HESA

Higher Education Strategy Associates

Category Archives: tuition

June 05

Random Crazy Thoughts About Funding Formulas

A few days ago, I attended a meeting of an advisory group on the review of the Ontario University Funding Formula. I can’t of course tell you what went on inside the meeting, but I thought I would share with you some of the (creative? crazy?) ideas that I had while inside them.

One issue which has popped up both in Ontario and in some meetings I had in DC last week, was the problems created by having money automatically fund enrolments. Now obviously money has to track enrolments to some degree – big universities need more money than little ones, expensive programs need more money than cheap programs, etc, etc. But on the other hand making the relationship direct creates an institutional incentive to deal with every cost problem by just chasing more students, which may not be socially optimal. Indeed, it leaves institutions open to the charge (not always entirely fairly) that they care more about getting people in the door than making sure they graduate.

So here’s an idea: since tuition fees rise directly with enrolment, institutions already have an incentive to chase bodies. Why not switch the funding formula incentive entirely to completion as Denmark does with its “taximeter” system? Completions are probably correlated about .75 or .8 with enrolments, which means that it wouldn’t cause a massive dislocation; you could probably up that to .9 or so if you funded based on an “expected completion metric” which took into account the quality of the incoming students (so, for instance, Queen’s would have to show much higher completion rates than Algoma to get the same money because the entrance averages of its students is higher).

Compounding the money-follows-enrolment problem is the fact that no formula I’ve ever been able to locate ever makes a distinction between the cost of an average student and the cost of a marginal student. This is on the face of it ridiculous: the 15,000th student at any institution is a heck of a lot cheaper to educate than the first or even the 5000th. And while yes, actually calculating marginal costs is a mug’s game and you certainly wouldn’t want to try to work that out in a funding formula, it’s not impossible to include a taper in the funding mechanism. That is, the first 100 in a particular field of study might be worth X, the next 100 might be worth .9x, the next 100 .8x, and so on and so forth. Easy enough. Why not do it?

One other interesting discussion to be had around funding models is the extent to which they can make systems “sustainable” (by which government means “not cost too much”). The Government of Ontario is very keen on the idea of using the funding formula to promote “sustainability” in Ontario universities. My first thought was that this was kind of nutty since a) the funding formula discussion is entirely allocative (ie. it is about how to divide the money not how much to give) and b) as I understand it, this funding formula review is not allowed to touch i) tuition, ii) collective agreements and iii) pensions. Frankly it’s pretty difficult to address sustainability if the formula can’t really take into account the largest components of revenue or costs. And yet, the central problem in institutions is getting cost increases back in line with revenue increases (see here and here).

As I’ve argued previously, there are good reasons why we might want to link total compensation to a particular percentage of total income, in much the same way that teams in professional sports do: it keeps the lid on costs when times are tight and it gives everyone in the institution an incentive to raise net revenues. Now, this particular provincial government won’t countenance doing that by interfering with collective bargaining (a problem since universities on their own don’t seem to be able to control costs very well) or by implementing the “BC solution”  where the government sets out sector-wide guidelines about the extent to which aggregate pay can rise.

But then I thought of a way around this: what if the funding formula actually fixed the proportion of compensation costs to non-compensation costs? What if the formula contained a dollar-for-dollar clawback as compensation rises above 75% of total income? Of course, there’d be all sorts of screaming, and the devil would be in the details as to how to define compensation (circumventing the limit by hiring people as contractors would be the obvious loophole to close), but I think it might actually be a very effective tool for to help institutions become more sustainable.

Food for thought, anyway.

April 16

De-Regulating Tuition in Nova Scotia

There seems to be a lot of interest in this Nova Scotia budget announcement on tuition-fee de-regulation, mostly from the everything-is-going-to-hell-in-a-handbasket crowd.  In the interests of trying to keep people’s eyes on the ball, I thought I would try to put this move into some kind of context and examine what the likely outcomes will be.

(Necessary conflict of interest statement: In fall 2014, I did some writing work for the Nova Scotia Council of University Presidents, relating to priorities for the 2015 budget.  Make of that what you will.)

To start, let’s be clear about what the province has done.  It has allowed universities to do two things:

1)      For out-of-province, international and graduate students, the government has permanently de-regulated tuition fees

2)      For in-province undergraduates, tuition fees are being de-regulated for one year only, in order to allow institutions to make a one-time “adjustment” to program fees, after which tuition will return to having a 3% annual cap.

