On Thursday, the American Association of State Colleges and Universities (AASCU) released a policy brief examining the potential consequences of Pay It Forward (PIF) (please see our previous blogs for background information). The AASCU brief summarizes other, similar approaches to paying for college and analyses PIF as a potential state approach to financing public higher education.
The report describes the following “13 Realities of PIF College Financing Proposals”:
- Most students could pay more, not less, for college.
- Considerable uncertainty would be introduced into campus budgeting and planning efforts.
- The majority of college costs are not covered.
- Students from sectors with the heaviest student debt burdens would be ineligible to participate.
- The class divides in public higher education, and more broadly, in American society, could intensify.
- Costs borne by students pursuing privately financed degrees and higher-paying careers would increase dramatically.
- PIF is duplicative—there are existing public and private programs that calibrate student debt to earnings.
- PIF’s start-up costs would be enormous.
- Payment collection would be costly and challenging.
- Campus and state leaders would have strong incentives to promote programs leading to high-paying occupations, to the possible detriment of the liberal and applied arts, humanities, and public service careers.
- Underlying college cost drivers would not be addressed.
- Support for state and institutional student financial aid could dissipate.
- Support for maintaining existing state investment in public higher education would erode, creating a pathway to privatization.
In addition, the authors discuss “The Unknowns of ‘Pay It Forward’”:
- How will institutional financing gaps be addressed?
- How would payments be collected?
- Who would control PIF funds?
- How would PIF’s structure and revenue generation differ from campus to campus?
- How would PIF complement or conflict with federal higher education programs?
- How would transfer students be integrated into PIF?
- What would be the consequences for noncompleters?
- How would college savings change under PIF?
- How would PIF affect campus philanthropic campaigns?
The report’s conclusion reads, “Creating a lifelong tax and privatizing public higher education through pay it forward is not the solution to addressing college affordability.”
I recommend that readers review AASCU’s full report.
On Thursday, the American Association of State Colleges and Universities (AASCU) released its most State Outlook. According to the report, state operating support for public four-year colleges and universities is 3.6 percent higher for FY 2015 than it was for FY 2014. Of the 49 states that have passed a budget thus far, support for higher education increased in 43 states and decreased in only 6 states. Of those 6 states that reduced funding, all were under 3 percent: Alaska, Delaware, Kentucky, Missouri, Washington (0.8 percent decrease) and West Virginia.
There was a relatively small amount of variation between states in terms of their year-to-year funding changes. For FY 2015, the spread between the state with the largest gain and that with the largest cut was only a 24 percent—this is compared to 57 percent, 25 percent and 46 percent, respectively, in FYs 2012, 2013 and 2014. The report notes that this decreased volatility likely indicates “a continued post-recession stabilization of states’ budgets.”
Charitable contributions to U.S. colleges and universities increased 9 percent in 2013, to $33.8 billion—the highest recorded in the history of the Council for Aid to Education (CAE) Voluntary Support of Education (VSE) survey. In addition, college and university endowments grew by an average of 11.7 percent in FY 2013, according to a January 2014 study released by the National Association of College and University Business Officers and the Commonfund Institute. This represents a significant improvement over the -0.3 percent return in FY 2012.
The report also describes ten highlights/trends from states’ 2014 legislative sessions, those being:
- State initiatives linking student access to economic and workforce development goals.
- Tuition freezes or increase caps in exchange for state reinvestment—this occurred in Washington and another example is discussed in our previous post.
- Performance-based funding systems that attempt to align institutional outcomes with state needs and priorities.
- Governor emphasis on efforts to advance state educational attainment goals.
- Interest in policies related to vocational and technical education, including allowing community colleges to grant certain four-year degrees (as described in our previous post).
- Efforts to develop a common set of expectations for what K-12 students should know in mathematics and language arts.
- STEM-related initiatives, including additional funding for STEM scholarships in Washington.
- Financial support for the renovating and/or constructing of new campus facilities—unfortunately, Washington’s legislature did not pass a capital budget.
