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Tuition Fees and Student Financial Assistance: Issues and
QuestionsD. Bruce Johnstone
International Conference on Higher Education Finance: Cost -- Access --
AssistanceWuhan PRC May 30-31, 2005
D. Bruce JohnstoneState University of New York at
Buffalo• Professor of Higher and Comparative Education;• Director Center for Comparative and Global
Studies in Education -- and of International Comparative Higher Education Finance and Accessibility Project
• Former Chancellor, State University of New York system , and President, State University of New York College at Buffalo
• Scholar of International Comparative Higher Education Finance:Cost-Sharing: Tuition Fee PoliciesStudent Assistance (Grants and Loans) Policies
The Principle of Higher Educational Cost-Sharing
Most countries perceive a need to supplement governmental / tax revenue
Cost-sharing (parents & students) is the most (potentially) lucrative and least disruptive
The dilemma: To maintain (even to increase?) participation and accessibility in face of rising tuition fees.
Costs of higher education shared by parents and
students• Tuition fees (costs of instruction)• Other fees technology, registration,
etc.)• Other privately-borne costs of H. Ed.• Paying for food and lodging• Other privately borne costs of living• Total private expenses
A shift in costs from taxpayer Government to parent /
student: 1. Increase reliance on private & semi-
private tuition-dependent institutions2. Charge, or sharply raise, tuition fees
Charge, or sharply raise, other “fees” (esp. lodging and food)
3. Reduce or ‘freeze” grants / other subsidies
4. Enhance loan recovery (increase interest, reduce defaults)
Opposition to Tuition Fees:[very different] Beliefs
That:1. All education should be paid for by taxes
Government revenue doesn’t have to come from taxes borne by ordinary citizens (not my taxes)
Government spending has no opportunity cost (I.e. no other public benefits foregone)
2. Tuition fees will limit accessibility of poor Theory aside, loans and grants do not work
3. New tuition fees will not go to universities But will go to waste or to corruption
4. Tuition fees part of bad “neo-liberal agenda Associated with WB painful structural adjustment
Equity Rationale for tuition Fees:
1. “Free” higher education in fact paid for by all citizens [not just business or the wealthy]
2. Incidence of most taxes (and all deficit financing) proportional or even regressive
3. Beneficiaries are disproportionately upper middle & upper class
4. Means-tested grants & loans can preserve reasonable access
5. Added revenue can go toward higher education quality and/or accessibility
The Political Acceptability of Tuition Fees Requires:
1. Means-tested financial assistance: effective and extensive grants and loans
2. Perception & reality of expanding participation and/or quality
3. Tuition clearly supplementing not supplanting tax-based revenue
4. Tuition increases modest & regular5. “Depoliticization” of tuition fees
Cost sharing: Critical Issues / QuestionsA comprehensive program of cost-sharing – that is tuition fees and other fees and all financial assistance (repayable and non-repayable, or loans and grants) requires addressing 15 issues / questions.There are many possible answers – but each must be addressed.
Critical Issue / Question #1
1. Should parents and students (to the limit of their financial ability) share in paying for some of the costs of instruction”
(That is, should there be there be tuition fees expected in most cases?)
Critical Issue / Question #2
2. If there are to be tuition fees, should they be expected from all or most students—or only some students?
(that is, only those “privately sponsored” students who score below the “cut-off” point on the national admissions examination– as in Russia, and in China pre-1997)
Critical Issue / Question #3
3. If there are to be tuition fees, shall they be charged mainly:(a) up front – from parents (at least
from those who can pay), or(b) deferred (via loans or “graduate taxes) -- from students?
[Mainly a European issue]
Critical Issue / Question #4(combines elements of #2 and #3)
4. How transparent or forthright should the tuition fees be (as opposed to: Tuition fees only for those not entitled
to the state-sponsored places Mandatory Fees only (for registration,
computing,sports, etc.) Deferred obligations repayable (with
interest) only Income contingently: (Australia, Scotland, rest of UK)
Critical Issue / Question #5
5. For Tuition Fees: What should be the approximate percent of undergraduate operating costs to be covered at the outset -- i.e. the approximate ratio of tuition fee to the per-student instructional cost?
