HESA

Higher Education Strategy Associates

Category Archives: Tuition

September 16

An Argument About the Effects of Tuition Reductions

At various times in the past (herehere, and here, for example), I have made the argument that lowering tuition fees is regressive because the benefits will accrue to people who are either the children of the wealthy, or people who will be wealthy, or both.  I have also said that where neither of those conditions is true (for example, some types of community college programs), there is a reasonable case for free tuition.

As a rule, people who disagree with this position make one of three tactical responses.  The first is to hurl abuse, usually with the word “neo-liberal” thrown in for good measure.  These people we can safely ignore.  The second is to take the Hugh McKenzie-CCPA route, which is to say it’s OK to have these kinds of transfers to the rich because they pay more taxes than everyone else.  This is not prima facie idiotic, but it’s a very, very difficult argument to make as a progressive.  In fact, you can only really make it through a syllogism like this: “I am progressive.  I made a statement.  Therefore the statement is progressive”.  Evaluate as you will.

But there is also a (rarer) third response, which says: “ah, but you’re only looking at ceteris paribus results.  Surely free tuition would bring all sorts of new students to the table, and change the benefit calculus.”  Now it is undeniably true that *if* there was a massive shift in demand, then my argument would be wrong.  So let’s look at that *if* – how likely is it to happen?  What would have to happen in order for such a shift to take place?

Let’s look at this logically: would lower fees make anyone less likely to want to attend higher education?  No.  So any shift is not going to come from a fall in demand from upper-income groups, it’s going to have to come from a surge in demand from lower-income youth.  That’s possible, though unproven. There is, for instance, no data from either Manitoba or Newfoundland to suggest that this is what happened when they reduced tuition over a decade ago.  But let’s assume for the moment it’s true.

Now, you have to ask the question: even if aggregate demand increases, are universities likely to take in more students as a result of fee reductions?  Unless you’re also assuming that governments are going to spend a whole extra wad cash for expansion, on top of cash for eliminating fees (NB: the Green Party plan for free tuition in Canada does not do this; neither does the Chilean free tuition experiment), the answer here is “probably not” (or at least not much).  But if the supply of spaces is more or less fixed, then for any benefit-shifting to happen, additional students from poorer backgrounds are actually going to have to displace richer kids in order to close the gap.  Poor kids in, rich kids out.  That’s not an impossible outcome, but given that: a) universities ration places through grades; and, b) youth from higher-income families have an advantage in terms of academic preparation (go see any number of PISA studies on that one), it seems very unlikely.

But let’s suspend disbelief, and assume governments ARE in fact prepared to both reduce price and expand capacity.  What wold happen then?  Well, we don’t know, really.  But we do know that governments have been expanding university capacity tremendously over the past 15 years – partly through higher funding, and partly through higher fees.  And as far as we know (and admittedly we don’t know as much as we should), access has in fact been widened, at least as far as ethno-cultural backgrounds are concerned.  But that raises a question: if you can improve access simply by increasing capacity, why not just do that instead of spending all that money to also make it free?

In short, we know a way to improve access, and it doesn’t involve making higher education free.  Conversely, we know that making higher education free, on it’s own, is very unlikely to change the social composition very much (i.e. it won’t be effective on its own terms), and therefore will provide extraordinary benefits to children of upper-income families.

September 01

The Tennessee Promise

So, yesterday I talked about a big increase in access in the UK, which seems to have little to do with tuition fees.  Today, let’s talk about a developing story in the United States, where a lowering of net prices seems to have had a big impact on access.

You may recall that in the US over the last couple of years, there has been a growing movement for free community college, something that President Obama picked up on earlier this year.  But before Obama picked up this baton, free community college had already been introduced in Republican Tennessee, where governor Bill Haslam had turned something called “the Tennessee Promise into law in 2014.

Technically, the Tennessee Promise is not “free tuition”.  It’s only available to students entering straight from high school (which is a bit weird in terms of design, but whatever).  Students have to be full-time, maintain a 2.0 average, meet regularly with a mentor, and perform eight hours of community service per term.  And technically, what it does is reduce your tuition to zero after all other forms of aid and scholarship are taken care of (this is what is known in the business as a “last dollar” scholarship).  If you apply for the award and meet the terms, government will cover your tuition to the point where your net price is zero.  For a good number of people, this means free tuition with minimal strings attached, so let’s just call it free tuition.