- Bills allowing individuals to carry guns on public college and university campuses—as of March 2014, seven states had passed such legislation.
- Legislation that extends in-state tuition or, as occurred in Washington, state financial aid to undocumented students.
Other noteworthy policy topics described in the report include:
- Student financial aid programs—some states broadened their programs while others limited them;
- Online and competency-based education reciprocity agreements;
- “Pay It Forward” Funding Schemes; and
- Consumer protection as it pertains to student recruitment, advertising and financial aid at for-profit colleges.
Posted by Corrin Sullivan, Intern at the Office of Planning & Budget and Educational Policy student through the month of July 2014. My focus is on higher education access and policy. I look forward to sharing newsworthy events in the higher ed world with you.
Let’s start with a quick summary of two articles from this past week in higher ed news.
Selected California Community Colleges May Soon Offer a Baccalaureate Degree
The California State Assembly Committee on Higher Education approved Senate Bill 850 (SB850) this past week, which launches a pilot program offering fifteen community colleges the opportunity to offer a four-year degree program as soon as January 1, 2015. The Community College Board of Governors and chancellor, in consultation with the California State University (CSU) and University of California (UC) systems, will consider a variety of colleges and select fifteen districts based on four-year degree proposals that meet a variety of criteria; most notably, degrees not available at any of California’s four-year schools and that address the state’s unmet workforce needs. Although the UC system has yet to comment on SB850, California’s Community College Chancellor, Brice Harris, commends the Assembly Committee’s approval of legislation stating that it has the potential to broaden higher educational access and offer more job training opportunities for Californians.
North Dakota Board of Higher Education Unanimously Approves Budget Requesting System-Wide Tuition Freeze
The North Dakota Board of Higher Education recently approved its biennium budget request, which asks for an approximate 14 percent increase in funding in exchange for freezing tuition rates among its eleven colleges and universities for the coming biennium (2015-17). Based on a new funding formula instituted in the 2013 legislative session that relies largely on credit-hour completion, the budget’s $774 base request reflects a $94 million dollar increase from the previous year’s request. The $94 million dollar increase includes a $49 million dollar request to cover operating costs associated with additional credits taken at the state’s colleges and universities. In addition to the $94 million base increase, the board has also requested $9.5 million dollars to cover sums “students would have to cover without a freeze,” compounded with several smaller requests to meet institutional equipment and staffing needs. The Board states that they will freeze tuition rates at all colleges and universities from 2015 through 2017 if and only if, the legislature agrees to fully fund the base budget and increase employee salaries and benefits. Noting affordability as an issue in declining student enrollment numbers, the freeze aims to decrease tuition so that rates are competitive with the state’s regional counterparts.
While the Board has frozen tuition rates at the state’s two-year schools for four of the past six years, this request to freeze tuition for all North Dakota higher education institutions is unprecedented. The budget is before Governor Jack Dalrymple, pending recommendations, prior to advancing to the state’s legislature.
Temple University recently created a new partnership between students and the university to help students graduate on time and limit the amount of debt they accrue. Under the program, called “Fly in 4,” if an undergraduate student fulfills a set of requirements aimed at promoting on-time completion, but is still unable to graduate within four years, the university will pay for any remaining coursework (tuition and fees). Additionally, in each incoming class, 500 students with financial need will receive “Fly in 4 grants” of $4,000 per year to help reduce the hours they must put toward employment and increase those they can devote to studying. 
“What we’ve found is that students from low- and middle-income backgrounds tend to take longer to complete their degrees, in part because they spend a lot of time working,” Temple President Neil D. Theobald is quoted as saying.
Starting in Fall 2014, all incoming freshmen and all incoming transfer students who enter on track to graduate on time are eligible for the program; however, only those with demonstrated financial need are eligible for the $4,000 grants. To remain eligible for the grants and/or for Temple to pay for any remaining coursework, students must:
- Meet with an academic advisor each semester;
- Register for classes during priority registration;
- Advance annually in class standing; and
- Complete a graduation review at or prior to completing 90 credits.
