Public research universities adopted high-tuition, high-aid model, study finds

Dive Brief:

  • Even as research-oriented public colleges raised tuition rates in recent years, low-income students enrolled at those institutions paid less to attend, a new working paper finds. This suggests public research universities provided more financial aid to students as they increased their sticker prices. 
  • However, this high-tuition, high-aid price model only broadly benefits those from the lowest income brackets if research-minded public colleges enroll more disadvantaged students, according to the working paper from the National Bureau of Economic Research.
  • Low-income students remain “relatively underrepresented” at top public research universities, though the share attending these institutions rises modestly with tuition increases, the paper says.  

Dive Insight:

Historically, public colleges were more affordable than private nonprofit colleges no matter a student’s wealth, as states subsidized these institutions and kept tuition rates down. 

However, public institutions’ funding streams have changed, notes the NBER paper, which was written by Emily Cook, economics professor at Tulane University, in New Orleans, and Sarah Turner, economics professor at the University of Virginia. The paper has been peer reviewed and is forthcoming in the journal Economics of Education Review, according to Turner. 

Declines in state appropriations, often blamed for increasing tuition at public college, can’t explain the pricing shifts, the report states. 

The researchers found that tuition levels for students couldn’t be predicted based on changes in state appropriations. 

For instance, moderate-income students attending R1 universities, the Carnegie Classifications’ top research designation, paid less for college than anticipated after declines in appropriations. Students from families making between $48,000 and $75,000 per year were expected to pay $944 more in net tuition at R1 universities based on appropriations declines between 2008-09 and 2011-12. They only actually paid $255 more.

The academics theorized that shifting market demands, such as interest levels of full-tuition-paying international students in attending U.S. colleges, facilitated public institutions’ moves to high-tuition, high-aid pricing models.

Proponents of such a progressive pricing system argue it helps low-income students by driving down their tuition costs. Critics point out this has not necessarily borne out in reality, in some cases with fewer disadvantaged students enrolling in college, in some cases because they’re wary of the sticker price.

But the term “high-tuition, high aid” dates to “a much earlier academic and policy dialogue about public tuition setting,” Turner said. Turner pointed to research from the 1960s that showed low tuition across the board caused wealth to be distributed unequally, because institutions like University of California, Berkeley, still received larger appropriations compared to community colleges and tended to enroll more affluent students. 

The new paper examines net tuition costs — or what students pay for college after factoring in all financial aid — among first-time, full-time in-state students from various financial backgrounds who attended several different institution types. 

Among community colleges and four-year public institutions that were not research universities, net tuition kept pace with tuition increases, suggesting those colleges did not adopt high-tuition, high-aid models. 

But at R1 institutions, students with a family income of less than $30,000 a year paid only about 30 cents in net tuition for every dollar that sticker prices jumped. For students with an income between $48,000 and $75,000 annually, net tuition rose 43 cents for every additional tuition dollar added to the sticker price.

While the press “has devoted much ink to the potentially deleterious effects of tuition increases on opportunities for low-income students,” analyzing increasing tuition levels is much more nuanced, the researchers wrote.

Low-income students attending R1 universities may see more financial aid, which compensates for tuition increases, they wrote.

“To this end, debates among advocates for ‘free college’ and proponents of market-driven tuition policies are likely to miss the most salient issues if they fail to look at the progressivity of tuition pricing rather than just the price charged to students from high-income families,” they wrote. 

Going forward it’s important to understand college pricing in the context of the higher ed market, examining how student demand and other institutions’ actions affect tuition and discounting decisions, Turner said.

“A next step is to model these interactions more explicitly which would then allow for more complete answers to counterfactual or ‘what if’ questions,” Turner said.

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