Chain Reaction: Tuition Rises Due To Higher Tuition

Annual average increases since 2010 in General Fund (GF) support and in-state tuition and fees at each school, compared to the Higher Education Price Index (HEPI) and Consumer Price Index (CPI). At nine schools the state funds have lagged even the smaller inflation measure.  Source: House Appropriations Committee

Increased pay for faculty and administrators is one of the major cost drivers behind the continuing climb in tuition and fee charges, a member of the House Appropriations Committee staff told that committee Monday.   As those charges climb, the universities are also increasing the percentage of tuition revenue used to provide financial aid for students being priced out, transferring costs from one group of students to the other.

Anthony Maggio’s presentation went into details missing from the State Council of Higher Education for Virginia’s own review of the cost increases.  His critical overview highlighted:

  • The six institutions that exceeded the tuition increases in their six-year plans. (Eight institutions including the Virginia Community College System stayed under the amounts in their plans.)
  • The amount the schools are still charging in their mandatory fees to support their athletic programs, now more than $1,500 at eight of fifteen schools and over $3,000 at one.  Legislation in 2015 slowed but has not stopped the growth.
  • A potential way he believes the universities may be shifting more research program costs onto the students’ tuition or fee payments, further explaining rising tuition.

Athletic charges included in mandatory comprehensive fees. Source: House Appropriations Committee

Maggio reported that Radford University increased tuition 7 percent instead of a planned 3 percent hike and blamed, among other things, enrollment loss and a commitment of funds to economic development activities.  The other schools that exceed their targets often mentioned salaries or fringe benefit costs.

The current state budget did not include additional state support for salary increases this fiscal year but waits until next year to fund the state’s share of those.  Maggio said about ten institutions have said they are moving forward with broad salary increases this year anyway, often citing concerns staff will leave over money.

Departing from his slides, he told about a prominent George Mason University law professor (unnamed) who left for the University of Chicago, prompting calls for higher salaries.  A later article in the Chronicle of Higher Education revealed the person left to be closer to family, and his replacement came to GMU from Chicago to be closer to the action in Washington.

“Yes, we need to be competitive,” Maggio said.  “We are competitive.  We may have gone beyond the pale.”

Christopher Newport University in Newport News blamed uncertainty over the state’s appropriations for its decision to exceed its target.  If those appropriations hold, CNU will use the tuition dollars to further increase the amount of tuition revenue it commits to financial aid.

At the University of Virginia and the College of William and Mary almost 20 percent of tuition revenue is used for financial aid, and at two other schools he listed the percentage as in the mid-teens:  University of Mary Washington and Virginia State University.  Three more are approaching ten percent.  Maggio also reported that in their six-year plans many schools earmark a high percentage of their new tuition revenue for this purpose, adding cost to both in-state and out-of-state students.

At William and Mary more than half of the new revenue from in-state students is earmarked for financial aid and 97 percent of the out-of-state increase is directed to that purpose, Maggio reported.

Two decades ago, if an institution received an allowance for indirect costs (overhead) with a research grant, 30 percent of that needed to go into the school’s education and general (E&G) operating fund.  In 2003 that was estimated to be about $30 million, but since then the schools received permission to keep 100 percent of the indirect money within the research program.

“Unless institutions have arranged for an internal cost recovery, the E & G program may be subsidizing the research activities which have grown significantly since the early 2000s,” Maggio wrote on his slide.  Then speaking into the microphone he doubted that such internal cost recovery mechanism is in place at most schools.

Looking forward to fiscal year 2020, Maggio said many of the schools shouldn’t have to increase tuition and fees at all, given the additional $75 million the state will be adding for them that year.  He added that 2 percent might be a more realistic expectation.  If that happens it would mark a radical change.

The projected FY 2020 tuition increase in each school’s six-year plan compared to what the House Appropriations Committee staff projects they need, given added state funding on the way and this year’s increases.  Who “expects” this is not clear.

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17 responses to “Chain Reaction: Tuition Rises Due To Higher Tuition

  1. I have to admit that I’m pretty stunned that student tuition covers financial aid for other students. That’s a form of benevolence for which tuition-payers can’t recoup any form of tax benefit. Our son saved pretty much every penny he earned starting as an elementary school student and saved enough for two years at GMU. Grandparents and parents rounded that out so that he could finish debt free. All of us scrimped in order to do it. It’s rather frustrating to see how tuition and fees are allocated in the Virginia college system.