President Theobald made six commitments to the Temple community in his October inaugural address, the first of which was to reduce student expenses. Fly in 4 is a part of that commitment.
“For nearly 50 years, researchers have shown that college students employed more than 15 hours per week during the school year earn much lower grades than do those working fewer hours for pay,” Theobald said. “In addition, time-to-graduation has become the primary determinant of student debt.”
To help fulfill its commitment and ensure students graduate on time, Temple has also invested heavily in advising (hiring 60 new full-time advisors since 2006, including 10 this year), created four-year graduation maps for every major, and trained faculty members to assist students with academic and career planning.
 For context, Temple’s 2013-14 undergraduate tuition rates were approximately $14,100 for residents and $23,400 for non-residents (depending on program and year of study).
 Contrary to a number of media reports, it does not appear that students are required to commit to working 10 hours per week or less in order to be eligible for the Fly in 4 grants. Temple University’s website makes no such statement.
*Although the conference budget cuts state funding by $7.3 million, it also reduces the amount employers can spend on benefits per employee per month to $622, which essentially offsets the cut.
† The $1,200,000 figure is an estimate until OFM sends additional instructions.
On Thursday, The Equity Line, a blog by The Education Trust, posted a critique of Pay It Forward (PIF) that discusses some of PIF’s major flaws. As a reminder, under PIF, instead of paying tuition and fees upfront, students would pay back a certain percent of their adjusted gross income for 25 years. For more information about PIF and how its supporters have applied PIF to the UW, please see the full OPB brief.
The Equity Line’s blog post highlights that although PIF is marketed as a “debt-free” way to pay for college, it is actually just another student loan program:
- It is estimated (by the author and the UW) that many students would pay more under PIF than they currently do to pay back student loans.
- Students with significant need – who currently receive federal, state, and institutional grants to cover tuition and fees – may have their grants (which do not need to be paid back) replaced with loans (which do).
- Students would not be able to cover these other education costs with federal or state need-based grants because by removing the cost of tuition and fees from a student’s budget, that student’s level of calculated need would fall as would their eligibility for federal and state need programs. Thus, students would have to take out more loans (or find a way to pay upfront) for these expenses.
As the author notes, rather than “Pay It Forward,” it’s really “Pay It Yourself and Pay More Than Ever.”
The College Board released its 2013 edition of “Trends in College Pricing” on Tuesday. The report provides information on what colleges and universities are charging in 2013-14; how prices vary by state, region, and institution type; pricing trends over time; and net tuition and fees—what students and families actually pay after accounting for financial aid.
Here are a few noteworthy points about prices at public four-year institutions:
- The average published tuition and fees for full-time resident undergraduatesat public four-years increased by 2.9 percent between 2012-13 and 2013-14, going from $8,646 to $8,893—this is the smallest percentage increase in over 30 years.
- In 2013-14, full-time students at public four-years will receive an estimated average of $5,770 in grant aid and tax benefits.
- Thus, average net tuition and fees for full-time resident undergrads at public four-years will be about $3,120 in 2013‑14—up from a temporary low of $1,940 (inflation-adjusted dollars) in 2009-10.
And a few key points about private nonprofit four-year institutions:
- The average published tuition and fees for full-time students at private nonprofit four-years increased by 3.8 percent between 2012-13 and 2013-14, going from $28,989 to $30,094.
- In 2013-14, full-time undergrads at private nonprofit four-years will receive an estimated average of $17,630 in grant aid and tax benefits.
- Thus, average net tuition and fees for full-time undergrads at private nonprofit four-years will be about $12,460 in 2013-14—up from a temporary low of $11,550 (inflation-adjusted dollars) in 2011-12, but down from $13,600 a decade earlier.