Now, some people assume that the term “de-regulation” means everyone is going to go hog-wild on fees.  But this isn’t necessarily true: remember that students will react to any price increase and this is a competitive market.  So the trick for universities is to work out the elasticity of the market – basically, how high can you jack up the price before people start looking for substitutes?

Universities essentially have two markets: “home” and “away”.   You can charge home students a heck of a lot before they will look for substitutes; they have to move away from home to find a substitute and that’s expensive – so the price differential can be quite high before a home market moves very much.   (note also that perceived quality matters – as many students leave Quebec for Ontario as the other way around, despite the substantial tuition gap).  But you can’t get away with that for “away” students in the same manner.  They are already paying substantially more than sticker price, because they are living away from home.  They already have cheaper alternatives.  How much more expensive can you make your product before turning them off?

Obviously, institutions are only going to raise fees in areas where they think demand is inelastic: that is, where a price hike isn’t going to substantially affect enrollment.  That means generally speaking you can expect fee rises to be concentrated in program where demand substantially exceeds supply.  Which means – among other things – that Arts programs aren’t likely to see big jumps.  But to add a bit of a wrinkle: the province has given universities the most flexibility over fees for group of students who are the most price-sensitive and the least flexibility over fees for those who are least price-sensitive.  Which makes for a very weird set of incentives: the pressure to go big will be highest for in-province students, because if they over-shoot on price to the high side they can always lower the price in subsequent years whereas if they price low, they won’t later be able to raise them significantly if they under-shoot.

It’s impossible in advance to say how institutions are going to take advantage of this flexibility.  Presumably strategies will vary depending on the amount of market power (i.e. excess of demand over supply) that each institution thinks it has in each of its programs:   But one lesson they should heed from the recent experience of almost-deregulation in Australia is this: make decisions quickly.  The longer uncertainty persists about what the prices will be, the longer opponents will have to raise support by suggesting the prices will be ridiculously high (King’s University Student Union was first off the mark on this one – see here – and they added some utterly ludicrous “statistics” on debt to bolster their case).  So while it goes against the grain to announce 2016 prices before Christmas, smart institutions will at the very least set out some principles that will counter the more hysterical propaganda as soon as possible.  Preferably before summer.

April 09

Australian Deregulation (Again) and the Future of Tuition Fees

So deregulation in Australia now looks to be dead and buried.  But in its death throes, the debate finally coughed-up some interesting ideas about how to pay for higher education.  Here’s the re-cap:

Not long after my last article on this subject, the coalition decided to put a second deregulation bill to a vote in the Senate.  The first bill failed by two votes.  The second one, after months of lobbying and arm-twisting, failed by four.  This suggests a couple of things:

1)      Minister Christopher Pyne and the Liberal party are as thick as two short planks when it comes to parliamentary management;

2)      If you give the opposition ten full months to yell “$100,000 degrees!”, you’re going to lose.  That some degrees were going to cost $100,000 was probably inevitable, but the idea that more than a handful would do so was risible.  The problem is that there’s really no way to model the consequences of deregulating a good such as education, which is at least partially a Veblen good.  As such, there’s no great way to refute those claims.  In other words: if you’re going to deregulate, do it quickly.

So the universities aren’t going to get any new money from students, which is a bit of a problem since there isn’t a whole lot of money coming from government either.  Pyne cancelled a planned 20% cut from the 2014 budget to university finances as a sweetener to get the deal through, but now that the deal has tanked there is genuinely no telling what the government’s next move might be (and the 2015-6 budget is right around the corner).

Now, right before the bill went down, ANU economist Bruce Chapman – the inventor of HECS back in the late 1980s – entered the fray.  He was an opponent of deregulation precisely because price increases, which students could pay using HECS, wouldn’t really act as a price signal, and hence would allow institutions to run-up fees far more than was socially useful.  But unlike the Labor Party he used to work for (it’s terribly difficult being a Labor loyalist in Australia these days, because of their ineffable uselessness), Chapman actually engaged with the government and suggested an alternative.

Effectively, Chapman suggested deregulation, plus a luxury tax: institutions can raise fees, but government can (and should) reduce public funding at something less than a dollar-for-dollar rate in response. Basically, if Melbourne raises an extra $10 million in fees, the government could cut their public subsidy by $5 million.  This allows institutions to use the market to get more money, but also puts some brakes on the process.  Institutions will still get their money, but students on the whole will probably pay less than they would under full-deregulation, the government will be on the hook for less HECS debt, and the financial gap between more and less prestigious institutions will be smaller.  It’s not an entirely novel idea – the Browne Review in England proposed something similar in 2010 – but it nevertheless has merit, and  deserves some examination here in Canada, too.