Now, you might expect that with this kind of incentive, enrolment might rise a bit.  And you’d be right.  According to very early results, the number of freshmen is up 29.6% over last year.  Obviously this is a pretty impressive result, but before we get too excited, we should probably find out a little more about where these new students are coming from.  Are they “new” students, or are they mostly students who would have gone to a 4-year college, but have chosen 2-year instead?  And what about students’ financial background?  If you’re poor enough to be anywhere near maximum Pell grant ($5,775), the Tennessee Promise provides no additional aid, because tuition at Tennessee Community Colleges is about $4,000.  So it may well be that what the Tennessee Promise is doing is providing aid to people higher up the income ladder.  This is a little inefficient, but since (as I noted back here) community college students tend to come from poorer backgrounds anyway, this is not as regressive as it would be if it were implemented at 4-year colleges.

We should be able to answer these questions in a few weeks (yes, Canadians, in some places data is available in weeks, rather than years).  Even though Tennessee does not track applicants by income the way the UK does, the state’s excellent annual Higher Education Fact Book does contain two pieces of data that will help us track this.  The first is college-going rates by county, which will help us understand whether the jump in participation is concentrated in higher- or lower-income counties, and the second is the percentage of students who are Pell-eligible.  I’ll keep you up-to-date on this when the data is out.

The most intriguing possibility here is that rates of attendance for Pell-eligible students might be rising, even though the Tennessee Promise provides no actual added benefit for many of them.  It may well be that simply re-packing the way we frame higher education costs (“it’s free!”) matters more than the way we actually fund it (“your tuition is $4,000, and you also have a grant for $4,500”).

This would have significant policy ramifications for us in Canada.  As we noted last year in our publication, The Many Prices of Knowledge, many students at Canadian community colleges face an all-inclusive net price that is negative, or very close to it.  Similarly, poor first-year university students in both Ontario and Quebec have negative net prices.   No one knows it, because we package aid in such a ludicrously opaque fashion, but it’s true.  And if the Tennessee data provides evidence that the packaging of aid matters as much as the content, then it will be time for Canadian governments to re-evaluate that packaging, tout de suite.

August 31

An Interesting Story about Access in the U.K.

Remember how, in 2012, tuition in England rose by about $10,000-$12,000 (depending on the currency exchange rate you care to use) for everyone, all at once?  Remember how the increase was only offset by an increase in loans, with no increase in means-tested grants?  Remember how everyone said how awful this was going to be for access?

Well, let me show you some interesting data.  The following comes from UCAS, which, at this time of year, does daily (yes, daily!) reports on “accepted applicants” (that is, applicants who have been offered a place at universities for the term commencing in a couple of weeks).  Figure 1 shows what’s happened to student numbers from families in the lowest income quintile since 2011, which was the year before the tuition increase.

Figure 1: Number of Accepted Applicants from the Lowest Income Quintile, England, 2011-15

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Big increase, right?  Over three years, it amounts to 19.8%.

“Oh well”, say the zero-tuition true believers, “this doesn’t prove anything.  What really matters is what happened to students from higher income backgrounds.  Surely, being less bound by financial constraints, their numbers grew even more”.

In a word: nope.  The rate of accepted applicants increased by more than three times faster for students from the bottom quintile (quintile 1) than it did for those from the top (quintile 5).  Of course that’s partly because they have a lot more room to grow: there are still about three times as many accepted applicants from the top quintile as the bottom quintile.  But the point is: contrary to expectations, the gap is closing.

Figure 2: Change in Number of Accepted Applicants by Income Quintile, England, 2011-2015, Indexed to 2011

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“Ok”, say the skeptics; “let’s look at counterfactuals: what’s going on in neighbouring countries, where policy didn’t involve a massive tuition fee increase?  What about Wales, where tuition stayed at a little over £3,000, or Scotland where tuition is free (for Scots: English kids still have to pay the £9,000)?”

Fair question.  Figure 3 shows what happened to students from the lowest income quintile in all three countries: in Scotland, rates of accepted applicants are up by 28%, in Wales by 21%, and in England by 17%.

Figure 3: Change in Rate of Accepted Applicants, England, Scotland, and Wales, 2011-15, Indexed to 2011

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“A-HA!”  Say the usual suspects.  “Clear evidence that free is better!”  Well, maybe.  But before declaring victory, why not look at rates of accepted applicants for low-income students across these three countries?   That is: what percentage of all youth from the bottom income quintile actually reach the stage of being “accepted applicants”?

Figure 4: Accepted Applicants from Bottom Quintile Families as a Percentage of all Bottom Quartile Youth, England Scotland, And Wales, 2011-2015

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Quite a different story, isn’t it?  Turns out that in horrible, vicious, neo-liberal, £9,000 tuition England, 18% of lowest-income quintile youth apply, and are admitted to university.  In idyllic, equality-loving, £0 tuition Scotland, the figure is not much more than half that, at 10%.  So let’s just say that the evidence claiming fees explain participation rates, and changes thereof, is pretty limited.

