A question of sorts about tuition

College is too expensive, and for every glowing report about the financial returns of a college degree, another blows apart those numbers by showing that particular schools and particular careers that, by grace of family connections, artificially inflate the numbers. At the same time, U.S. Taxpayers are disproportionately subsidizing the elite universities with large endowments— schools that spend more money managing their portfolios than on scholarships. The jobs of Presidents hang on their ability to pull in large donations. Most colleges are simultaneously seeing increased selectivity and increased enrollment and are crafting incentives to push those numbers higher still. I don’t want to get bogged down in most of those perks and whether they ought to exist or distracted by other cost-saving measures taken by schools or even question where all that money goes. I’ve been lead to believe that universities function through dark rituals carried out by accounts and involving large piles of imaginary money. Yes, I am being glib, but since I know just enough about it to make wildly inaccurate generalizations, I will refrain from doing so. Instead, I will focus on the extension of in-state tuition and tuition freezes, because there is something I find troubling here.

On the issue of tuition freezes, I have just one comment: the phrase itself is a red-herring. Promises to eliminate or freeze tuition do not keep down the price, but adds incentive to call the bills something else, usually fees. The itemization of the bill is a nice addition, but it also represents rhetorical chicanery when some of the fees can plausibly be argued to belong in the tuition pile. For instance, in graduate education, there are instances where students with tuition waivers nevertheless pay a fee for every credit they take. Fees or tuition, the result is the same: costs rise.

My working hypothesis on the split between in-state and out-of-state tuition is that the out-of-state rate represents more or less the full tuition rate, while the in-state is a lower rate because it is subsidized by the taxpayers of that state. This is not to say that there is a 1:1 correlation, and there is the added variables of federal funding and donations, but, in general, this seems to be a reasonable model. Likewise, though I haven’t seen it stated outright, it seems likely that state taxes that go to supporting state higher education institutions are done with this sort of implicit assumption in mind. States are, by and large, reducing their financial support for higher education, for a variety of reasons, which forces out low-income students and results in more cost increases for families.

Working with the model, though, and the fact that states still do help subsidize education, there is another anomaly that has me turned around: the extension of in-state tuition to out-of-state students. The University of Missouri participates in the Midwest Student Exchange Program, which reduces the cost of attendance for students in surrounding states and I have seen other proposals to reduce out of state tuition. The purpose, of course, is to attract ever-more students to the university in order to get more tuition dollars and, as for-profit institutions can attest to, means milking federal funding for all it is worth. International students bring in even more money.

I am sure that I am being overly simplistic with all of this, and it is linked to and symptomatic of all sorts of other issues in the finances of higher education, but I can’t help but wonder if the mad race to bring in students has the side-effect of making these institutions large businesses that happen to reside in a particular state, blurring the lines between where the students come from in order to lure them in. I do wonder if maybe it would be useful to frame the state funding for higher ed specifically as a benefit for in-state students. On the other hand, maybe I am making mountains out of molehills.

2 thoughts on “A question of sorts about tuition

  1. I’m a bit closer to the picture, as I’ve frequently sat in Faculty Senate meetings and read industry literature regularly.

    (Aside, I highly recommend following Bryan Alexander’s blog if you have even half an interest in the future of higher ed)

    You’re right about tuition freezes. The in-state vs. out-state tuition question is thornier and deeper. One truth is that for many colleges the tuition rate is rising, but the average cost may not be, because students pay what is called the discount rate. For years colleges have crafted financial aid packages with increasing amounts of aid just so they can raise tuition, for two reasons: 1) Until recently, people have conflated the idea of cost with value. A more expensive tuition must be a better school, right? So I want me or my child to go to an exclusive school with a big sticker price. Obviously it has gone too far in this direction and attitudes are changing. 2) While I want a big sticker price, I don’t want to pay it. And if I see a large financial aid package, it’s because the school really wants me, right? And everyone wants to be wanted.

    So as attitudes around the sticker price have shifted, schools are looking for, as you’ve said, new ways of attracting potential students instead of scaring them off. Offering the in-state rate is another form of financial aid, and is calculated into the existing models, I’m sure. So if you get that in-state rate, you may get less other forms of aid, such that your discount rate comes out to be similar. Effectively it’s a way of ‘reducing tuition’ without actually doing so.

    Personally, I’d like a lot more transparency in the whole thing. I’d like to see schools get out of the financial aid business entirely, because it’s a conflict of interest, and is abused as a way to incentivize students to choose one school over another, which is the best interest of the school, not necessarily of the student. Rather than schools holding those purse strings, I’d like to see schools list a fixed tuition rate and let other agencies get students the aid they need to go to the school -they- choose. I’m still okay with listing separate in-state and out-state rates based on the fact that states will give subsidies to the schools to educate state residents, but that too could go directly from state to student. Of course, there are large overheads with handling financial aid in such a direct fashion, which is why schools are in the middle to begin with.

    As an aside, schools everywhere are absolutely panicking over enrollments. Yes, in many cases they would -like- to be seeing increased selectivity and increased enrollments, but the truth is that the US college-age population is shrinking, and we can look at grade schools to see that this is a continuing trend. Combined with the tightening of private education loans and the reduction of state aid, schools are indeed desperately seeking more applicants. They are doing things like dropping SAT requirements, making transferring in easier, and higher experts in foreign relations to build greater foreign enrollments. And yes, advertising an in-state rate to certain out-state residents, often constructing it in such a way that their revenue per student stays flat.


    1. Thanks for the response, Chad, and this is all a mess–you’re explanation is a lot clearer than were my half-formed thoughts. Transparency and communication would be great, but those also fly in the face of public relations rhetoric, though that is usually how administrations end up in trouble.


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