Tuition “Freezes” Really Aren’t Freezes in a Deflationary Economy

by James A. Bacon

Wow, the James Madison University board of visitors voted Friday to keep tuition charges flat for in-state and out-of state students. The action follows decisions by the College of William & Mary, Virginia Commonwealth University and Christopher Newport University to freeze tuition and fees next academic year.

“The action taken today by the board of visitors is reflective of the care we have at JMU for our students and families, many of whom are facing financial hardship in the face of the COVID-19 crisis,” said JMU President Jonathan Alger in a statement. “This decision is yet another way in which we will continue to support students in that endeavor and help ensure access to learning.”

Yeah, right. Meanwhile, JMU will increase its mandatory fees by $124 next academic year, and jack up room & board by $384 — more than $500 — reports the Richmond Times-Dispatch. In related news, the U.S. Commerce Department announced that personal incomes fell nationally by 2% in March, when the effects of the COVID-19 epidemic were being felt. Incomes likely lost even more ground in April as jobless claims accelerated. Many economists are warning of a deflationary economy, in which overall prices decline, which would mean that holding tuition, fees, room and board steady is the monetary equivalent of a price increase.

The non-tuition increases, said JMU in a press release, “are necessary to cover cost factors such as operating costs and contractual obligations, debt service obligations, for new facilities, and student services.

Meanwhile, Virginia families also have to cover cost factors such as operating costs (food, utilities, health care), contractual obligations (alimony and child support payments), and debt service obligations (mortgages, car payments, student loans, and credit cards).

University boards are worried that closing campuses and finishing classes by going online might cause parents to hesitate about enrolling or re-enrolling their kids next year. Resistance to the ever-escalating cost of higher-ed had been growing even before the virus, although the impact was felt mainly by small private institutions that didn’t benefit from hefty state subsidies and financial aid. But there are few signs that many Virginia institutions are taking precautionary measures in case enrollments and revenue head south.

Google searches reveals that Longwood University has cut pay for faculty and staff from 5.7% to 7%, with senior university leaders taking a 15% haircut. The top brass at the University of Virginia as well as the athletic director and several coaches are taking pay cuts as well. That’s all I found. (If readers know of other cases, please let me know and I will update this post.)

Here’s what businesses in the non-protected part of the economy do when they encounter an unprecedented situation like the COVID-19 epidemic: They find ways to cut costs. Cost cutting may include such tried-and-true short-term measures such as restricting travel, entertainment and out-of-town conferences (not a hard decision to make under the current circumstances). Or it may include laying off employees, attacking administrative expenses, shutting down money-losing or marginal product lines, and investing in productivity-enhancing devices. Nothing like that has made it into the headlines. That’s not to say it’s not happening behind the scenes, but if it were, you’d think high-ed institutions would be bragging about it.

The proper way to understand the organizational behavior of nonprofit higher-ed institutions is that they are operated for the benefit of powerful internal constituencies such as administrators and tenured faculty, not the students. It’s that simple.

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14 responses to “Tuition “Freezes” Really Aren’t Freezes in a Deflationary Economy

  1. So.. California State University looks like this:

    “All students enrolled at a CSU campus pay the same systemwide tuition fee, which is currently $5,742 per academic year for undergraduate students enrolling in more than six units per term and $3,330 for undergraduates enrolling in six or fewer units.​​​

    The 2020-21 tuition fee for students enrolled in a postbaccalaureate teacher preparation program for a multiple subject, single subject, or special education credential is $6,660 for students enrolled in more than six units and $3,864 for students taking six or fewer units.

    Students enrolled in a graduate or another postbaccalaureate program will pay a tuition fee of $7,176 for more than six units and $4,164 for six or fewer units.”

    If Virginia did what California has done or North Carolina has with it’s state system ($8,987), then at least most Virginians would have some alternative and the others could just do whatever they’re going to do.

    I think the Universities which say they are planning on on-campus operation are blowing smoke. California State, to their credit , just came right out and said it was a no-go – they can still change their minds if things look better but at least they were up front and honest with their prospective student enrollees.

  2. Deflationary economy? I thought you reported a trip to Kroger yesterday. Prices are up. In Target today there were many items where no price was visible – you need it, so don’t ask!

