Last night, while reading the newspapers online as I usually do, I came across an article in the NY Times about the cuts hitting the state universities here in California. Now this isn’t news to those of us that live here: we’ve see the University of California (UC) and California State Universites (CSU) fall from being top institutions to institutions begging for money. The article noted, for example, that “The state’s two systems were each cut by $650 million, and they each could lose $100 million more if the state’s optimistic revenue expectations do not materialize.” According to some meetings I had at CSUN, because of existing contracts, those funds can’t come from teacher salaries: they have to come from facilities, student services, new programs, equipment budgets, etc. Schools are coping with these cuts by raising tuition. Again, quoting from the article: “Tuition is expected to rise roughly 20 percent next year, just the latest in series of steep increases. Yearly in-state tuition at California State University will average about $5,500, while at the University of California, it is expected to be $13,200 if the increases are approved this month. Programs all over the state are being shuttered, star professors are leaving for colleges in other states, faculty positions are being left unfilled and class sizes are continuing to grow. While the state’s spending on the system is down to a level not seen since the late-1990s, the campuses enroll tens of thousands more students.” In addition, because they pay more, the schools are increasingly turning to out of state students, because they cannot afford to serve their original in-state mandate.
However, one paragraph of this article really got me incensed, perhaps because I’ve got college finances on the brain:
To a large extent, the wealthiest and poorest students fare better, either because they can afford the hefty increases or because they have enough financial aid to cover them. But students from families with incomes in the low six figures often feel the biggest pinch, taking out more loans with each tuition increase.
This is just another example of the middle class getting it in the neck; and it is something I’m increasingly aware of. Here’s an example. On the FAFSA, which is the standard student aid application used to determine the parent’s expected financial contribution (and thus the amount of “need based” aid the school will offer), assets owned by the student are assessed at a rate of something like 25%. Parents get an asset exemption: exempt are funds in retirement accounts and the first $50K of bank assets. That’s fine for the very wealthy and for the poor. It screws the middle class. If you do what financial advisors advise, and save for that potential layoff or downturn, you’re going to have much more than that $50K in the bank for emergencies. This is especially true in the major metropolitan coastal areas where housing prices rose. If you bought in the bubble market (and most of us did) and are honest and paying your mortgage (most people do), then you have large expenses each month that college financial forms don’t consider. How do you deal with this? You trust that the merit side of financial aid is truly need-blind, despite the rumors you hear to the contrary. I’ll note this is one reason we’re exploring private colleges more: we feel there is more merit-based aid available, due to endowments, from those institutions. Such institutions are also much more insulated against future cuts.
We see these examples all the time. Home mortgages are another area. This has been an area designed best for the poor or the wealthy. In fact, there haven’t been major hits in the upper-upper end, where homes are typically paid for by cash. The lower end, even with price drops, have been helped with buyer assistance programs… and for those having financial trouble, with mortgage modification programs. But in the middle? Even though prices have dropped, they are still much higher out on the coasts, Jumbo mortgages are harder to get. Further, the middle is where folks typically sell one house to buy a next, and this has just been destroyed through the pricing drops. The middle are the folks who are paying the mortgage but with less breathing room… and no help forthcoming.
These are examples of the class warfare that is hurting America. Studies have shown that the rich are getting richer, and the poor poorer, and it is harder than ever for people to move between strata. The era of doing better than your parents is gone, for the most part. If we look at the behavior of Congress, we have the rich refusing to tax or eliminate tax loopholes for the rich, while cutting-cutting-and-cutting more services for everyone. They have theirs, and so they don’t care. The middle classes are often bearing the brunt of those cuts: we see schools cuts, we see arts funding cut, we see infrastructure funding cut, we see science cut.
You see class warfare in the comments sections of every newspaper. You do an article about the cost of education, and the chorus pipes up about overpaid teachers, pension deals, union warfare. They think only about those horrible teachers wanting to earn a living wage teaching students. There seems to be no thought about the future: no thought that it is today’s education that will inspire students to become the innovators and entrepreneurs of tomorrow. America’s future is not in manufacturing—it is innovation, and innovation requires education and execising of a critical mind.
I’m not sure where I’m going with this… that’s the trouble with Sunday ruminations. I’m not sure how to address the problem, but did at least want to raise the issue.