Average net prices in all sectors took a noteworthy dip around 2010 due, in part, to significant increases in Pell Grants and veterans benefits that occurred in 2009‑10 as well as the 2009 implementation of the American Opportunity Tax Credit. However, some of those benefits have been scaled back since their initial launch. Moreover, total state appropriations declined by 19 percent between 2007-08 and 2012-13 and FTE enrollment in public institutions increased by 11 percent over that same time. Consequently, net prices have risen in the last few years for all sectors, but most noticeably in the public sector. It is important to remember that there are many variations by institution, region, and state. Even within institutions, different students pay different prices based on their financial circumstances, program of study, year in school, academic qualifications, athletic ability, etc.
See Inside Higher Ed and The Chronicle for additional analysis and discussion of the report.
(This piece was originally posted on 07/11/2013, however it was lost due to technical issues and is therefore re-posted here.)
Last week, the Oregon legislature passed a bill that, if signed by the governor, will implement a pilot program to study the effects and feasibility of substituting upfront tuition payments with income-based, post-graduation payments. For 24 years after graduating, four-year college students would pay back 3 percent of their income and community college students would pay back 1.5 percent. Students who do not graduate would pay back a smaller percent determined by how long they were in school.
If, after several years of study, Oregon decides to adopt a plan (or some form of it), it would signify a major shift in the funding paradigm for public institutions. But that’s a big IF. The plan has received considerable criticism due to a multitude of unanswered questions that could pose significant logistical barriers. For example:
- How would institutions and/or the state pay for the plan’s implementation (i.e. the several years of foregone tuition revenue between when a student enters school and when they graduate and start earning pay)?
- How would the state efficiently collect accurate income data on students who move out-of-state?
- How would the state go about collecting and enforcing payments?
- How would the plan account for and apply to part-time students, transfer students, mid-career students, and other non-traditional students?
- How would the plan work with federal and state financial aid programs? Would low-income students be accommodated so as to avoid creating barriers to entry?
- How does one pilot a 24-year repayment program in just 2 or 3 years?
Even if Oregon’s higher education commission, which is tasked with implementing the pilot program, can find viable answers to those questions, the plan still has a number of possible (if not likely) negative consequences. For instance, the plan may:
- Magnify the public’s view of higher education as a private good (only benefiting the individual) rather than a public good (benefits for many) which, in turn, could spur the continuing and problematic trend of replacing state dollars with tuition revenue;
- Make institutions even more vulnerable to economic variations and recessions as their revenue would be tied to graduates’ earning and unemployment rates; and
- Create social and economic imbalance between Oregon and other states since students who expect to earn less—e.g. social science and humanities majors—would be incentivized to go to Oregon, and students expecting to earn more—e.g. engineering and medical students—would likely go elsewhere.
Granted, the idea of basing college payments on graduates’ income is not a new one. Some federal student loans are eligible for income-based repayment and a program similar to Oregon’s already exists in Australia. However, Australia’s version is administered at the federal level, meaning many problems inherent in Oregon’s plan (tracking students who move around the country, imbalance between states, etc.) are avoided.
The Economic Opportunity Institute, a liberal think tank in Seattle, proposed a version of the plan for Washington in October 2012; but, unlike Oregon’s version, it has yet to go anywhere. We’ll keep you posted.
In “For Public College, the Best Tuition Is No Tuition,” a recent opinion piece published by The Chronicle, the author describes the merits of Finland’s no-tuition education system. In Finland, “all education became public and free” during the 1960s as part of a multipronged strategy to reform and improve education. The other prongs of the strategy involved strengthening the country’s basic education by providing teachers with better pay and training, ensuring that students have individual attention at a young age, and by making education more interactive and experience-based. Forty years later, the country ranks 1st in Pearson’s Global Index of Cognitive Skills and Educational Attainment, which is based on results from a variety of international tests of cognitive skills as well as measures of literacy and high school graduation rates. The US ranked 17th. Though the accolades go to Finland’s basic education system, the author concludes that the US should model its higher education system after Finland’s. However, a higher percentage of the US’s population has attained tertiary education (42 percent, ranked 5th, versus 39 percent in Finland, ranked 9th) and a higher percentage has entered into higher education (72 percent, ranked 8th, versus 68 percent in Finland, ranked 13th).
