The Economics of a Tuition Reduction
Two weeks ago, the Northwestern University administration decided to move first- and second-year students to remote classes for the fall quarter. The Friday update also mentioned a 10% tuition reduction. Many students argued that the quality of online education is not on par with in-person instruction, and the university listened - or so it seemed.
My initial instinct was to applaud this decision that would ease financial burdens for Northwestern families. But follow-up emails from the administration outlined that the 61% of NU students who receive need-based aid “will not be impacted, as their aid will be reduced commensurate to tuition, and their expected family contribution [EFC] will remain the same.”
This decision ignores the fact that lower-income families have been disproportionately affected by the pandemic. EFCs were set before “coronavirus” was part of our lexicon. Since then, the pandemic has drastically affected households all over the United States, causing missed rent payments, delayed medical care, and heightened levels of food insecurity. Based on public use data files from the Census’s Household Pulse Survey, I estimate that during the week of July 21st alone, over 60% of families at the bottom of the income distribution experienced a loss of employment income - known as an income shock - in the past week, a rate more than twice as large as among households at the top. Families cannot be expected to meet last year’s EFC after experiencing the unanticipated income shocks of the pandemic.
This is especially dangerous because of the limited ability of lower-income households to smooth their consumption, or to keep their patterns of spending stable across different levels of income. Lower-income households typically have fewer available resources with which to smooth consumption. This explains the food insecurity, medical delays, and missed rent payments we’ve been seeing in the news. Not only are the households excluded from Northwestern’s tuition reduction more likely to be hurt by the pandemic, they are less able to break their fall when they are. The administration’s decision ignores this reality.
Northwestern has made a political decision to exclude students who receive financial aid and benefit those who are least likely to be affected by the pandemic. Instead, the administration can and should scale up the Aid Review for Loss of Income Program given these unprecedented circumstances, and reduce EFC or offer grants for families who have experienced income shocks. Northwestern University needs to do better.
Photo via Northwestern University
