Summary of Recent Literature on Issues of Tuition, Access and Affordability

 

 

 

Price Elasticity – Impact of Tuition Increases on Enrollment

 

  • Tuition increases depress enrollments, particularly among low income students.  Many studies conclude that demand for higher education responds to price, including:

 

Kane, Thomas (1999). The Price of Admission:  Rethinking How Americans Pay for College.  Washington, D.C.:  The Brookings Institution Press.

 

Examined 3,000 colleges and universities from 1980 through 1992.  Found large effects from changes in tuition policies and the business cycle on enrollment in public colleges:

 

Public 2-Year – Enrollment fell 14.9% for every $1,000 annual increase in price

Public 4-Year -  Enrollment fell 10% for every $1,000 annual increase in price

 

Public 2-Year – 1% increase in unemployment rate results in a 2.1% increase in enrollment

Public 4-Year – 1% increase in unemployment results in no identifiable effect on enrollments

 

McPherson, Michael S. and Morton Owen Shapiro (1998).  The Student Aid Game:  Meeting Need and Rewarding Talent in American Higher Education.  Princeton:  Princeton University Press.

 

Concluded that an increase in net price of $150 reduces new enrollments among low-income students by 1.6 to 2.4 percent.

 

Heller, Donald E.  (2001).  “The Effects of Tuition Prices and Financial Aid on Enrollment in Higher Education:  California and the Nation,” prepared for the EdFund.

http://www.edfund.org/pdfs/i-57.pdf

 

Found that a 10 percent increase in tuition in California would decrease enrollments by 1.34 percent at community colleges and just under 1 percent at four-year institutions

 

 

Trends in Student Choice and Enrollment Behavior

 

  • Net costs to students affects not only whether student attend school, but where they enroll.  Student participation patterns are changing, with a growing concentration of lower income students at the community colleges and fewer at four-year institutions. Moreover, where students enroll and whether they attend full-time or part-time affects the likelihood of finishing their education and earning a degree.

 

Institute for Higher Education Policy (2000).  The Policy of Choice:  Expanding Student Options in Higher Education.

 

Key findings:  Patterns of enrollment have changed over the ten-year period 1989-90 to 1999-2000:

 

  • Among traditional freshman, the proportion of low-income freshman decreased at most types of 4-year institutions, but increased at two-year institutions.
  • Higher income students decreased at less selective four-year and proprietary institutions, and increased at both public two-year and more selective doctoral level four-year institutions
  • The percentages of students receiving institutional aid and loan aid were tied more closely with type of institution than to family income
  • More expensive schools are relatively more costly for low-income students than for high income students

 

McPherson, Michael S. and Morton Owen Shapiro (1998).

 

Found that lower income students enrolled in community colleges in much higher  proportions, and upper income students in much lower proportions.  Since 1980, there has been a significant shift in the proportion of low income students attending two-colleges, growing from 45 to 47 percent.  Upper income students, on the other hand, fell from 15 percent to just 9 percent by 1994.

 

King, Jacqueline (2002).  Crucial Choices:  How Students’ Financial Decisions Affect Their Academic Success.  American Council on Education for Policy Analysis.  Washington, D.C.

 

Warns that colleges will increasingly be challenged to maintain and enhance graduation rates and time to degree.  This will become even more difficult as the student population becomes more diverse in terms of age, race/ethnicity and socioeconomic status.  The report focuses on the characteristics of low-income students who are at the greatest risk of dropping out.  These students may find it difficult to make better choices when selecting a college or university or when considering going full-or part-time because their level of unmet need is so high.

 

Some of the important findings of the report include:

 

  • Low income students were less likely to attend four-year institutions than middle and upper-income students, 29 percent compared to more than 50 percent.
  • Low income students were less likely to attend full-time than middle and upper-income students.  (Students who attend full-time are more likely to complete a degree than those who attend part-time).
  • Average unmet need for low-income students is more than three times that of middle and upper-income students ($3,556 versus $994 in 1996).

 

National Trends in Measures of Affordability

 

  • There is growing evidence that college is becoming increasingly less affordable, particularly for those least able to pay.

 

“State Appropriations, Public Institution Tuition Rates and State Student Financial Aid FY 1975 to FY 2002.”  Postsecondary Education Opportunity.  No. 121, July 2002. 