  3. Today was a marked decrease of people walking in the park. Still a fair number but not the crush that we were seeing a week or two ago.

    LOTS of traffic. A LOT of people are out and about!

  4. Graduations, Campus Classes Canceled by Coronavirus Shock College-Town Economy

    Blacksburg, home to Virginia Tech, ‘couldn’t have imagined’ crisis that shut down university

    Virginia Tech is responsible for more than half of Blacksburg’s economy, generating about $1.2 billion in annual income, according to Anna Brown, a researcher at Emsi, a provider of labor-market analytics. One of every two jobs is supported by the university, its students and visitors, according to Emsi estimates.

    As of January, the university had 9,742 employees, including full-time and part-time faculty, staff and wage workers, a university spokesman said.

    https://www.wsj.com/articles/graduations-campus-classes-canceled-by-coronavirus-shock-college-town-economy-11589707800?mod=hp_lead_pos9

  5. Higher ed can’t win on this blog. If they increase tuition, they get slammed. If they don’t raise tuition, they still get criticized. In fact, because the additional state funding that was the carrot for freezing tuition is gone, I expected them to raise tuition.

    • Proof that higher education failed someone, no?

      • Of course! And it’s gradually trended that way since many on this blog graduated from higher ed way back when it was cheap and “good”.

        Now, it’s become a bunch of rent-seeking leftists ripping folks off…, promoting immoral behaviors and many other various nefarious corruptions and outrages…

        A more complete bill of particulars is often provided at the drop of a hat… from the usual suspects here!

        😉

  6. Still looks like Virginia 529 is a good thing as a grandparent to help out, when the time comes. I try to put some bucks in there each year for each grandkid, and we get a tax deduction from Virginia. Being super conservative I have started out in a Stable Value Funds, which is probably working out well right about now.

    The one thing I would request Bacon’s Rebellion to work on, it would be nice if we could make the year’s donation up to the tax due time (end April). That way we know if we can afford it after taxes etc. Some states do this.

    • That sounds like a non-controversial, beneficial piece of legislation that some Delegate or Senate should be willing to introduce. Most legislators will consider ideas like this from a constituent. He or she would be even more open to the idea if you could provide a list of states that do it.

    • “Grandparent-owned 529 plans are treated differently than parent-owned 529 plans when completing the FAFSA (Free Application for Student Aid). Distributions made from a grandparent-owned 529 plan are considered income to the student.”

      Assuming you have funds to burn, and your child is willing, giving your child money to fund a 529 owned by them may be better since it is not considered income to the grandkids. Better still, help your kid fund their retirement IRAs. Then they’ll have money to help the kids.

      Since anyone can pay tuition for anyone, you may want to wait, and help by paying tuition and use the American Opportunity Credit.

      When money skips generations, Uncle Sugar gets very inventive at collecting taxes.

  7. Dick says:
    “Higher ed can’t win on this blog. If they increase tuition, they get slammed. If they don’t raise tuition, they still get criticized. In fact, because the additional state funding that was the carrot for freezing tuition is gone, I expected them to raise tuition.”

    Here I agree totally with the thrust, tone and slant, of Jim’s Post. In my view JMU’s freezing of tuition while it increases “its mandatory fees by $124 next academic year, and jack up room & board by $384 — more than $50o” is more of an insult and testament to JMU’s institutional arrogance, than any sign of institutional good will to its customers (students, their families, & taxpayers).

    JMU needs an attitude readjustment. One that reflects the reality of the new world that its customers, and the institution itself, lives in.

    JMU needs to immediately start stripping out its bloat, its waste, and its non essential costs. Likely too, its current leadership should go, given their apparent ignorance of the new world they live in, and their apparent inability to made the changes necessary to lead the institution in that world, one where close to 40 million Americans have lost their jobs, and the Nation is losing $Trillions quarterly, and likely monthly at the rate it is now going.

    • Everyone should read this article Don linked in. It shows have far Virginia’s public colleges and university have to go to get lean after so many years of living high on the hog, despite their protections. And I suspect the teaching at Purdue is far effective as well, if only because teaching is a respected profession at Purdue, as opposed to many other universities, including UVA, where teaching students is lowest status a professor can have, one that typically guarantees no promotion up the latter into tenure, or anything else admired or giving security or respect there either.

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