    • From each according to his means, to each according to his need…..think about this: how much of the existing and future student debt is money actually borrowed to support college athletics or to provide this financial aid for others…

      • “From each according to his means, to each according to his need…..think about this: how much of the existing and future student debt is money actually borrowed to support college athletics or to provide this financial aid for others…”

        I would add cross-subsidizing different types of research, administration, and graduate programs to that .

      • That’s appalling. Student A, who can’t afford to pay full freight, receives financial aid and also takes out loans to go to college, and a chunk of what he borrows goes toward financial aid to Student B. But Student B is doing the same! This is not only income redistribution, it’s mindless reallocation.

        As for the “need” — the taxation without representation argument — the criteria for college financial aid are already so skewed that it’s hard to imagine a worse penalty on the middle class family with children.

  2. Yup it’s wealth redistribution by an arm not authorized to do that. It’s also, as Helen Dragas identified, the cat chasing its tail, no end in sight. Missing is the pressure on public universities to control costs. “If we can’t raise ‘tuition,’ we’ll raise ‘fees,’ no matter that even ODU online students must cough up $1637 yet never enter the new Ballard Stadium.” We need Boards of Visitors who are trained to read budgets and willing to dissent at the table, we need legislators to exert limits, and mostly, we need Virginia families to say “enough, this doesn’t work.”

    • Can you imagine the outcry if the Secretary of Transportation instructed VDOT to look at every car’s Bluebook value as its inspection neared renewal. Low value cars would be assessed a low fee while high value cars would be assessed a higher fee. This is not a personal property tax approved by a Board of Supervisors. In fact, this tax has never been voted on by any elected body. It is just the whim of the Secretary of Transportation and VDOT. All done to “make driving affordable”. Meanwhile, of course, the cost to register a car is skyrocketing so that VDOT can have higher salaries, plush offices, private jets and a part ownership in a sports team.

      How would people react?

      There would be a hue and cry that this represented taxation without representation. People would rightly claim that the Secretary of Transportation has no right to levy taxes without a vote from the General Assembly and a signature by the Governor.

      Yet our useless General Assembly blithely looks the other way while unelected university administrators and the unelected political contributors who comprise the Boards of Visitors illegally levy taxes on Virginians as suits their whim.

  3. Yeah…. I’m going to respond to this: ” wealth redistribution by an arm not authorized to do that” and this ” Grandparents and parents rounded that out so that he could finish debt free. All of us scrimped in order to do it. ” and this: ” From each according to his means, to each according to his need”

    so what is “means-tested” financial aid – exactly – and where should the funding for it come from and who should be administering it?

    I do not know if Higher Ed is specifically “authorized” to essentially means-test financial aid AND to fund it as a direct transfer but it is “out there” and pretty much “expected” .

    And clearly and obviously – it’s not a standard across-the-board proposition with each individual School deciding how to do it and to what degree.

    I can see where there would be different views about this across the board, especially now days when people question the basic premise behind the progressive tax system, and things like earned income credits, and even programs like ObamaCare and MedicAid… ..

    But with higher ed – this is pretty much what you get if govt does get more involved in it – and the question is or perhaps ought to be: Do we want a more govt-sanctioned/imposed standard process?

    Would it be better for the government, for instance, to put strings on State Aid to go directly to students on a means-tested basis and prohibit the schools from using tuition to do that?

    As far as R&D is concerned – I’d advocate a State ban on any higher ed using one penny of tuition for Research. All of it should be funded from companies and select Fed govt/DOD grants.

    60 minutes had an interesting segment on MIT R&D which is totally self-supporting from the proceeds of it’s hundreds of patents…. no tuition at all is used for it.

    In my mind -that should be the standard for Higher Ed… and the interesting thing about this is how a person with Conservative values would approach this. Do we want more govt involved ? I just don’t see how any of this gets changed without the govt weighing in on it… and we already have a loud chorus of voices who say the govt is already too involved in rules for Higher Ed – 🙂

    I personally think State Aid should go to students – not the Universities. Let the students “shop” for the best College – with some protections so they do not squander it or get scammed… like has been the case with VA education voucher benefits.

    • You’re missing the point. I have no problem paying taxes that are the result of bills passed by the General Assembly and signed into law by the governor. If I don’t like the taxes I can oppose the GA members at the next election. Those taxes may be used to provide means tested financial aid to college and university students. Again, I’ll take out my frustration with the elected officials at the ballot box and (especially in Virginia) with campaign contributions.