But getting beyond the issue of fees, I think there’s a bigger story here.  Right across the UK, regardless of tuition fee regime, there is a massive uptick in participation from low-income students over the last couple of years.  Clearly, something is going right there with respect to low-income students.  Is it a change in aspirations?  Expectations?  Academic preparation?  As far as I know, no one has published on this – I have a feeling everyone was so keyed on explaining expected declines in participation that no one was set up to explain the opposite.  But whatever is going on, it’s a success, and other countries would do well to learn from it.

August 04

Summer Updates from Abroad (2): The UK Teaching Excellence Framework

The weirdest – but also possibly most globally consequential – story from this year’s higher education silly season comes from England.  It’s about something called a “Teaching Excellence Framework”.

Now, news of nationally-specific higher education accountability mechanisms don’t often travel.  Because, honestly, who cares?  It’s enough trouble keeping track of accountability arrangements in one’s own country.  But there are few in academia, anywhere, who have not heard about the UK’s Research Excellence Framework (or its nearly-indistinguishable predecessor, the Research Assessment Exercise).  There is scarcely a living British academic who has travelled abroad in the last two decades without regaling foreign colleagues with tales of this legendary process, usually using words like “vast”, “bureaucratic”, “walls full of filing cabinets”, etc.  So news that the country may be looking at creating a second such framework, related to teaching, is sure to strike many as some sort of Orwellian joke.

But no, this government is serious.  It’s fair to say that the government was somewhat disappointed that its de-regulation of tuition fees did not force institutions to focus more on teaching quality.  With the market having failed in that task, they seem to be retreating to good old-fashioned regulation, mixed with financial incentives.

The idea – and, at the moment, it’s still just a pretty rough idea – is rather simple: institutions should be rated on the quality of their teaching.  But there are two catches: first, how do you measure it?  And second, what are the rewards for doing well?

The first of these seems to be up in the air.  Although the government has committed to the principle of assessing teaching at the institutional level, it genuinely seems to have not thought through in the least how it intends to achieve this.  There are a lot of options here: one could simply look at use of resources and presence of qualifications: student/teacher ratios, number of profs who have actually sought teaching qualifications, etc.  One could go the survey route, and ask students how they feel about teaching; one could also go the peer assessment route, and have profs rate each others’ teaching.  Or there’s the “learning gain” model, used by the Collegiate Learning Assessment, which was part of the AHELO system (from which, by the way, the UK has now officially withdrawn).  Of course, everyone knows that most of these measurements are either untested, or can be gamed, so there’s some fear that what the government really wants to do is to rely on – what might generously be called – lowest-common denominator statistics; namely, employment and income data.

Why might they want to do something this bell-ended, when everyone knows income is tied most closely to fields of study?  Well, the clue is in the rewards.  British universities have – as universities do – recently been clamouring for more money.  But according to this government, there is no more money to be had; in fact, at about the same time they announced the new excellence framework, they also announced a £150 million cut to the basic teaching grant, spread over two years.  So the proposed reward for good teaching is the ability to charge higher fees (so much for de-regulation… ) But as I explained a couple weeks backraising tuition doesn’t help much because, thanks to high debt and a generous loan forgiveness system, somewhere between 60 and 80% of any extra charges at the margin will end up on the public books circa 2048, anyway. 

But… if you only increase tuition at schools where income is the highest, the likelihood is that you will get a higher proportion of graduates earning enough to pay back their loans, over time.  And hence less money will need to be forgiven.  And hence this might not actually cost so much.  Which is why there is an incentive for government to do the wrong thing here.

Still, on the off-chance the government gets this initiative at least partially right, the impact could be global.  Governments all over the world are trying to get institutions to pay more attention to teaching; expect a lot of imitators if the results of this exercise look even half-promising.  Stay tuned.

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.

May 28

The 2016 Presidential Race

I’ve been spending a bit of time in the United States the last couple of weeks (Indianapolis, Boston, Washington DC), and one of the things I’m noticing is the extent to which political discourse – which, ludicrously, already centers around the 2016 Presidential Race – is focussed on issues in higher education.  Specifically: issues of tuition and student debt.

This is interesting for a couple of reasons.  First of all, it’s an enormous shift from about ten years ago, when higher education first started to inch into the news.  Back then, it was about competitiveness: how can we use higher education to gain a march on all these various Asian countries (usually India and China) who suddenly  appear to be eating Americans’ lunch.  Back then, higher ed was relishing the attention – finally, a Sputnik moment, to push higher education back to the forefront of the political debate (Sputnik being a positive thing in American higher education, because it brought about a huge burst of spending on university science).  Now, no one is talking about a higher education bonanza.  No one is talking about quality.  To the extent anyone is talking about putting up new public money, it is meant to be used to make education more affordable.

(In Canada, of course, we’re way ahead of them.  This is the feed-the-student-starve-the-campus routine that we’ve seen for the last four years.)