Pyne now says the Chapman proposal could form part of his third (!) deregulation bill, but university presidents have had enough, and have stopped backing deregulation (some interesting comments on this here from Hannah Forsyth).  You can go nuts working out their tactical motivation for abandoning the government at this point, but to me it just looks like they’ve decided this government is a goner, politically – why waste political capital backing anything from the present government, which would certainly be eviscerated by the next lot?  Better to negotiate elements of a Chapman package with Labor once they’re in power, and can claim the idea as their own.

At the dying end of this business came another interesting idea about how to set fees, this time from the excellent Andrew Norton.  He argues (here) that an egalitarian approach to setting fees would be to equalize them on the basis of average time-to-repayment.  Since time-to-repayment is a function of income in Australia, the equivalent here would simply be to set them as a function of average income, an idea I explored back here.  On recent trends, Arts fees should be falling, and Engineering fees should be rising.  Yet somehow, over here, such a simple idea seems beyond the pale of discussion.

Australia’s higher ed policy landscape is crazy in many ways, not least of which is the way university presidents tend to form circular firing squads on many issues.  But their vigor in discussing big policy issues in higher education is bracing; a welcome contrast to all the hiding from reality going on in Canadian governments.

April 06

College Tuition 2014-15

Statistics Canada, for reasons best known to itself, only tracks tuition for university programs.  For college programs, we’re basically in the dark.  We’ve got nothing, nada, zip.

In theory, it’s not all that difficult to work out.  All you need to know is price and enrolment for each program offered: sum the prices, divide by enrolment, and voila!  Average tuition.  And yet nobody does it (my guess for why Statscan doesn’t do it?  Something less than full confidence in the enrolment data that comes in from colleges).

(Actually, Canada’s not alone in this.  In truth, there are very few countries with accurate tuition indexes.  Most countries either have zero tuition, or a set tuition fee, or fees [under Australia’s HECS system, students pay one of three prices depending on what fields of study they are in, with no variation by institutions], or they have a huge multiplicity of prices, often due to having many private institutions.  Almost no one keeps track of what goes on in private sectors, which is why you will search in vain for decent statistics on tuition in places like Brazil, Mexico, Russia, or even China for that matter.  The miracle has more to do with the fact that we have a decent set of tuition statistics for universities – albeit ones with some pretty loopy characteristics, as I noted back here – rather than the fact we don’t have one for colleges.  But I digress.)

The more faithful among you may remember that we here at HESA Towers tried to come up with a college tuition figure a few years ago.  In retrospect, our numbers were probably a little high in at least one province (Saskatchewan).  So this time, we think we’ve fixed the problems, and are giving it another shot.

Here’s how we came up with our numbers.  We looked at posted prices on institutional websites, and then – where tuition varies across programs – came up with an enrolment-weighted average fee for diploma-level programs (both shorter and longer programs are excluded from these calculations). In Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, and Saskatchewan there is only one institution, so the calculation is relatively straightforward. In Alberta, an estimated enrolment-weighted tuition figure for diploma-level programs was provided to us by the provincial government. In these six provinces, we are pretty confident about our numbers.

In the other four provinces (Ontario, Manitoba, British Columbia, and Quebec), we did not do a census of institutions; instead, we obtained fee and enrolment data from a representative sample of college institutions, enrolment-weighted the fee data, and assigned it to the entire province.  I know what you’re thinking: Quebec CEGEPs do not charge tuition.  However, they do charge a variety of fees for things like athletics, student services, etc., and we counted those. In these four provinces, there is a bit more of a margin of error in that we are not fully certain how representative our sample is.

Caveats aside, here’s what we found.

Figure 1: Average Tuition in College Diploma Programs

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Saskatchewan and Prince Edward Island have the highest average fees, at just under $4,700.  This does not of course mean that all students are paying this amount; in fact, most are paying less, but both schools have enough high-tuition programs to pull up the average.  In most provinces, the average is somewhere between $3,100 and $4,100, though Quebec and Newfoundland are substantially below that.  The national average is $2,396.

That’s the picture for 2014-15 anyway.  We’ll try to keep this index up-to-date each year – look for an update on this in September.

