The University of Chicago Gets an 'Incomplete' for Its Student Loan Solution

The University of Chicago caused a stir the other day when it announced that come next fall, select members of its incoming Class of 2019 won’t need to take out student loans for their college education, thanks to the school’s No Barriers program.

Chicago joins several dozen other institutions as it sets aside a portion of its hefty ($6.7 billion) endowment fund and fundraising proceeds in the form of scholarships for low-income applicants who are worthy of admission to the prestigious university. The financial assistance is intended to help bridge the gap between the price of a degree and the sum total of what a subject family has the ability to contribute (by the university’s estimation), other grants and scholarships that are awarded to the student, and the economic value of the part-time work he or she will be required to perform while attending school.

Some institutions limit their assistance to the cost of tuition and fees, while others intend for that to also pay for room, board and books. Either way, it’s unlikely that every single dollar of cost will be covered by a college’s largesse. And that will leave families in the difficult position of having to address that shortfall by some other means.

There are those who would say that this is faux altruism—a cynical (not to mention expensive) way of changing the subject with regard to the ongoing debate on the ever-increasing price of higher education. Others may point out that for every discounted tuition it authorizes, the school will need to register an offsetting full retail-price admission, which could end up skewing the selection process in favor of wealthier but less qualified candidates. Still more would remind the rest of us that there’s a limit to any revenue-reliant organization’s generosity.

I’m inclined to believe that these schools are genuinely concerned about broadening the availability of good-quality education to a more diverse group of students. I can also appreciate the need to offset higher and lower-paying students. And yes, I’ve heard the chatter about the relaxation of admissions standards for the benefit of the revenue dollars that may yield—a difficult balancing act for schools that care about maintaining institutional standings.

What concerns me more, however, is that all we’re talking about is the revenue side of the equation.

Whether the money comes from full- or discounted-price paying students, governmental Pell Grants, other merit and need-based scholarships, or the non-operating income that’s derived from a college’s investment activities, this scheme is unsustainably focused on what’s coming in the front door as opposed to what’s headed out the back.

Sure, there’s been a lot of discussion about the need for holding down costs by weeding out inefficiencies. Yet the entrenched administrations of the nation’s privately and state-run schools continue to engage in excessive administrative staff-hiring practices and ignore the obvious organizational and operational redundancies that exist within close geographical proximity. It’s also business-as-usual with regard to extravagant construction projects and over-the-top fees the schools pay to celebrity entertainers they book.

Helping those who are financially less fortunate to afford a college education is certainly a noble undertaking. An equally worthwhile endeavor, however, would be to restore higher education’s fundamental value proposition for the benefit of everyone else, too.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.