 

Concludes that states have done little or nothing to protect college affordability for their own undergraduates.  The shift in cost burden from state to student has occurred with little or no thought about how higher prices would affect students from different family income backgrounds.

 

Access Denied:  Restoring the Nation’s Commitment to Equal Educational Opportunity.  Report of the Advisory Committee on Student Financial Assistance.  Washington, D.C. February, 2001.

 

Found that the college entry and completion rates of low-income students continue to lag significantly behind that of middle and upper-income students.  Low income students attend four-year institutions at half the rate of the comparably qualified high-income peers.  The report cites three major factors for these results:

 

  • The cost of higher education as a percentage of family income has risen only for low-income families. 
  • A shift in policy priorities away from access (toward middle income relief and merit aid) has caused a steep rise in the unmet need of low-income students.
  • In response to the excessive levels of unmet need, low-income students have abandoned plans of full-time enrollment, are working long-hours and are borrowing heavily.

 

Kipp, Samuel M, III, Price, Derek V., and Wohlford, Jill K (2002).  Unequal Opportunity:  Disparities in College Access Among the 50 States.  Lumina Foundation for Education.  New Agenda Series.  Vol. 4. No. 3.

 

Concludes that access to higher education is unequal among states and within states depending on a student’s income and dependency status finding, among other things, that:

 

·        Affordability more often requires borrowing for low-income dependent students than for median-income students

·        Far fewer institutions are accessible to both dependent and independent low-income students than to their median income counterparts

·        Except for many public two-year institutions, most colleges and universities are generally not accessible to low-income independent students to attend full-time even with borrowing

 

Losing Ground:  A National Status Report on the Affordability of American Higher Education.  The National Center for Public Policy and Higher Education.  San Jose, California. 2002.

 

Finds five national trends that if left unchecked will have serious adverse consequences for broad college opportunity in America:

 

·        Increases in tuition have made colleges and universities less affordable for most American families

·        Federal and state financial aid to students has not kept pace with tuition increases

·        More students and families at all income levels are borrowing more than ever to pay for college

·        The steepest increases in public college tuition have been imposed during times of greatest economic hardship

·        State financial support of public higher education has increased, but tuition has increased more

 

The report offers some compelling reasons why affordability is important:

 

·        Affordability is a key element of educational opportunity, and education and training beyond high school have become the gateway into middle class America

·        The education and skills of the population are central to the economic and social health and success of communities, states and the nation

·        The gap in college attendance rates between high- and low-income Americans has widened even among those who are academically prepared for college.

 

Factors Affecting Tuition Increases

 

  • A number of reasons for the recent surge in tuition increases at public institutions have been cited including:  declining state funding, state appropriations not keeping pace with increased enrollments, shrinking endowments, faculty salary increases and increased spending associated with competition for better students, including more merit aid.

 

“Creeping Ivy, Soaring Tuition.”  Business Week, April 8, 2002. 

 

Cites that even as state funding and endowments shriveled, faculty salaries continued to climb in 2001-02, about 2.2 percent higher than inflation.

 

Caplan, Lincoln.  “Contemporary Calculus:  Economically Driven Decisions are Tranforming Higher Education.”  U.S. News and World Report.  September 1, 1997.  V123, n8, p80. 

 

Reported that in an effort to show legislators a better student body, state colleges and universities are increasingly spending scarce aid dollars to attract a class with high grades and board scores.

 

“State Appropriations, Public Institution Tuition Rates and State Student Financial Aid FY 1975 to FY 2002.”  Postsecondary Education Opportunity.  No. 121, July 2002. 

 

Concludes that state investment effort in higher education has been on the decline since the late 1970s.  As states have reduced their state funding efforts, public colleges have aggressively increased tuition.  This has resulted in a substantial shift in the costs of higher education paid by taxpayers in general to students and their parents.

 

U.S. Department of Education, National Center for Education Statistics.  Study of Costs and Prices, 1988 to 1997-98. Volume 1.  Washington, D.C.:  Government Printing Office, December, 2001.

 

Study examined changes in various categories of expenditures, revenues, and enrollment to determine statistical associations between these variables and price over time. 

