Glenn Murphy Alex Berger Economics of Education Topic Proposal General Overview of Rising Tuition Costs Americans, it seems, have never been better educated. Between 1970 and 2000 the number of individuals enrolled in institutions of higher learning increased from 8.5 million to 15.3 million. Likewise, from 1971 to 2001, the percentage of 25- to 29-year olds in the United States holding at least a bachelor's degree rose 71 percent. So why, as Congress prepares to reauthorize the federal law governing higher education, are policy- makers so unhappy? The answer is the ever-rising cost of college tuition, and the anxiety it's causing the public. There's no escaping the fact that college costs are rising. College tuition costs and fees over the last decade have increased 47 percent at four-year public schools and 42 percent at private institutions. In the 2003-04 academic year, tuition and fees increased 6 percent, or $1,114, on average at four-year private institutions; 14.1 percent, or $579, at four-year public schools; and 13.8 percent, or $231, at two-year public institutions --- high by historical standards, but not unprecendented (College Board, Oct. 24, 2003). The College Board, an association of colleges and universities, fingers the economy and a shortfall of federal and state revenues for the hike in schooling costs . The group said many students have been protected from tuition hikes by the growing availability of financial aid. Even so, the latest figures took on a political charge as Republicans accused colleges and universities of wasting taxpayer funds on lavish campus facilities. Among those cited were large hot tubs, sunbathing decks and massage facilities, as well as a rock- climbing wall at a recreation center at the University of Houston. Elwyn Lee, vice president for student affairs at the University of Houston, objected to his school's 264,000-square-foot, $53 million recreation center being used as an example of college largesse. He said the facility was built at student request and is being financed with a $75-a-semester fee. But Rep. John Boehner, R-Ohio, chairman of the House Education and the Workforce Committee, said colleges and universities have not been held accountable for such spending (Frances, 1990.) "Hyperinflation in college costs has been pummeling parents and students for more than a decade, and the problem has not been a lack of spending by states or the federal government," he said. "The bigger issue is whether institutions are accountable enough to parents, students and taxpayers, and clearly they are not" (Frances, 1990). The anticipation of the enrollment decline in the number of high school graduates in the early 2000's led private institutions to spend funds to make campuses more attractive, add programs, and carry out full-fledged marketing campaigns for new students. Administrative costs have risen as much as two percentage points over the past decade, but the causes are not clear. The rise could be attributed to more student services and programs to meet governmental social policy and health and safety requirements, and the expanding use of computers in all kinds of administrative functions. The 1990 Chaney and Farris survey of financial officers indicated a majority thought that the addition of computers and the upgrading of computer facilities were very important causes of rising tuition costs. Rising insurance costs were also among the top reasons identified as a major cost pressure (Chaney and Farris, 1990). Even as the portion of federal, state and institutional aid that is need-based (projected aid based on household income) has declined, college costs as a percentage of family income are higher for middle and low- income families than for high-income families. Total charges at a four-year public institution claimed 71 percent of family income for low-income families in 2003-04, compared to 19 percent for middle-income families and only 5 to 6 percent for the 25 percent of American families with the highest incomes. In the face of persistent rates of increase in tuition that exceed inflation, the changing pattern of financial aid in the U.S. has had an influence on who gets a college education. It has been suggested that the government require in no uncertain terms that universities submit reports on proposed tuition increases and institute measures to ensure that "no student will ever be left behind because he/she cannot afford tuition." This would help dispel any reservations that the public might have towards schools because of increased tuition. The government has also considered employing a mechanism for calculating reasonable tuition costs, to thwart the few schools trying to cash in on tuition increases and shift the funds to schools more conscientious in their mission to educate. But, there is good news. There is more financial aid available than ever before -- over $122 billion. And, despite all of these college cost increases, a college education remains an affordable choice for most families (College Board, Oct. 24, 2003). In 1982-83, over 50% of federal financial aid was in the form of grant aid, but by 2002- 03, this had fallen to 40%. Most federal financial aid now comes in the form of loans, and research suggests that students from lower-income families are less willing that other students to take on large loan burdens to finance their higher education. Federal grant aid has not kept up with the increases in college costs. During the mid 1970's the average Pell Grant received by students was about 46% of the average costs (including room and board) of attending a public higher education institution. Last year, the ratio had dropped to below 30%. The Bush administration has proposed increasing loan limits but has shown little interest in increasing Pell Grant levels. In addition, financial aid at private colleges and universities in the U.S. has become "merit" based rather than "need" based, as private institutions use financial aid for enrollment management purposes ( to attracting a class with "desirable characteristics" at least cost) rather than to permit lower income students access to them. Probably less than fifteen to twenty private academic insitutions provide financial aid based solely on students' financial need today. As a result, the U.S. has not achieved its goal of reducing educational inequality based upon family income levels. Moreover, more and more students from lower- income families are being forced, for financial reasons, to enter higher education through public two-year colleges. Given projections of growing college-age populations during the next decade, primarily from limitations on state resources for both operating and capital expenses, we may increasingly see limitations on access to college and disparities in college attainment, by income and/or race/ethnicity, in the U.S. in the years ahead (Hauptman, 1990). More private colleges and universities are trying new approaches to enhance affordability. Some private colleges and unversities have cut tuition, while others have locked in the tuition rate for a student's four-year or five-year enrollment. A handful allowing the bartering of products and services for tuition. Others offer three- year bachelor's degree programs, or four-year graduation and employment guarantees. There's also good news for parents and students who are not receiving tuition assistance from employers, and in recent years, the trend for employers to assist students with tuition has become promising with the onslaught of on-the- job training, etc (National Assoc. of Independent Colleges and Universities, Jul 12, 2004). The continuing rise of tuition costs will eventually further the gap between low, middle, and high income students', which will make it near impossible for low and middle income bracket famililes to obtain quality higher education unless the playing field is leveled. With no end in sight to the tuition dilemma, the other fail-safe is to continue to reinforce our country's reliance on education and attainment in hopes that one day the benefits will finally outweigh the costs. Work Cited 1)Chaney, B. and E. Farris. "The Finances of Higher Education Institutions." Washington, D.C.: Office of Planning, Budget and Evaluation, U.S. Department of Education. ED 327 110. (1990) 2)Frances, C. "What Factors Affect College Tuition?: A Guide to the Facts and Issues." Washington, D.C.: American Association of State Colleges and Universities. ED 317 149. (1990) 3)Hauptman, A. "The College Tuition Spiral." Washington, D.C.: American Council on Education. (1990) 4)Board, College. "College Board Reports Increase in College Tuition and Financial Aid." http://fdncenter.org/pnd/news/story.jhtml?id=47400008. Oct. 24, 2003. 5)National Association Of Independent Colleges and Universities. "Tuition Getting Still More Expensive." http://compensation.blr.com/display.cfm/id/153792. July 12, 2004.
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