January 28

Another Australian De-regulation Update

So the last time we tuned into antics in Canberra, the government was trying to pass a fairly ambitious piece of legislation that would completely de-regulate tuition fees while (more or less) maintaining the HECS system, which means post-graduate contributions are always tied to income, and thus do not become too onerous.  The government was also going to cut institutional grants by about 20%, but keep the “demand-driven” system in which government dollars follow students no matter how many students attend.

The problem with this, politically, is that the government does not control the Senate.  With Labour and Green opposed to the coalition, the government needs to attract six of eight votes belonging to independents and minor parties to get anything done in the upper chamber.  Late last year, four of those senators were making positive noises. Two others (including the delightful Jacqui Lambie – seriously, click that link, it’s totally worth it) were implacably opposed, while the final two in play – Dio Wang of the vaguely Ford-ist (minus the drugs) Palmer United Party, and Independent Nick Xenophon – were opposed, but perhaps open to passing a deal with amendments.

So the government switched into deal-making mode, right?  Wrong.  For reasons that defy rational explanation, the coalition opted for a snap December Senate vote on the package, as-was.  Cue a two-vote loss.  Frank Underwood would not have been amused.  In Australian parlance: the coalition whips were clearly a few sheep short of a full paddock.

But that wasn’t the end of the story.  In response, the lower house simply adopted the same bill again, and sent it back to the Senate – only this time the government was ready to deal.  The 20% cut in government grants, those “necessary” savings that required the government to introduce de-regulation?  Turns out they’re negotiable – de-regulation apparently now matters more than fiscal probity.  The universities can hardly believe their luck: full freedom to increase fees, and no loss in government grant?  I don’t know exactly what’s going through vice-chancellors’ heads right now, but I’m betting that the words “eating”, “too”, “having”, and “cake” are all in there somewhere.

Problem is the government isn’t negotiating with vice-chancellors, it’s negotiating with Wang and Xenophon.  Wang has now said he is personally for de-regulation, but will abide by a caucus decision on the party line when voting (the question remains open as to how this would work, given that the only other Palmer senator is dead-set against the bill).  Xenophon wants the whole matter of university funding tossed over to a big bipartisan commission, a position which manages to be both sensible and absurd.  Sensible in that yes, changes of this magnitude are best done in bipartisan fashion, because otherwise institutions get policy whiplash if the opposition comes to power and undoes the change (a point I made back here).  On the other hand, it’s absurd in that there have been quite a few inquiries and commissions into higher education in the last few years; there are few secrets about the current system’s strengths and weaknesses.  Also, bipartisan commissions take two to tango, and there’s precious little sign the opposition Labour Party has any interest in handing the government a way out of this debacle (even if, as is whispered, some of them actually approve of the policy).  Xenophon presumably knows this, which is why his position – in Canadian parlance – is classic ragging the puck.

The clock is ticking on this proposal.  Universities need to know what to tell incoming students about their fees, so the question pretty much has to be solved by March.  That means another vote in the next five weeks or so.  Given the government’s ham-handedness in handling the file to date, odds are it’s not going to pass, though stranger things have happened.  But given the vaulting ambitions of Australian universities, and the seemingly limited desire of Australian government to fund higher education (per-student government funding is 30-40% lower than in Canada), it’s hard to imagine this option not coming back in some form in 2016.

January 27

Setting Tuition Fees

On what basis can tuition fees be set?  Let us count the ways.

The most obvious is “whatever the market will bear”.  This is the way most goods and services are priced, and the system on the whole works pretty well.  Private institutions around the world also work on this principle.  So do public institutions in many places, at least where MBAs and international students are concerned (also out-of-state students in the US).

But other than that, public institutions are not permitted to charge market-based prices (if Australia ever passes its deregulation bill it will be the exception – but more on that tomorrow).  They therefore have to find some other principles on which to base prices.

One option is to ask people to pay in some kind of relation to the returns on their education.  In a pure graduate tax system (which doesn’t actually exist anywhere), this happens directly because education payments are tied to annual income.  A rough-justice version of this concept sees fees vary by field of study, according to average returns in each field.  Canadian universities superficially do this by charging higher fees in fields like medicine, dentistry, and law than in Arts and Science.  But then again, in most cases, Canada’s variable fees only kick in at the second-degree level – at the first-degree level there is actually very little variation.

