More Flexibility to Raise Tuition?

Central to debates over the New Badger Partnership is the question of whether additional flexibilities that make it possible to raise tuition are desirable.

Evidence can and must be used to make these decisions. A robust, evidence-based debate on our campus is obviously needed but to date has not occurred. Instead, to many of us outside Bascom it seems as though administrators have mostly relied on the input of a few economists and some other folks who work in higher education but are not scholars of higher education. It also seems like seeking advice from those mostly likely to agree with you. (Please--correct me if I'm wrong--very happy to be corrected with evidence on this point.)

It would be wonderful to see a more thorough review of existing evidence and the development of an evaluation plan that will assess positive and negative impacts of any new policy in ways that allow for the identification of policy effects-- not correlations. (Let's be clear: comparing enrollment of Pell recipients before and after the implementation of a policy like the MIU does not count.)

A few years ago I blogged about studies on the effects of tuition and financial aid on individual decision-making. To summarize-- effects of each are relatively small (especially when compared to effects of academic under-preparation, for example) but usually statistically significant. Also, what we call "small" reflects our value judgments, and we must recognize that.

Effects of "sticker shock" are thought to accrue early, such that the "shocked" students end up academically unprepared for college (for example don't even graduate high school) and thus are omitted from the eligible population of students on whom effects of aid and tuition are usually estimated. So hypotheses about sticker shock are very hard to test, partly because a good test requires measuring both the initial "shock" and the resulting behavior many years later (when college enrollment decisions are made).

There are other ways to think about these questions, beyond individual-level analyses. For example, we could contemplate possible effects of tuition hikes and aid increases on overall enrollment (which results from the aggregation of behaviors of many individuals). We could also look at evidence on how common it is for institutions like ours that hike tuition and raise aid to sustain the commitment to that aid over time.

Let's start down that path by examining one study that sheds light on the first of those questions. I will review more such studies in the coming days. My goal is to help facts and figures replace fear as the driving force behind our campus decisions.

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In "Rising Tuition and Enrollment in Public Higher Education" Hemelt and Marcotte examine the relationships between tuition and aid on the one hand, and enrollment on the other. Essential to this discussion, for most of their analyses they disaggregate by type of institution, making it possible to isolate effects on universities comparable to UW-Madison.

Using national IPEDS data on public 4-year colleges and universities from 1991 to 2007, the authors find that on average a $100 increase in tuition and fees (in 2006 dollars) would lead to a decline in enrollment of a little more than 0.25 percent. Since we rarely raise tuition by $100, let's instead consider that a $1,000 increase in tuition would result in an enrollment decline of 2.5 percent.

But most relevant to this discussion, these economists find that the tuition elasticity of enrollment is largest at Research I universities-- and they specifically give the example of UW-Madison. According to these scholars, freshmen at universities like Madison's are "much more" affected by tuition increases than students at other kinds of institutions (for example, freshmen at UW-Stout). (The tuition elasticity is -0.24 at Research I's compared to -.107 on average). And, the average amount of aid received has the smallest effects for students at Research I universities, compared to other colleges (.06 on average, compared to .01 at Research 1's).

In plain English, what does this mean? The consequences of raising tuition are greatest for students at places like Madison, and the benefits of increasing aid are smallest.

Why is this? The authors consider the possibility that students at Madison are not weighing the price of Madison relative to the price of Stout or Eau Claire, nor the price of other Big 10 schools writ large, but rather the price of comparably elite Research I institutions. Restricting their analysis to the top 120 public universities in the country, then, they again find that these students are particularly price sensitive, and particularly aid insensitive.

A few words from the authors: "These patterns in price and aid sensitivity are consistent with students opting out of “top 120” schools for competitors as price rises, while finding a way to pay tuition bills at other state schools where students may have fewer options....The evidence...of higher price sensitivity but lower aid sensitivity at “top 120” and Research I institutions raises general questions about enrollment patterns at public four-year colleges and universities, beyond the implications of tuition on enrollment at single institutions. One implication may be a shift of students from higher income families to private institutions or public universities in other states, along with a shift of students from lower income families to less expensive public universities within the state. This would suggest a redistribution of students across public colleges and universities within a state, with those most financially able leaving the system, and others scaling back to enroll at more affordable
institutions. Obviously, student-level data are needed to test this."

Distributional consequences of tuition policies are too rarely considered, and are not addressed in the NBP.

Sure, consequences and benefits should be put into context-- for example considered against the consequences of not raising tuition. But this paper by respected economists clearly indicates that it is not appropriate to assert that increasing financial aid at institutions like UW-Madison will effectively hold students harmless from the negative effects of tuition increases. Enrollment will be affected, and distribution of enrollment across institutions may be particularly affected. Who will measure those effects? And who will care?

Politics As Usual?

There is much buzz here at UW-Madison about the proposed New Badger Partnership. You can read all the details about what the Chancellor has proposed here, and you can read about some of the concerns expressed here.

In the interest of a rich discussion of this important policy proposal, I want to draw your attention to some relevant research on the topic. I'll start off with a recent paper by Michael McLendon, professor at Vanderbilt University, and his colleagues Russ Deaton and Jim Hearn.

In a 2007 article McLendon discusses trends in higher education governance reforms over the last several decades, and in particular the rationales posed for these reforms. The piece is worth reading in its entirety, but here are some highlights relevant to the campus debate:

Between 1985-2002 states considered more than 100 different ways to modify governance of higher education systems. "Policy rationales asserted in justification of these changes often pointed to the desire for improved accountability, operating efficiency, cost savings, competitiveness, coordination, and innovativeness....Paralleling roughly the emergence globally of a public sector reform movement christened the “new public management” (Brudney & Wright, 2002, p. 354), some American states experimented with changes to their governance systems for higher education that focused on efficiency rather than equity, choice rather than standardization, decentralized rather than centralized decision-making, performance rather than process, and outcome rather than input measures."