      The issue is that charging one set of students more that it costs to educate them so the surplus can be used to supplement another set of students is a form of taxation. As such, it needs to be passed as a single purpose bill by the General Assembly and then signed into law by the governor.

    • “In my mind -that should be the standard for Higher Ed… and the interesting thing about this is how a person with Conservative values would approach this. Do we want more govt involved ? I just don’t see how any of this gets changed without the govt weighing in on it… and we already have a loud chorus of voices who say the govt is already too involved in rules for Higher Ed –”

      The government has already weighed in. It doesn’t cover all research costs, expects the universities to pick up part of the cost, which they in turn pass along to undergraduates who are running up debt, and to taxpayers, who must guarantee the debt.

      http://www.changinghighereducation.com/2016/08/the-high-cost-of-funded-research.html

      And expecting every college to be like MIT in science research is like expecting all basketball players to be like Lebron James. That isn’t much of a policy.

  4. WOW!

    Steve’s article here is fabulously informative. And he’s getting into the real red meat of real numbers telling us about what’s been going on and is going on, and has been hidden before.

    At long last we are being enabled to follow the money. Cheers to Mr. Anthony Maggio, too.

    Izzo, this is right down your alley. I’ll be posting more here too.

    But we are making real progress at long last, exposing the reality of what is really on in these institutions instead of accepting the political spin of those tasked to run them, but who hide what is really going on in Virginia’s public colleges and universities.

    And why can’t SCHEV make these presentations? I thought that this sort of presentation was their job? And their fiduciary duty to safeguard the public, and to protect all Virginia’s citizens?

    • I can only conclude that SCHEV, like many of the BsOV have lost their objectivity, with the institutional pull too strong to fight. SCHEV has shown little resolve to advocate for anything that doesn’t keep the charming and persuasive, hand-wringing administrators happy.

      As for Larrythe G’s comment, you’re right about the governance conundrum–more bureaucratic oversight is unlikely to yield a better outcome, and institutions will not siphon off themselves what is made available to them. The only lever left appears to be supply–drastically reduce student lending, let students shop for educational value using transparent metrics, and force the institutions to allocate their spending very carefully.

  5. Steve commented on the amount of debt being run up to fund the increase in financial aid. I think this point is worth clarifying. The schools that have moved closer to a high tuition/high aid model, W&M and UVA, actually have the graduates with the lowest debt. Schools with lower sticker prices, including VT, have graduates with higher debt. You can see this on both SCHEV and the government scorecard sites. While the high tuition/high aid approach is redistributive, it can reduce debt depending on how is executed.

    • A fair point, and one I’ve heard from those defending this practice. I do think UVA and W&M might have a more wealthy student body period and those figures might be there without this practice, but clearly that is the goal set by those who advocate this – truly lower the burden on lower middle and lower income, and even middle income cohorts depending on where they draw their lines.

      My points in response were usually 1) this just takes off the pressure to control costs, and that pressure needs to strengthen and 2) if need based financial aid is a societal goal (and it is) then the cost should be spread through the tax code and not concentrated on such a few families, wealthy as they are.

      • There are multiple motives to expand financial aid through higher tuition. One is, as noted, a desire to improve access and affordability (lower debt for lower and middle income students and families), but there may also be the desire to simply fill seats and increase applications, or to fill some of those seats with good students and applicants that are being enticed by generous financial aid from private schools. I saw yesterday that Rice University will offer full tuition scholarships students whose families have incomes between $65,000 and $130,000. Below that level, the Rice will also provide grants to cover students’ room and board, along with any other fees. Access is good, but it can generate a financial aid arms race, funded in part by income redistribution.

    • I think the photo at the top of Jim’s post says it all. Too much money. The government should get out of the student loan business, and a law should be passed requiring that a student’s tuition payment must be dedicated exclusively to the actual cost of educating that student, on the penalty of fraud if violated.

  6. I find it interesting that Anthony Maggio describes “tuition” increases being used to fund increases in financial aid. When he talks about research as a driver of cost increases, he says “education and general” (E&G) operating fund may be adversely impacted. I’m pretty sure tuition goes into E&G, but he appears not to have wanted to use the word tuition. Most people in academia try to avoid ever directly saying tuition funds research.

    • Maggio’s understanding of higher education, and how it works, is woefully lacking. Accordingly his opinions are flawed as Jim’s fine article suggests. I’ll return to this.

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