Even if the US should model its higher ed system after Finland’s, the no-tuition strategy is not nearly as feasible as the author suggests. To determine whether Finland’s approach would be “affordable” for the US, the author multiplies the number of US public students in 2008-09 by the average cost of public tuition, room, and board in 2009-10. By his calculations, the program would cost $130 billion annually which, he notes, is more or less equivalent to what the federal government spent on Pell grants and student loans in 2010 ($134 billion). His approach, however, has some serious flaws:
- First, what he is analyzing here is the cost of all public education becoming free, not all education becoming public and free, which is Finland’s model. It is unclear whether the author accidentally left out private non-profits and for-profits—which would be converted to public institutions and made free under Finland’s model. But if the other sectors are added into the equation, the program costs increase significantly.
- Second, undergraduate tuition and fees have increased since 2008-09. Between 2009-10 and 2012-13, adjusting for inflation, undergraduate tuition and fees increased by about 5 percent per year at public institutions and by an average of 2 percent per year at private non-profits. During that the same time, federal spending on Pell grants and undergraduate financial aid remained relatively stable after adjusting for inflation, meaning the costs would not be nearly as interchangeable as the author suggests.
- Lastly, completely eliminating the price of tuition would stimulate demand, which would increase enrollment at public institutions and, thus, the cost to taxpayers. Not only would there be a per-student cost (tuition, room, board, etc.) for each additional student, more students would also require more buildings, classrooms, labs, housing and other capital investments.
Another significant feature inherent in Finland’s system that isn’t contemplated by the author is Finland’s use of a barrier to entry. Finland has limited enrollment spaces and, thus, requires that students pass certain standardized tests at specified levels, depending on the program. This works well in Finland due to their exceptional K-12 system, which ensures that all students are thoroughly prepared for college regardless of personal income or community wealth. The same cannot necessarily be said about our basic education system in the US. Thus, it isn’t clear whether a standardized test could serve as a barrier to entry without significantly and profoundly harming less prepared students.
We’re trying to create a system in which students of all backgrounds and privileges have access to higher education, but substituting price for a proxy barrier like college preparedness may not get us very far. College preparedness would be a preferable barrier in that naturally-talented low-income students would have a better chance of attending college than they currently do; but what would happen to the students who don’t have the resources they need to succeed? Would they be denied access to higher education?
There are costs and tradeoffs associated with every higher education system and reform plan, free tuition is no exception. Free tuition may be a viable option, but it’s not a silver bullet.
On Saturday, the Senate released a revised budget proposal, which closely resembles the budget they passed in April. For the UW, the two budgets differ in just a few ways:
- Unlike the original Senate budget, the revised budget does not include a $12.5M transfer away from the UW Hospital Account;
- The revised budget does not cut the UW by $3.2M for “administrative efficiencies” that were assumed in the original budget; but
- Compared to the original proposal, the revised budget provides the UW with $3.2M less in new funding.
The latter two changes essentially nullify each other. A few additional changes occurred with regards to state employee health benefits; we are working to interpret the effects and will provide more information as soon as possible.
As mentioned, the revised Senate budget doesn’t stray far from the original. Just like the Senate’s original proposal, its revised budget:
- Provides the UW with $479.6M (General Fund and Education Legacy Trust funds) for the 2013-15 biennium—$10.2M of which is one-time performance-based funding;
- Assumes 0% tuition increases for resident undergraduates;
- Preserves tuition setting authority, but nullifies that authority if either SB 5883 or SB 5941 pass (the bills would require the UW to decrease resident undergraduate tuition rates by 3 percent for the 2013-15 biennium and limit future resident undergrad tuition growth to the rate of inflation); and
- Generates “new” funding for higher education by imposing a 20 percent tuition surcharge on international students at the state’s public colleges and universities.
For more information about the original Senate proposal, please see the full OPB brief.
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