Commentary: How Should Higher Education Be Financed?

OECD Economics Department Working Papers, 2007

America's higher education system is among the best in the world. Nevertheless, there is scope for improvement. In particular, there appear to be substantial financial barriers to higher education despite large government expenditures aimed at promoting access. Policy makers have proposed addressing these barriers by increasing student grants. However, grants are costly, inefficient, inequitable and ineffective. Income tax concessions and state government subsidies suffer from similar problems. In contrast, international best practice seems to be converging on student loans with repayments that vary according to income. Income-contingent loans facilitate access to college at low fiscal cost and without the inefficiency and inequities that accompany grants, subsidies or tax concessions. At the same time, they do not discourage risk-averse or uninformed students in the way that conventional loans do. The United States has an income-contingent loan programme that should be expanded. While the design of repayments could be improved, the main problem with this programme is that lending limits are too low. Higher limits, especially for unsubsidised direct loans, would benefit students and promote access at little cost to the government. Were a good system of loans in place, then less cost-effective means of promoting access, such as grants and tax concessions, should be cut back.

1997

Data from a panel of 2,269 colleges and universities track the major changes in educational costs, prices, subsidies, and financial aid over the seven eventful years from 1986-87 to 1993-94. The ability to give student subsidies is recognized as a central determinant of an institution's economic circumstances and strategy. Subsidy resources allow a school to sell its educational services at a net price below the costs of their production. So prices are always less than costs --how much less depends on a school's resources.

2004

The Student Debt Crisis surpassed credit card debt as a hegemonic source of debt by Americans. The exponential rise in the cost of college has forced the majority of young Americans to take out student loans. This debt has followed many Americans throughout their lives even to the point of defaults. The meteoric rise in tuition and decline in state support has been catastrophic for the future of the middle class. The origin behind this draconian upheaval in price may reside with the fall in state appropriations or the truth may be found elsewhere.

Center for Studies in Higher Education, 2016

In an era of significant disinvestment in public higher education by state governments, many public universities are moving toward a "progressive tuition model" that attempts to invest approximately one-third of tuition income into institutional financial aid for lower-income and middle-class students. The objective is to mitigate the cost of tuition and keep college affordable. But is this model as currently formulated working? What levels of financial stress are students of all income groups experiencing? And are they changing their behaviors? Utilizing data from the Student Experience in the Research University (SERU) Survey of undergraduates and other data sources, this study explores these issues by focusing on students at the University of California and ten AAU institutions that are members of the SERU Consortium. At least to date, the increase in tuition, and costs related to housing and other living expenses, have not had a negative impact on the number of lower-income students attending UC. Reflecting to some degree UC's robust financial aid policies, and perhaps the growing number of lower-income families in California, there has been an actual increase in their number and as a percentage of total enrollment-a counterintuitive finding to the general perception that higher tuition equals less access to the economically vulnerable. At the same time, there is evidence of a "middle-class" squeeze, with a marginal drop in the number of students from this economic class. Students' concerns for paying for higher education and accumulated student debt in the 2014 SERU are predictably higher among lowerincome students, yet upper-middle income students (with annual family incomes from $80-125,000) are the least likely to agree that the cost of attendance is manageable. With these and other nuances and caveats briefly discussed in this study, the progressive tuition model appears to be working in terms of affordability and with only moderate indicators of increased financial stress and changed student behaviors. These results are not necessarily predictive of the future if tuition rates go up further. But they do indicate the higher tuition rates at highly selective public universities, if accompanied by robust federal, state and institutional financial aid, may be the best path for maintaining access to lower-income students, and for generating income needed for institutions to maintain or improve student-to-faculty ratios and other markers of quality. Freezing tuition, as currently demanded by state lawmakers in California, does not appear to be based on any clear analysis of the correlation of tuition and affordability. It appears more as a politically attractive way to appeal to voters while ignoring the financial consequences for public colleges and universities and the quality of the student experience.