Australia has shown more gumption here: since the mid-90s their version of tuition fees (i.e. HECS contributions) have divided fields of study into three “bands”, with the lowest one (paying $5,000/year) containing fields like humanities, languages and education, the middle one (roughly $7,500/year) including computer science and engineering, and the top one ($8,500/yr) including law, medicine, etc.  (Of course, they then went and altered this scheme by designating science and maths as “national priorities”, and reduced their tuition to about $4,000/yr, but whatever.)

A third option is to charge students in relation to what it costs to educate a student.  In practice, this looks a lot like charging based on returns, because the capital-intensive programs also tend to be high-return programs.  However, law and business tend to cost a little less in this variation, and Fine Arts tends to cost more.  However, lack of clarity on how to define “costs of education” makes this a difficult system to adopt.

These are all ways of varying tuition; in practice, however, there is little variation in first-degree programs at public universities around the world, apart from Australia.  The reason is fairly simple: in most places, fees are controlled directly or indirectly by government.  And where government is involved, the key principle in deciding fee levels is: “what can we get away with?”  Because for governments, tuition is less a legitimate revenue stream that institutions use to reach financial (and hence academic) goals, and more a necessary evil that must be subordinated to short-term electoral calculations.

Some Canadian governments take this idea completely meta.  When Manitoba abandoned its tuition fee freeze in 2009, it chose to tie its tuition to the mid-range of what institutions in other provinces charge.  That is to say: tuition in Manitoba is the average of what other provincial governments think they can get away with.  Alberta does the same thing on a case-by-case basis: where institutions can prove that some of their programs are under-priced compared to similar programs at other major Canadian universities, the government will grant an exception to its blanket tuition policy and allow these programs to raise tuition to match.  Somehow, this process came to be known as the “market-modifier” system, which is odd considering there appear to be no markets at work here whatsoever.

Anyways, the upshot is there are lots of possible ways to set tuition, very few of which are likely to see the light of day because governments are disinclined to give up control of the fee-setting process either to institutions or an algorithm.  C’est la vie.

January 15

Free Community College in Canada?

As Canadians, we have a tendency to pay an excess amount of attention to developments in the US.  For instance, people are already asking whether the Obama free community college model would work in Canada.  But this is actually two questions.  The first is whether or not someone could make community college free; the second question is whether that someone could be the federal government?

Let’s take the second question first: could the federal government be the ones to do this in Canada?  The answer, pretty clearly, is: no, they couldn’t.  Formally, the Canadian and American constitutions look pretty similar in the way education is clearly a provincial/state responsibility.  But the US has evolved a couple of ways by which the federal government can enter the education system.  The first is by spending big on student aid, and then imposing conditions on the receipt of such aid.  The second is by offering states conditional matched funding to get them to do things.

Could Canada do the same?  Not really.  First of all, the ratio of provincial to federal spending, even including student aid, is nowhere near enough for the feds to get a foot in the door on most policy matters.  Second, the Americans are much more comfortable with notions of asymmetric federalism than we are.  Obama isn’t expecting all states to participate; in Canada, we tend to view these things as all-or-nothing: either everyone is in (or has been paid off via a special deal), or no one is.

Complicating things further is that different provinces and states charge different amounts of tuition.  In the US, Obama has made a small nod to this by saying that states with already low tuition won’t be required to chip in as much – and states are ok with that kind of language.  In Canada, it would be an utter nightmare.  And it’s just not differences in tuition (fees in Ontario are twice what they are in are Newfoundland) or participation rates (college part rates in Ontario are three times what they are in New Brunswick) that make it tough to determine the right amount of compensation.  Quebec already has free college – how on earth could it be compensated under a free community college plan?  You’d almost have to go to a whacking huge lump sum, and try handing over it as a conditional transfer; but since we’ve never had conditional transfers in education, this seems like an unlikely pass.

That still leaves the question of whether individual provinces might take this route.  It’s obviously possible (see: Quebec); in my experience, however, provinces get spooked by talk of “free”.  During my time as a consultant, I’ve suggested the free college idea to two provinces (and no, I’m not telling you which ones), and both times the idea was rejected out-of-hand.

Only one premier has gone on the record on this idea, thus far: Kathleen Wynne.  According to Metro:

She said she is worried this model would actually limit access to post-secondary institutions because “there would be a limited subsidy that would be available and that’s not something I want to do. What I want to do is increase access and I want everyone who’s qualified is to be able to access a college or university or a skilled trade.”

