Do State Subsidies for Public Universities Favor the Affluent?

Public universities typically charge students less than the full cost of education, using funds from state and local government and other sources to cover the difference. This indirect subsidy is one of the largest forms of aid in America’s higher education system but is less understood in the policy community than grants and loans, which are provided directly to students in visible amounts, making them easier to analyze. Researchers and journalists aim to understand these indirect subsidies through proxies such as per-student spending, or per-student state appropriations. These simple analyses have led many to conclude that indirect subsidies at public universities favor students from affluent families. However, neither of these measures provides accurate information about the subsidy a student receives because they do not account for the tuition that students pay.

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