Private colleges have always catered to the wealthy. Why are they tax-exempt?

Why are taxpayers subsidizing private universities that give preferential treatment to students from wealthy families?

If universities want to behave like business firms and cultivate a high-end clientele, then let’s require them to relinquish their non-profit status.

Others have commented on the overall problem of nonprofit organizations – charities, religious and educational organizations – in the U.S. that often attain this classification too easily, then proceed to make profits, just undistributed to shareholders, and cost the government billions of dollars in foregone taxes. Private universities are not as “private” as is often imagined with funding through student financial aid, research grants and, most importantly, their tax-exempt status.

It is time for universities to prove that they make fair admissions decisions if they want continued public support.

The recent admissions scandals come as little surprise to many who work in higher education and within a context of admissions exceptions. Some of these admission exceptions are justified and transparent, as in those for students with special talents. Other admission exceptions are shrouded, the most well-established of which is giving preference to sons and daughters of powerful alumni and wealthy donors.


Familiar ”side doors” to admission known to some parents include participation in minor sports not available at most high schools –rowing, fencing, polo – and “provisional” admission for those who can’t meet minimal academic standards, a practice which does not damage the school’s selectivity ranking.

Furthermore, some private universities are less than forthcoming about the fact that they have a ”need-aware” admission process: Plainly stated, those students who apply for financial aid may be penalized with a lower ranking. Finally, many private colleges have “early decision” admission programs which are too risky for low-income students to participate in because they need to commit without being able to compare financial aid offers.

Of course, public universities also admit some students based on special circumstances – especially athletics – but should be vigilant in seeing that these decisions are guided by the highest ethical standards. This is why UCLA’S involvement in the recent admissions scandal is especially troubling.

Those who work at private universities do good and important work every day, and the admissions scandals and unfair practices should not reflect negatively on all. There are many individual stories of traditionally underserved students who have benefited from these institutions.

Through their graduates and the research of their faculty, elite private universities give value to society directly and indirectly. As a group, private universities are a primary reason why the U.S. is the world’s leader in higher education. However, do these social benefits on balance mean institutions should automatically be given tax-exempt status?

It is important to understand the context of this discussion because the history of admissions practices in American universities is disturbing, showing clear preference towards legacy students, the rich and the influential.

Women were not even allowed to study at the higher education level until the mid-19th century, then mostly in female-only colleges. Only later were they allowed into coeducational colleges but with strict enrollment limits.

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Historically, American universities developed with clear social benefit through their education of religious and political leaders, doctors and nurses, and classroom teachers. In the 19th century, it would have been common to consider all educational institutions, whether or not government sponsored, as serving the social good.

Unfortunately, the general public is largely unaware of the behind-the-scenes preferences given in admissions and would like to believe that these important American institutions are consistent meritocracies. However, the fact is that higher education is a primary way in which privilege is passed along from wealthy parents to their children.

Can one justify to working class families a tax exemption status for those universities that disproportionately benefit the children of the wealthy? Colleges need to admit based on merit, not money, or lose public support.

Gary A. Berg is author of eight books including Low Income Students and the Perpetuation of Inequality, and the forthcoming The Rise of Women in Higher Education: How, Why and What’s Next.
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