 Public Policy
and Higher Education in the West: A Tuition and Fee Update
Policy Implications
Tuition
and fees trends combined with state and federal policies raise several
questions about state tuition and financial aid policies.
Tuition and Affordability.
The share of household income required to pay college expenses has increased.
For households in the WICHE region, tuition and fees at research/ doctoral
institutions accounted for 8.5 percent of their income in 1997-98, up
from 7.4 percent in 1992-93, and 5.8 percent in 1987-88.2
For students at baccalaureate/master's institutions, tuition and fees
consumed 6.2 percent of household income in 1997-98, 5.3 percent in
1992-93, and 4.3 percent in 1987-88. Two-year public institutions in
the WICHE region (excluding California) are an exception where tuition
and fees accounted for a smaller percentage of household income–down
from 2.8 percent in 1987-88 to 2.4 percent in 1997-98.
Recent state and federal actions
impact tuition and fee levels. For example, the California legislature
voted to significantly increase state appropriations for higher education
in 1998-2000. This increased state funding will compensate for a 5 percent
cut in resident undergraduate fees at the state's public colleges and
universities for the 1998-99 academic year and a freeze on fees for
academic year 1999-2000.
At the federal level under the
Taxpayer Relief Act of 1997, college freshmen and sophomores enrolled
at least half-time may be eligible for the Hope Scholarship, a tax credit
worth up to $1,500 a year. Students who are less than half-time or have
completed more than two years of college may be eligible for the "Lifetime
Learning Tax Credit." This program allows up to a 20 percent federal
income tax credit on the first $5,000 paid in tuition annually. Although
the federal tax credits should help more students pay for college, benefits
for students from economically disadvantaged families are potentially
restricted since families might not qualify for the tax credit if they
do not pay enough income tax. In addition, the tax credit comes months
after tuition is due; thus, tuition still will be a challenge for needy
students. Key questions that need to be addressed are:
- How can state
tuition policies best expand access to higher education?
- Should
tuition policies be designed to provide access to the neediest students?
- How can
state public policy help both students and institutions benefit from
the new federal tax policies?
- How
well do a state’s tuition policies support its priorities for
access to and affordability of higher education?
Tuition and
Enrollment Policies. Public two-year institutions in the West
lost more than 1 percent of their total undergraduate full-time equivalent
enrollments in 1996-97, compared to their share in 1992-93.3
This decline may continue because the Hope Scholarship tax credit under
the Taxpayer Relief Act of 1997 could significantly reduce the differences
in tuition and fees between community colleges and four-year institutions,
especially in low-tuition states such as California, Arizona, and New
Mexico. The closing of the tuition gap might further reduce enrollments
in the community colleges while increasing enrollments in four-year
institutions. Policy questions include:
- How does tuition
at different types of institutions affect enrollments?
- What kind
of balance should state policy seek between enrollments at public
two-year institutions and four-year institutions?
- Will
state tuition policies, coupled with the new federal tax policies,
shift enrollments away from community colleges to four-year?
Tuition and Financial Aid
Policies. The College Board reports
that federal student aid amounted to $60-billion in 1997-98, 80 percent
higher in constant dollars than that of 10 years ago.4 However,
the vast majority of this growth has come in the form of student loans,
which now represent 60 percent of all aid. Meanwhile, average federal
grant aid has declined.5 The Pell Grant has steadily lost
purchasing power over the past 15 years. Today, the maximum Pell Grant
covers only one-third the average cost of attending a public four-year
college.6 The growing reliance on loans puts a disproportionate
burden on the neediest students.
Seeking to reduce the student's
financial burden, the Higher Education Amendments of 1998 mandate changes
effective in academic year 1999-2000. For example, the maximum authorized
Pell Grant will be $4,500 in 1999-2000, up from the current level of
$3,000. The maximum grant will rise by $300 in each of the following
three years and by $400 in 2003-04. Interest rates students pay on loans
will be lowered to 6.8 percent while they are in school and to 7.4 percent
after that.
Following the national trend
of increasing student financial aid, some states in the West are significantly
expanding aid. In response to growing public concern about preserving
access to college, lawmakers in Nevada and New Mexico agreed to increase
state spending on financial aid. Utah established a matching-grants
program as an incentive for institutions to raise money for scholarships
at community colleges, branch campuses, and centers. Questions for policymakers
include:
-
Should
state policy support need-based grant programs so that the neediest
students are less dependent on loans?
-
How
do state financial aid programs affect affordability and access
in light of rising tuition and newly added federal tax credits?
-
How
should state policy define the relationship between tuition and
financial aid to support access and affordability goals?
-
Can
state policy encourage development of other sources of financial
aid, especially from corporate and community sectors?
-
What
has been the impact of prepaid tuition plans on financial aid demand?
Endnotes:
2Western Interstate
Commission for Higher Education, Policy Indicators for Higher Education:
WICHE States. Regional Fact Book for Higher Education in the West,
(Boulder, CO: WICHE August 1998), 69.
3Western
Interstate Commission for Higher Education, 64.
4The College Board. Trends in Student Aid, 1998,
(Washington, DC: October 1998), 6.
5The College Board, 12.
6The College Board, 13.
Introduction
Public Four-Year Institutions
Public Two-Year Colleges
Conclusion
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