On the Democratic side, it’s President Obama’s proposal for free college tuition that is setting the tone of the debate.  Bernie Sanders, trying to outflank Hillary Clinton to the left, has been an outspoken proponent.  Martin O’Malley (remember Mayor Carcetti, from The Wire?  He’s based on O’Malley), the only other semi-serious contender, talks about “debt-free college”, but his actual policy proposals involve expanding and improving income-based repayment, and allowing college students to refinance their loans at lower rates of interest.  Clinton, meanwhile, has said she supports Obama’s free college plan, but then went on to say that debt is caused by more than tuition, which implies that her thinking actually lies in other areas (most likely: more Pell grants, more tax credits, and tougher regulation of for-profits).

Action on the Democratic side of the ledger isn’t all that surprising: they’ve owned the higher education file since 1992, when Bill Clinton became the first ever candidate to successfully campaign on the issue.  What’s more interesting is the amount of attention being paid to higher education by Republican candidates.

Among currently declared candidates, Marco Rubio has shown the most audacity, backing a relatively serious access and completion agenda.  He has co-sponsored legislation backing so-called “human capital loans”, and has also called for the creation of a national unit-record data base to collect better data on student outcomes.  This has made him something of a darling among centrist wonks who think he might herald a new age of bipartisanship in higher education.

That may be clutching at straws: a number of other Republican candidates seem to be trying to run based on their ability to beat the living crap out of colleges: Governors Jindal (Louisiana) and Walker (Wisconsin) both introduced stonking cuts to higher ed in their budgets this year, mostly to show how tough they are on feckless elites (a Republican meme that goes back to Ronald Reagan’s successful 1966 run for the California Governor’s office).

The presence of differences in policy thinking in both parties means it’s sure to be a topic of debate right through the primaries (i.e. for another ten months or so).  Stay tuned.

May 25

Free Tuition: A Rocky Rollout in Chile

So the big news last week in Santiago was the announcement of the start of the “free tuition” plan, which was part of President Michelle Bachelet’s election platform in 2013.  Only it’s not quite free tuition, and it’s still not clear how it will be paid for.

I’ve written previously (back here) about the Bachelet promise, and the potential difficulties with implementing it in a country where most higher education is provided by private institutions, and forced nationalization is expressly prohibited in the constitution.  To those difficulties have been added the fact that the big tax hike the government thought would finance its reforms to compulsory and post-secondary education isn’t in fact going to raise quite as much money as previously expected, due mostly to a slump in the price of Chile’s main export, copper.   Not to mention the fact that the President herself has seen her approval ratings crater due to corruption allegations regarding her son.

The announcement last week left a lot of questions unanswered.  Free education, the President said, would now be available to “el 60% de los estudiantes más vulnerables”, which sounds like 60% of students, but based on the number of students estimated to benefit – roughly 250,000 students, or a quarter of the total – actually seems to mean “students from the poorest three income quartiles”.  There was no explanation of how institutions would be compensated for taking students.  And the President added a curious phrase, saying that students would be able to “accedan a la gratuidad completa y efectiva, sin beca ni crédito”. One hoped that the intention here was to underline that she meant free tuition and not just free net tuition (i.e. where grants offset the cost of fees).  However, some – including the academic and former Minister Jos Joaquin Brunner – have wondered whether it might mean that those who receive free tuition will lose eligibility for student aid.

Weirder by far is the President’s decision to simply exclude some institutions from the process.  Universities that are members of CRUCH (an acronym meaning “Council of Rectors”) – 16 public and 9 private universities that make-up the older (pre-1973) higher education system – were included, as were a selection of the country’s Institutions Professional (basically, Polytechnics), and its Centros de Formacion Tecnica (basically, community colleges).   But the country’s 35 private post-1973 universities were pointedly left out of the program.  No reason for this was forthcoming; and in case you’re wondering, it’s not solely because they are private, as all the IPs and CFTs are private, and they were included in the scheme.  One senses that some decades-old animosity between university sectors is playing-out here.  Whatever the reason, it puts Chile in the weird position of giving free tuition to median-income students attending a CRUCH university, and giving nothing beyond loans to students from the bottom of the income scale studying in the same program at a private university.

In theory, the government is committed to implementing full, across-the-board free tuition at some later date.  But it’s unclear exactly when this will happen and, given the situation in the private universities, whether it will in fact cover all forms of education.  Will it, for instance, cover graduate studies?   Will it cover 7 or 8 years of undergraduate education (currently the norm), or only the first 4 or 5?  Most importantly: how are institutions going to be compensated for taking all these students for free?

Hopefully, all of these questions will be resolved expeditiously.  But with only seven months remaining until the implementation date, Chileans are still in the dark about a lot of important details.

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.

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