Stop subsidizing payoff-based college admissions

There aren’t many places where Republicans and Democrats can find common ground, but one has become clear as the Supreme Court takes up race-based admissions preference in lawsuits involving Harvard and the University of North Carolina. However the court ultimately rules, these cases have brilliantly illuminated the unsavory, publicly-subsidized admissions practices of selective colleges.

The most egregious may be those practices that allow the wealthy and connected to purchase special admissions treatment by making a large “charitable” contribution to deep-pocketed colleges — and to do it with big taxpayer subsidies. For progressive Democrats committed to promoting equity and ending tax breaks that favor the ultra-wealthy, such practices are obviously troubling. The same is true for populist Republicans frustrated with bloated college bureaucracies and self-dealing elites.

It’s no secret that hefty donations can win preferential treatment. As Robin Mamlet, Stanford’s former admissions dean, has explained, fundraising staff routinely flagged applicants who were related to big donors and that admissions decisions “certainly factor[ed] in a history of very significant giving to Stanford.” Former Yale president Richard Levin conceded, “We do advise the admissions office about applications coming from the children or grandchildren of significant donors.”

This kind of payoff-based admission process gets vulgar fast.

The University of Southern California’s color-coded VIP spreadsheet, surfaced by the 2019 “Varsity Blues” admissions scandal, was peppered with notes such as, “given 2 million already,” “[p]reviously donated $25k to Heritage Hall,” and “father is surgeon.” The Harvard racial preferences litigation brought forth a wealth of similar records, including a campus official cheerfully musing that an applicant’s family had “an art collection which conceivably could come our way.”

At Harvard, connection to a wealthy donor reportedly boosts an applicant’s chances of admission by a factor of nine. At Duke, in recent years, up to 5 percent of the student body owed its admission to such connections. Between 2013 and 2019, state auditors found that the University of California system admitted at least 60 well-connected students who (according to state auditors) would otherwise have had “virtually no chance of admission.”

While these practices may be distasteful, higher ed apologists like to argue that many of the institutions employing wealth-based admissions schemes are private. If private institutions sell indulgences or cater to the privileged, they insist, that may be unfortunate but is hardly a public policy concern.

Such arguments are wrong for at least three reasons.

First, many of these institutions actually are public. Moreover, even private universities like Duke and Harvard collect a fortune in federal student loans, grants, and research funding. It’s wholly appropriate for federal lawmakers to insist that public funds not subsidize or support institutions engaged in such behavior.

Second, almost without fail, these campuses fraudulently pledge to admit applicants without regard to their financial status. Former Harvard president Lawrence Bacow asserted, “When we admit kids, we don’t look to see whether or not they can afford to come.” Such statements are false: These institutions do indeed favor some applicants precisely because of their family wealth. That means other applicants are wasting time and money on rigged admissions processes.

Third, wealthy families who make influence-peddling “donations” are allowed to write off the full amount as charitable contributions — meaning that rule-abiding taxpayers are stuck picking up 40 percent or more of the tab for their payoffs. As long as there’s no explicit quid pro quo agreement between parent and university, donors can deduct the full value of a university contribution that buys their child special admissions consideration.

This is nonsensical. After all, the IRS has long held that donors can only deduct the value of their contribution minus the value of any good or service they receive in return. For instance, an individual who gives a university $25,000 and then gets prime box seats for football games is only allowed to deduct the gift amount minus the value of those seats. This makes obvious sense: An exchange of goods or services is not a charitable contribution.

Yet the IRS currently ignores the quid pro quo when it comes to admissions. It’s time for that to change. After all, every seat taken up by a wealthy, well-connected applicant is a seat denied to a student based on merit. This also allows elite colleges to shake down wealthy families to pad their endowments and insulate themselves from healthy market pressures.

Some higher ed apologists shamelessly try to justify the shakedowns by claiming the dollars go to scholarships for needy students. In truth, there’s no evidence the dollars are used this way and, even if they were, campus officials could compensate by trimming bureaucratic bloat or tapping their outsized endowments.

There are various ways to address the challenge, ranging from IRS enforcement to statutory provisions. But the bottom line is that Americans — left and right — should be able to agree that taxpayers should no longer be asked to aid collegiate shakedown artists or subsidize admissions fast-passes for the rich.

Frederick M. Hess is the director of education policy studies at the American Enterprise Institute, and the author of a recent National Affairs essay on ending payoff-based admissions.