California Journal of Politics and Policy

In an environment of declining public funding and rising tuition rates, many public universities in the US are moving toward a "progressive tuition model" that attempts to invest approximately one-third of tuition income into institutional financial aid for lower-income and middleclass students. The objective is to mitigate the cost of rising tuition and keep college affordable. But is this model as currently formulated working? Utilizing data from the Student Experience in the Research University (SERU) Survey of undergraduates and other data so urces, this study explores these issues by focusing on students at the University of California (UC) and 10 researchintensive public institutions that are members of the SERU Consortium. Focusing mostly on survey data from 2014, we find that increases in tuition, and costs related to housing and other living expenses, have not had a significant negative impact on the number of lower-income students attending UC or on their behaviors. Since the onset of the Great Recession, there has been an actual increase in their number-a counterintuitive finding to the general perception that higher tuition equals less access for the economically vulnerable. At the same time, there is evidence of a "middle-class" squeeze, with a marginal drop in the number of students from this economic class. With these and other nuances and caveats discussed in this study, the progressive tuition model appears to have worked in terms of affordability and with only moderate indicators of increased financial stress and changed student behaviors. This study indicates that tuition can and should be a part of the search for a viable funding model for many public universities, like UC, and that demanding lower or no tuition does not appear to be based on any substantial analysis of the correlation of tuition and affordability.

The Journal of Higher Education, 1998

This book examines issues in the provision of student financial aid within the context of continuin:3 changes in governmental student aid policies and private sector decisions resulting in larger and larger shares of the cost of higher education lieina borne by individuals and their families. The two chapters of Part 1 first review the role student aid has played in the past and the present and then sket !hes how the shifting environment of higher education is changing the way colleges and universities approach student aid. The four chapters of Part 2 examine how undergraduate education is financed in the United States, identifying differences for various sectors and for students of differing family backgrounds. Implications of recent financing trends for access to and choice of undergraduate college are reviewed. Part 3 focuses on how various categories of colleges and universities have been changing their financing patterns both their sources of revenue and their patterns of expenditure. The effects of external incentives such as government financial aid programs are analyzed and the possibilities of unintended consequences considered. The relationship of pricing and aid decisions by institutions to their strategic competitive choices is also addressed. Part 4 focuses on no-need or merit aid from the viewpoint of both students and institutions. The conclusions in Part 5 address implications for policy at the government level and for individual schools. Principles for decision making are offered. (Contains 48 references and an index.) (DB)

Change: The Magazine of Higher Learning, 1991

The Review of Higher Education, 2002

This essay draws upon the final report of the National Commission on the Cost of Higher Education (1998), Ehrenberg (2000), and King (1999) to explore (a) the cost of higher education at selective private colleges and universities, (b) public concern about the rising costs of higher education, and (c) the shift in financial aid policy from access to affordability. It also discusses implications for selective private institutions, the broader goals of access and choice, and higher education professionals.

The ANNALS of the American Academy of Political and Social Science, 2014

1997

Data from a panel of 2,269 colleges and universities track the major changes in educational costs, prices, subsidies, and financial aid over the seven eventful years from 1986-87 to 1993-94. The ability to give student subsidies is recognized as a central determinant of an institution's economic circumstances and strategy. Subsidy resources allow a school to sell its educational services at a net price below the costs of their production. So prices are always less than costs-how much less depends on a school's resources. Using a global accounting frame, the paper emphasizes the inter-relatedness of institutional decisions on enrollments, subsidy resources, sticker prices, financial aid, and general subsidies. Public and private sectors faced very different circumstances and behaved very differently. Within each sector, Carnegie school types lived in different worlds. Public Research Universities faced sharply reduced public support but countered it with restricted enrollments and higher tuitions that allowed them to maintain and even expand educational quality. Public Two-year Colleges, in contrast, were well protected by public policy so that even as they absorbed a twenty-five percent increase in enrollments, they maintained educational expenditures with only very modest increases in net tuition ($62 over seven years). The prices that students paid for a dollar's worth of education changed between public and private institutions, between Research Universities and Two-year Colleges within the public sector, and between high-and low-subsidy schools in both sectors-and these changes appear to have influenced students' enrollment choices. Increases in sticker prices either reallocate subsidies or raise net tuitions.

Journal of Education, Society and Behavioural Science

Higher education has always been a fundamental cornerstone for development and prosperity in the United States. It is incumbent upon the government and other stakeholders to formulate policies to ensure our institutions of higher education are well resourced and funded to enable economic development. The unprecedented price hikes in tuition at universities and colleges, coupled with high student loan interest rate has compelled a lot of students to drop out of college [1]. Majority of the dropouts are now resorting to drug sale and other nefarious activities in order to sustain their lives. The current pandemic has put a huge strain on the American economy with over a million death and unemployment is at all-time high. This article critically examines the severity of insufficient funding for higher education and the adverse impact of the escalating tuition fees. To regulate the rising tuition fees, suggestions are made with reference to sustainability of strategies and policies to s...