<headdesk>

What utter gibberish.  The most coherent spin you can put on her statement is that she prefers the present policy of giving a crapload of money to upper-middle-class kids in universities, rather than shift the spending-focus to lower-income kids in college.  Sad, but cynical and true.

December 03

Solving the Fees Problem

So, here’s the problem: Canadian governments are mostly broke.  Even the ones that didn’t look broke a couple of months ago (Alberta, Saskatchewan, Newfoundland) are now very definitely broke (especially Newfoundland).  There’s no money for PSE.  Everybody knows that.

So, equally, everyone knows that the only way institutions are going to avoid a crunch is either by turning themselves into finishing schools for the Asian middle class, or by charging domestic students higher tuition fees.  No one genuinely thinks the former is a sensible long-term solution, and yet that’s the way we’re heading because Canadian families and the politicians who represent them are resistant to the idea of a rise in fees.

To be clear, resistance does not arise because anyone really thinks fees deter access.  Even the dopiest politician knows that participation rates today are over 50% higher than they were 20 years ago when nominal tuition was about half what it is now (certain student groups are indeed that dopey, but that’s another story).  No, the reason people don’t want more fees is because too many people think that what universities and colleges are offering isn’t worth what they’re charging.

This is of course insane because, as we know, Canadians, on aggregate, are paying Net Zero Tuition for post-secondary education.  We have $7.2 billion going out every year in various forms of aid – exactly equal to what universities and colleges charge in tuition to domestic students – and apparently no one notices.  The focus is exclusively on the sticker price, never on the net price, which in many cases is negative.  This shouldn’t be a surprise, given the opacity of our student aid system.  We prevent students from working out their student aid package before they apply, and then we hand out as much of our aid as possible at the back end where no one will notice it.

It’s madness.  And it has to change.  We need to make it a lot more obvious what a great deal people are getting.  We need to make it so that when governments spend money to make it easier for people to go to school, the people being helped actually realize they are being helped.

This is going to require coordination.  Our confusing system is a product of the fact that many different players (feds, provinces, institutions) designed it so that it met their own administrative needs and desires for visibility, not the needs of students.  We need all of them to agree to make it less complicated, more predictable, and more visible.  That means, above all, ditching tax credits and either turning them into (hopefully targeted) grants or transferring them to institutions in return for a reduction in tuition.

Can’t be done, you say, because governments like to take credit for tax expenditures?  Tosh.  It’s abundantly clear that the public has no idea the credits even exist, so governments could hardly do worse than what they do now.  Besides, there’s precedent to show it’s good politics: in 2012, Quebec ditched some tax credits in order to pay for improved student aid, and back in 1999, Manitoba explicitly ditched a refundable tax credit to pay for a tuition roll-back (meaning the roll-back cost the government nothing, and students were in fact no better off at the end of the day, but boy did the NDP make hay out of that one).

So it’s doable.  But someone has to get the provinces and the feds to sit down together to make them do it.  The only people who can do this are the institutions: specifically, the Association of Universities and Colleges of Canada (AUCC) and Colleges and Institutes Canada (CIC).  Only they have the clout to get the provinces and the federal government in the same room to hammer out a deal.  And it’s eminently in their interest to do so.  Until Canadians rediscover what a fantastically good deal they actually have in their higher education system, the likelihood of more funds heading their way is pretty slight.

November 21

Variation in Tuition in the United States

One of the things foreigners always get wrong about the American higher education system is tuition fees.  The external perception of tuition is driven by what’s happening at the famous private institutions, mainly in the country’s northeast.  But that’s not even close to being the whole story.

Figure 1: Tuition by Type of Institution, United States, 2014-15

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It is true that tuition at private non-profits is pretty high – $31,231, on average; though it goes much higher than that (one-sixth of these colleges charge over $45,000/year for tuition alone).  Of course, discounts are rife, and few actually pay the sticker price.  Net tuition and fees in this sector are actually only about $12,500.  And more to the point, only 2.7 million undergraduates (i.e. fewer than 20% of the total) attend schools in this sector.  In contrast, 6.6 million students attend public 4-year colleges, where the average sticker price is only $9,139 (avg. net tuition = $3,000), and 7.1 million attend public 2-year colleges (i.e. community colleges), where fees are just $3,347 (avg. net tuition = -$1,900).

