Monday, February 6, 2012

On Tuition Flexibility

This Wednesday the Wisconsin Special Task Force on UW Restructuring and Operational Flexibilities will hear from the chancellors of Madison and Milwaukee on several issues, including flexibility for tuition-setting.

I'm on the record as having numerous concerns about the unintended consequences of giving institutional administrators more say over tuition, since they operate under intense local and political pressures to generate more resources which lead them to raise tuition even when it comes at the expense of access commitments. The latter are far more difficult to uphold, since even when people feel strongly about supporting college opportunities for disadvantaged families, the fact is that those families are quite distant from the lives of decision-makers, and thus easy to neglect.

A new paper from the National Bureau of Economic Research by Columbia economist Judith Scott-Clayton offers important reminders for this task force and the chancellors.  The access commitment is easy to make in theory, and much harder to fulfill in practice.  Sure, we like to believe that we can simply meet it by redistributing tuition revenue from middle and upper-class families to poorer families via financial aid (discounting).  But this relies on a set of assumptions, including that (a) poorer families will know the discount is coming and ignore the sticker price, (b) they will know and believe this information early enough to ensure their kids are prepared for college (as researchers put it, “potential college students cannot respond to a price subsidy if they do not know it exists"), (c) that this redistribution strategy will survive significant political push-back from the middle and upper-class families, (d) that the unintended divisiveness of the policy won't cause many consequences to campus climate and educational opportunities for the poorer students, and (e) that the access commitment will last even as campus administrations change.

I'm skeptical that these assumptions will be met by the kinds of tuition flexibility proposals we've seen in this country.  Short of a flat-out widely advertised and legislated promise to all Wisconsin residents under $80,000 (or some other income cutoff) that the full costs of attending college will be FREE, I don't think (a) and/or (b) will actually happen.  I don't think anyone knows about (c) or (d) and as for (e), get real-- no one puts this stuff in writing like they ought to.

Back to the NBER paper by Scott- Clayton-- here are key takeaways:

1. The chances are good that the market failure known as incomplete information has become more consequential in recent years as pricing of college has become much more individualized.  Despite decades of informational interventions, misinformation remains widespread-- as Scott-Clayton puts it,  "while many students appear well aware of the benefits of postsecondary education—in some cases even overestimating expected earnings gains—they persistently overestimate costs and are uninformed about sources of potential aid."

2. Creating a more complex system in which costs are higher and more variable, and more discounting is utilized, is unlikely to be offset by purely informational amendments.  In other words, an awareness campaign like that proposed by Biddy Martin last year likely won't even partially solve the problem creating by more tuition complexity.

3.  Informational contraints "can potentially undermine the effectiveness of even very large investments in financial aid."  In other words, we could spend a lot of money without creating much access--and we have to keep that in mind. It's a subject deserving of widespread and thorough public debate.

The lesson from this National Bureau of Economic Research paper for Wisconsin is this:  it's imperative that whatever tuition policy we move towards, it should not exacerbate students’ confusion about cost.   In my estimation, tuition "flexibility" at the institutional rather than System level will create more harm than good from those already left out and left behind by Wisconsin and its universities.

Postscript:  I want to clarify that the hearing on Wednesday will include discussion of two different tuition issues. First, whether the legislature should have granted the Regents flexibility to set tuition and then capped tuition.  I concur with Chancellor Ward that this is inappropriate-- the Legislature has much on its plate, and should allow the UW System Board of Regents the opportunity to convene a full discussion of tuition issues and make its own policies.  There are many ways for various constituencies to make their case to the Regents for keeping tuition very reasonable for Wisconsin residents, and the outcome will have more political legitimacy if done this way. Second, I understand that some chancellors want to have the flexibility to set tuition devolved to their own campus-- rather than have the Regents set it. This is not something Chancellor Ward is arguing for-- in contrast to his predecessor, and to the chancellors of Milwaukee and Stevens Point, he concurs that tuition-setting is an important function of university systems.  Finally, one last point-- anyone who claims that an access agenda is antithetical to an educational quality agenda is caught in the old Iron Triangle rhetoric, and needs to get up to speed.  Access (including diversity) is a key element of quality, and providing quality without access is no way to secure our children's future.

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