Columns

Hunter Fast ’12: No free lunch for Brown

By
Opinions Columnist

Many viewpoints have been expressed in recent weeks regarding Brown’s proposed 4.5 percent tuition hike for the next academic year. In this regard, Simon Liebling’s ’12 column denouncing the increase as plutocratic excess (“Grin and bear it,” Mar. 25) stands as a beacon of clarity and reason in stark contrast to the “brown-nosing” opinions of anyone who could possibly find the administration’s actions to be justifiable.

Unfortunately for the entire Brown community, the policies that Liebling espouses — namely, a tuition freeze and the cancellation of layoffs — are inconsistent from a budgetary standpoint for a number of reasons. Furthermore, because financial aid has increased at a commensurate rate, the tuition hike resembles a progressive tax, primarily affecting those that have weathered the recession best: the wealthy.

Central to Liebling’s logic is the assumption that Brown’s endowment can be utilized to fill gaps in the University’s operational budget, thus allowing the administration to have “frozen our tuition and cancelled layoffs” in the face of sharply decreased revenue. However, the vast majority of the endowment is held in illiquid assets (i.e., assets that cannot be readily converted to cash).

The illiquidity of University endowments is evidenced most directly by the fact that Brown’s endowment lost 26.6 percent of its value at a time when the U.S. dollar gained value through deflation. This disparity implies either that the best schools in the country hired profoundly incompetent money managers, or that their endowments cannot retain their value by converting to cash, with the latter being by far more likely.

Because of this painful reality, Brown does not have the ability to call funds out of the ether that national governments seemingly have, thus limiting Brown’s options for ameliorating the effects of the recession on the educational experience of its students. In short, an endowment is not a savings account, nor is the administration as powerful as a government.

In light of this, Brown is bound by the economic maxim that “there is no such thing as a free lunch.” In order to fulfill one of Liebling’s demands, the University must make short-run sacrifices on some other front. While every student has a different set of interests, and thus different ideas of which expenses should be cut, demanding that the University renounce programs intended to ensure long-term financial stability in order to balance a short-run budget deficit is deeply irresponsible.

Enter the role of the tuition hike. Although the University administration has been accused of heartlessly exploiting its students in the interest of its ruthless campaign to improve Brown’s facilities, this accusation is only half true. At the end of the day, some students will obviously see their tuition rise.

However, the University has, by expanding financial aid, ensured that the most economically vulnerable students will be generally protected from Brown’s budgetary woes. This is verified by a comparison of aid award estimates from the Office of Financial Aid for this academic year and the next, which demonstrates that the financial burden for families on financial aid will increase by a percentage that is well below current inflation rates, much less the tuition increase.    

Therefore, the correct accusation is that through these policies, the University is callously neglecting the economic interests of its patrician students in order to provide the best educational experience possible to all of its students. Due to this fact, resistance and protest must be the best options. After all, the bourgeoisie has nothing to lose but its chains.

Of course, this is not to say that all is well for the affordability of a college education; such an assertion would merely be “brown-nosing.” A collaborationist Herald editorial (“The Corporation and the economy,” Mar. 3) noted that “tuition has been growing faster than inflation since the 1970s.” However, without taking other factors into account, the inflation rate is a misleading value for comparison.

The income growth of wealthy Americans began to heavily outpace that of the middle and working classes in the 1970s, and because the student bodies of Brown and other competitive universities are disproportionately wealthy, the editorial’s observation may not be a coincidence. If this conclusion is correct, then it gives rise to an unsettling phenomenon.

While many universities cover the demonstrated need of less well-off students through financial aid, perpetual increases in tuition can render the sticker price of a college education intimidating to all but the wealthiest of prospective students. This may prompt families to substitute less expensive options, to the detriment of future earning potential, thereby causing the income growth of the most wealthy relative to lower income brackets to accelerate further. Thus, the cycle is perpetuated for another generation.

There is no magic bullet for the problem of college affordability, but potential solutions will be found only through analysis of the ways in which amoral reactions to economic circumstances can generate negative outcomes. A moralistic approach that does little other than accuse its detractors of collaboration, hypocrisy and brown-nosing is remarkably unhelpful.
 

Hunter Fast ’12 is an economics concentrator who hopes that this column will be sufficient to earn him a writing gig for the Brown Noser. He can be reached at
hunter_fast (at) brown.edu.