But the differences aren’t simply by sector, they’re also geographic.  In-state tuition at 4-year publics varies widely from one state to another.  In Wyoming, tuition is $4,646; in Vermont, it’s $14,419.  There are some broad regional trends you can see in the data, but they aren’t quite as stark: in New England (i.e. Maine, New Hampshire, Vermont, Rhode Island, Connecticut, and Massachusetts), average tuition at public four-year institutions is $11,436; in the South and Southwest, it’s about $8,300.

This often makes people stop and think: why is it that tuition in the liberal, blue-state northeast is higher, while in the conservative red-state south and Midwest it’s cheaper?  Well, the answer is that politics in the US didn’t always break down the way it does today.  Back in the 1890s when the big Land-Grant universities were starting to grow, most of today’s low-tuition states were run by governments heavily influenced by the Populist movement.

Populists were suspicious of universities because they served such an elite section of the population.  They wanted them opened up to the children of farmers, and to make sure that they taught “practical arts” as much as the liberal ones.  These being the days before student aid really existed, the way populists gave effect to this was to order institutions to keep tuition low, a tradition that in most states remains true today.

In fact, one way to predict state tuition levels in the US today is simply to look at vote totals from the 1896 election.  That was the “Cross of Gold” election, which pitted the Democratic/Populist William Jennings Bryan against the Republican William McKinley.  Figure 2, below, plots today’s in-state tuition rates against Bryan’s share of the vote in that election.

Figure 2: Current-Day In-State Tuition Versus William Jennings Bryan’s Vote Share in 1896

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Rather amazingly, there is still a relationship between political patterns of 120 years ago and tuition policy today.  It’s not a perfect fit, of course – South Carolina, in particular, was a Bryan stronghold, and yet now has tuition of nearly $12,000 – but the pattern is clearly there.

America is large, and contains multitudes.  Generalizations about its higher education system need to be treated with much caution.

November 17

Affordability

If I could ban one word from higher education discussions, it’s “affordability”.  It’s a word without precision, and, particularly when used as a synonym for “accessibility”, it’s downright misleading and harmful.

The worst is when someone uses the raw price of a good – in this case tuition – to indicate “affordability”; as in: “tuition went up 5% last year, and that makes it less affordable”.  This is simply asinine.  When the price of milk or gas goes up, we don’t wring our hands about the “affordability” of milk or gas.  We don’t do this for two reasons.  The first is that “affordability”, as a concept, is a ratio and not a point. It’s a function not just of price, but of available resources.  If people were serious when talking about affordability, they would be talking about it in terms of fractions, not prices.

(This of course raises a question – what should we use as a denominator?  When I talk affordability, I tend to use mean or median family income, because nearly all students entering post-secondary education for the first time are drawing on family resources to do so.  The Canadian Centre for Policy Alternatives tends to use much smaller numbers as a denominator, like whatever the minimum wage happens to be.  I get where they’re coming from on this – many students, as they get older, pick up more of the burden of their education costs [though they also tend to earn significantly more than minimum wage].  My number will tend make the fraction fairly small.  Their number will make it look large.  Who’s right?  It depends; to some extent, we both are.)

Which brings us to the second issue: there are people for whom a night out at the movies is affordable, and others for whom it is not.  For some people a Mercedes S-500 is affordable, for others (most of us) it’s not.  Demand curves slope downward, and affordability matters at the margin, not the average.  Most people are simply not affected by an increase in price.  Even in the largest tuition increase in history – the English tuition hike of 2012, where tuition rose by nearly $9,000 – the net effect on applications was only about 5%.  To the extent that affordability affects accessibility, the issue is always about how it affects student at the margin, not how it affects the average student.

That’s why student aid is important.  Student aid helps the students at the margin (or at least it does so everywhere outside Ontario, where “needy” has been re-defined by a vote-grubbing government as anyone with income under $160,000).  Having grants offsetting higher costs is precisely the way affordability concerns should be dealt with – provided you think that affordability is an access issue.

The problem is, for most people the question of affordability is about almost anything other than accessibility.  For most, it’s about making sure that whoever is paying for tuition has more money in their pocket to have a better “quality of life”.   Parents – you deserve that second vacation each year rather than paying tuition!  Students – you should have smaller loan repayments on your way to being the upper-middle class of tomorrow!

Affordability – as a ratio – is thus an important concept in the way we design student aid to help students at the margin.  But the way most people try to explain the concept, and the purposes for which they deploy the concept, are either wrong or disingenuous.  We need to talk a lot more about access and a lot less about affordability.

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