Friday, November 20, 2009

University of California Regents raise tuition 32 percent - great idea!

Note: See this later blog post for more on this issue, including an op-ed I published in the San Francisco Chronicle:

The media are alive with coverage of the Cal Regents' decision yesterday to raise fees (what the rest of us call tuition) 32 percent for next fall (including a 15 percent mid-year increase for the spring semester).  The Chronicle of Higher Education had some good video of the protests at the Regents meeting, though regrettably the video doesn't show any actually Tasering taking place even though the narration makes reference to it.

If my calculations are right, this means that fees next year will be in the ballpart of $12,560 for resident undergraduate students, certainly a large dollar and percentage increase over what students are paying this year.  But where does this place UC compared to other public universities?  Each year, the Washington Higher Education Coordinating Board produces an excellent report summarizing tuition and fee rates at public universities in every state.  The most recent report is for last year, and shows that Berkeley's rate of $8,932 was 12th highest in the nation for public flagship universities - but still $4,774 or 34 percent below the most expensive public university in the nation, a distinction held by my own institution, Penn State - University Park.  Other flagships have not yet announced their increases for next year, but Berkeley will by no means be the most expensive - tuition prices at Penn State and the University of Vermont this year, for example, are already over Berkeley's announced rate for next year.  But there is no doubt that Berkeley's announced increase will move it up in these dubious rankings.  Tuition at the other UC campuses is generally lower than at Berkeley, but still high compared to peer institutions. (If you are interested in reading more, here is a link to the UC news office information about the fee increases.)

Undoubtedly the protests and outrage at the Regents' decision is due not just to the large increase imposed for this spring and next year, but also because of the fact that UC historically had been one of the cheaper public universities in the country, especially considering the perceived quality of the education that students at most campuses enjoy.  Data from the Washington Higher Ed Board show that twenty years ago, Berkeley was the18th least expensive flagship in the nation.  By 1999, it had jumped to 19th most expensive in the nation, and next year's rate will undoubtedly put it in the top five.  So in two decades, the comparable price of Berkeley has changed quite radically.

But many of the articles included little about what the Regents had decided about financial aid for next year.  The university is expanding its "Blue and Gold Opportunity Plan," which next year will guarantee that students with financial need and family incomes below $70,000 will not have to pay any tuition or fees (but may still have to pay for room, board, books, etc.).  So these students will be held harmless by the fee increase.  In fact, the press release issued by the UC President's Office states the combination of state, federal, and institutional grant aid and tax credits will ensure that the three-fourths of students who come from families with incomes below $180,000 will see no increase in their fees over this year.

In comparison to most other flagship universities, Berkeley has done an excellent job enrolling low- and moderate-income students, as measured by the proportion of undergraduates receiving Pell Grants.  In an issue brief I wrote for The Century Foundation, I examined the proportion of Pell Grant recipients enrolling at almost 150 of the nation's most selective colleges and universities (both public and private) in the 2001-02 academic year.  At that time, 32.4 percent of Berkeley undergraduates received Pell Grants, a rate higher than all but two other institutions (one of which was UCLA).

The most recent data (2007-08) available from The Institute for College Access and Success (TICAS) show that 28 percent of Berkeley undergrads still receive Pell Grants.  Many of Berkeley's flagship peers come nowhere near this level of achievement in enrolling low- and moderate-income students:
U. of Michigan - 8%
U. of Virginia - 8%
U. of Illinois - 16%
U. of Georgia - 12%
to name just a few.

It's important to note that there is research that shows that students, particularly those from poorer families, react to the sticker price of college (the posted price before subtracting grant aid) more than they do the net price when making decisions on enrolling in postsecondary education.  One can understand why when the majority of the news coverage of the Regents' decision yesterday focused on the fee increase, with little information about the financial aid initiatives.  So there is, and should be, some concern about whether these increases will dissuade some poorer students from attending UC who otherwise would qualify for admission.

But just as there are a good proportion of poor students at UC, its more selective campuses such as Berkeley and UCLA also have a good percentage of more well-off students.  The TICAS data show that in 2007-08, 42 percent of Berkeley undergrads and 47 percent at UCLA did not even bother applying for financial aid.  While it is possible that some of these students may have financial need even though they did not bother applying for aid, the chances are much greater that most of these students came from families who had income and assets large enough that they knew they would not qualify for state, federal, or institutional aid.

One advantage of higher fees is that they allow the university to capture the consumer surplus of these wealthier students, an issue I wrote about in an earlier post this month.  Remember, even at a fee level of approximately $12,560 next year, a Berkeley education is still going to be much cheaper than the alternative at almost all private universities, or out-of-state public universities.  Clearly many of these families would be willing to pay even more, so it makes economic sense for the university to capture these higher fees from these families and turn them around into need-based grants for students from poorer families.

The UC Regents are in a tough position.  The university is facing a budget shortfall of over $1 billion (before the fee increase), due largely to the cut in its state appropriation.  There are certainly steps that the institution needs to take to make sure it is operating as efficiently and effectively as possible, but it is unrealistic to expect that it can reduce its budget $1 billion on the cost side.  Employees at UC are already facing 11 to 26 days of furlough this year as a cost-cutting measure.  Without generating more revenue - and the university has also committed itself to raising $1 billion for student support over the next four years - it would have little choice other than to let the quality of the education degrade even further.  And this would be an absolute travesty for an institution that has long been a jewel of American public higher education.

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