 

For Public Research/Doctoral Institutions (like UConn), the study found:

 

  • Institutions with greatest declines in appropriations (from all government sources) per FTE student typically had larger increases in tuition
  • Institutions with greater increases in non-instructional expenditures (public service, academic and institutional support, and plant operations and maintenance tended to have larger increases in tuition
  • Institutions that had the largest increases in instructional expenditures and those with larger increases in institutional aid tended to have greater increases in in-state undergraduate tuition

 

For Public Comprehensive Institutions (like CSU), the study found:

 

  • Institutions that had the greatest declines in appropriations per FTE typically had larger increases in tuition
  • Institutions with larger increases in revenue from government grants and contracts tended to have smaller increases in in-state undergraduate tuition
  • Institutions with larger increases in instructional expenditures tended to have greater increases in in-state undergraduate tuition
  • Other variables that accounted for lower proportions of the variation in in-state undergraduate tuition included non-student related expenditures (administration) and changes in student services expenditures

 

For Public Two-Year Institutions changes in the 11 independent variables accounted for only 7.3 percent of the variation, leaving most of the variation in tuition changes unexplained.

 

Wellman, Jane V. (2001) Looking Back, Going Forward:  The Carnegie Commission Tuition Policy.  The New Millennium Project on Higher Education Costs, Pricing and Productivity – Working Paper.  The Institute for Higher Education Policy. 

 

Found that sticker prices at both public and private institutions continue to grow faster than inflation.  Net prices are still rising faster than inflation, even after discounting for grant aid.

 

Paper cites the biggest cause of tuition increases in public institutions is a reduction in state spending.  Tuition increases can be held down in good economic times, but remain vulnerable as state economies take a turn for the worse.  Predicts the return of double digit tuition increases.

 

Wellman, Jane V. (2002)  Weathering the Double Whammy:  How Governing Boards Can Negotiate a Volatile Economy and Shifting Enrollments. Working Paper for the ABG National Conference on Trusteeship.  Washington, D.C. ABG. 2002.

 

Identifies several forces that are contributing to budget strains:

 

A recession that is causing short-term revenue losses

More fundamental, structural gaps in state revenues and expenditures that are eroding long-term funding for higher education

Cost competition for students and faculty by institutions

 

 

Enrenberg. (2000)  Tuition Rising:  Why College Costs So Much.  Cambridge, MA.  Harvard University Press.  2000.

 

Although focused mainly on private colleges, author argues that tuition increases rise from the “cookie monster” nature of leaders at the top universities and the “arms race” competition that has developed among them.  Characterizes these leaders as having an infinite appetite for money to pay for new, bigger and better academic programs.

 

 

Where Do We Go From Here?

 

·        Several leading higher education associations and authors offer suggestions of next steps for states and governing boards as they struggle with how to deal with the structural deficiencies facing higher education

 

 

Wellman (2002).

 

Recommends that governing boards seek analytical information, communicate clearly with internal and external constituencies, and make thoughtful and deliberate decisions, including:

 

  • Identifying their institution’s short- and long-term challenges, protecting investments as they make budget cutbacks
  • Refocusing institutional mission, planning and programming, using present political opportunities for an agenda of deregulation and accountability (Connecticut has implemented most of these already) and reducing funding for low performing programs
  • Assessing and integrating tuition, aid and outreach strategies, avoiding enrollment shock waves
  • Redoubling institutional commitments to cost management and cooperation
  • Paying attention to enrollment planning and management, making sure institutions maintain commitment to access and quality, including strategies that increase access for those students who must overcome significant societal and personal challenges to obtain their education

 

King (2002).

 

Suggests a series of questions that institution’s should be asking themselves, including  the demographic composition of the students they serve; the financing choices students are likely to make; services needed to help students balance work, family and academic obligations; and how much an extra year costs students in terms of expenses and lost income.

 

National Center for Public Policy and Higher Education (2002).

 

Recommends that every state develop its own strategy for enhancing college affordability.  Every state can consider family income levels when establishing tuition policies and ensure that adequate student financial aid is provided to the neediest students.  Every state should ask:

 

·        How much should families of various incomes be expected to contribute to tuition and college-related expenses?

·        How much debt should be encouraged?

·        How should student financial assistance be provided and to whom?

·        How much incentive does the state wish to give its citizens to increase their knowledge and skill levels?

 

Kane (1999).

 

Recommends simplifying the student financial aid system stating that whether a student enrolls in college should depend less on how skillfully his or her parent can navigate the system, and more on whether the student can expect to prosper there.