Sound familiar?

Why so much reform? As McLendon and his colleagues note, it is most common to depict "reforms as a rational response by state leaders to policy problems for which the redesign of higher education systems might serve as a suitable solution." But, McLendon posits, building on an argument advanced earlier by Aims McGuiness, an entirely different explanation is possible: political instability. Turnover in who's in charge- and the threat of turnover-- may in and of itself lead to these reforms-- even though they are posed as rational and necessary, in fact the reforms themselves may be political animals.

And this is, in fact, what McLendon finds. "Fluctuations on the political landscape of states [are] the primary drivers of legislation to reform governance arrangements for higher education."

In particular:

(1) "States are more likely to enact governance legislation in years in which the legislature became captured by one of the two major political parties, following a period of divided party control of the institution."

(2) "As the percentage of a state’s legislature that is Republican increases, so too does the probability of a state changing its higher education governance system."

(3)"The longer governors occupy office, the lower the probability of their states enacting structural changes. Conversely, states whose governors are newer to office appear more likely to undertake such reforms...A turnover in administration could present the most opportune time for a governor to seek to maximize control over executive branch agencies, leading to the changes in higher education governance we have documented."

(4) "Our analysis yielded no evidence linking passage of governance legislation with the economic conditions of states, the characteristics of their college and university systems, or regional diffusion."

In other words, historically states have not made decisions about the governance of state higher education institutions based on stated rationales but rather based on politics.

Is the situation here in Wisconsin at this moment in time really any different?

Overachievers

You don't get to be a professor at a top university by settling or compromising. You get there by striving, competing, and working against all odds to cram extra hours into already-long days. You expect the best, of everyone.

So it's hard to be a professor at a public university right now. Almost by definition, public universities aren't the top of the heap in spending on the things that professors are trained to care most about-- research, salaries, resources. This leads to frustration, anger, and indignation when our talents go unrecognized, our fields disrespected, and our friends leave for private universities.

It's hard to be a professor at a public university, for sure.

Of course, it's also hard to be a kid whose entire future depends on achieving economic stability and that seems to depend on college-- but college is increasingly out of reach. You're told that the flagship college in your state is really the only one that's worth going to and despite your desire to ignore those elitist comments, they nag at you. You want to go there, but annual costs of attendance are more than your family makes in a year. Your parents didn't go to college, and none of your friends managed to get to that place. So really, why bother? Why work your tail off in high school to get the best grades, work after school jobs to save money, and why knock yourself out to take that ACT? You're never going to be able to get in, and if you do, it's gonna financially cripple your family to afford it. The government has never come through with real financial help before, why expect it to now?

Somehow, my heart tells me it's harder to be that kid than it is to be me.

It's time for UW-Madison to be with the children of Wisconsin's working poor families. Offering financial aid -- accompanied as it is by a byzantine system of paperwork, rules, and caveats-- is clearly insufficient to overcome the fear instilled by widespread talk that tuition is high and getting higher. (I am a researcher of financial aid-- it "works" but it by no means demonstrates sufficiently large effects to hold students harmless from high tuition.) Financial aid won't help combat word on the street that the place is so elite it won't even hang with the other UW universities or colleges anymore. It's out for itself--its alumni, current students, and professors-- not for you.

I am not naive-- we are going to take a bone-crushing hit this year. Our belts are going to tighten so much that we can hardly breathe-- at least we will think that's true. But the fact is, UW-Madison doesn't know poverty. Not even close. It's been blessed to have what it needs to be nearly everything it's wanted to be. That's getting harder to do, and now in these times choices will have to be made. Programs will have to be cut. Faculty will have to teach. Class sizes might have to be a bit larger. The truth is, we will survive this-- and we will be more respectable for it. UW-Madison is nothing without the respect of Wisconsin. Leaving the state behind is not an acceptable approach to accommodating our desires to be the "best."

A Little Information Could Go A Long Way

THIS GUEST POST COMES FROM ROBERT KELCHEN, DOCTORAL CANDIDATE IN EDUCATIONAL POLICY STUDIES AT UW-MADISON.

In a new report, Filling in the Blanks: How Information Can Affect Choice in Higher Education, Andrew Kelly and Mark Schneider of the American Enterprise Institute examine the role that information can play in the college choice process. One thousand parents in five states were asked which of two similar colleges they would recommend to their high school-age child. Half of the parents were given information about the colleges’ six-year graduation rates, while half were not. The researchers found that parents who were provided information about graduation rates were fifteen percentage points more likely to recommend the college with the higher graduation rate to their child, with larger differentials for parents who reported having less information about colleges and who had lower levels of education.

The intervention shows the importance of providing salient information to the parents of high school students. However, because parents in the study were making a theoretical decision instead of an actual decision that would affect their child, they had less of an incentive to think as carefully about their choice. This might result in effects that are larger than in real life, especially where parents have evenmore information about the two colleges being compared. A logical next step would be to repeat this experiment with high school students to see if the results significantly differ. Encouraging or requiring colleges to publicize their graduation rates may lead parents and students to choose colleges at which the student is more likely to graduate, as they take this information into account. In any case, even a small effect of additional information can make this low-cost intervention sound public policy.