam Hussein.