No tuition fee 0 % Nominal > 10% Low 10-20% Moderate 20-35% High >40%
Critical Issue / Question #6
6. For any Tuition Fees: How do, and or how should they vary -- by:
The academic ability of entering student? Cost of academic program? Level [Baccalaureate, masters, etc]? Expected earnings of graduates (by the
likely varying ability to repay student loans)? Market demand? No variance: all fees should be the same
Critical Issue / Question #7
7. How should tuition Fees increase over time? That is:
Not at all or as little as possible? With the rate of inflation? With the rate of increase of underlying
per-students operating costs Whatever it takes to fill the gap from
declining tax revenues Whatever politics determines
8. For Tuition Fees (and however they are to vary), by whose / what authority are they to be set and increased?
The government The university management or
board Some publicly established and
accountable entity (other than government)
Critical Issue / Question #8
(
Critical Issue / Question #9(begin consideration of student
loans)9. If there are to be loans or some
form of deferred contributions, how is the basic repayment obligation to be expressed?
a fixed schedule of repayments at a rate of interest (fixed or variable) conventional
some percent of annual earnings of borrower (i.e. income contingent) until repay at some rate of interest)
hybrid fixed schedule with payments limited to maximum percent of income
Income contingency itself mistakenly thought always to
be:Cheaper than fixed-schedule Collected by employer (withholding tax)Better for lender (government)More equitableThe only way to protect low earning
borrowerPreferred by borrowersFeatures can be applied to income
contingent or fixed-schedule loans
Critical Issue / Question #10
10.If there are to be generally available loans, who/what is to bear the risk of non repayment?
Banks [prohibitive interest rates] Co-signatories [equity issue] Other borrowers (that is, mutualized
income contingent] The government
Critical Issue / Question #11
11.If there are to be generally available loans, how subsidized (by the taxpayer) should they be?
Not at all (market sets rate) Minimally (government’s borrowing rate), More subsidized – inflation, or zero real rate Heavily subsidized (minimal recovery)
Applies to Fixed Schedule or income contingent
Critical Issue / Question #12
12.What should be the form of subsidies: As between: direct grants and the effective grants of loan subsidiesOr between:
smaller subsidies for all or larger targeted subsidies for some
For loans, between subsidies based on: parent’s low income when borrowing, borrower’s own low income when repaying
Varieties of the effective grants embedded in student
loans1. Effective grants in form of up-front loan
interest subsidy based on parents’ low income
2. Effective grants in form of debt forgiveness based low lifetime income (income contingent)
3. Effective grants in form of debt reduction for academic merit
4. Effective grants in form of debt reduction based on post graduate practice and venue
Critical Issue / Question #13
5. If there are to be generally available loans, how should payments be made:
By borrower (e.g. monthly payments) By employer (deduction from wage) Base or default obligation by borrower with
employer payment as option
Applies to Fixed Schedule or income contingent
Critical Issue / Question #14
14.What are the effects of this total cost-sharing package –tuition fees minus grants and loans--on, e.g.:
Aspiration and school preparation Participation (including by ethnicity, socio-
economic class, gender, etc.) Persistence and outcomes ( Manpower needs of economy Other needs of state and civic society (e.g.
culture)
Critical Issue / Question #15(Or better thought of as #1)
15.What are the public aims (prioritized) of this total cost-sharing package (fees plus all forms of student assistance) e. Accessibility and maximum participation Greater equality of outcomes & diminishing
intergenerational transmission of status Manpower Development / needs of economy Cost-sharing to lessen reliance on public
treasury: the neo-liberal economic agenda
Conclusion
Must consider all of the elements of cost-sharing--tuition fees, other fees, grants, other forms of “discounting,” availability of loans, terms of loans, availability of part-time employment, etc—together ,
and assess the cost-effective meeting of the state’s aims
~The end~
The International Comparative Higher Education Finance and
Accessibility ProjectState University of New York at
Buffalo