College & Workforce Readiness

Rising College Costs Spark Responses

By Sean Cavanagh — October 22, 2003 9 min read

Setting out along a path cluttered with rising tuition costs, larger college loans, and longer-lasting debts, high school seniors headed to a select group of universities next fall will secure the sort of relief that thousands of their peers can only dream about.

Two new college-affordability initiatives—one launched by a state, the other by a leading public university—will attempt to ease the impact of rising tuition costs and, according to their supporters, set an example for other state and campus leaders to follow.

The University of North Carolina at Chapel Hill announced a plan earlier this month to give freshmen from qualified low-income families enough financial aid to finish college free of debt. That effort has drawn inquiries from higher education leaders in at least a dozen states, one UNC official said last week.

A few months ago, Illinois lawmakers took a different tack: They passed a measure locking in tuition at freshman-level prices for each new class of students at the state’s public universities. The sponsor of that law hopes it will spark similar cost- control programs in other states.

Over the past year, concerns that students from poor and middle-income families are being priced out of college have increased among higher education advocates across the country—and in Washington, where members of Congress are debating proposals to make college more affordable.

Efforts to respond to those fears through tuition guarantees are nothing new; about a dozen private colleges are believed to have them in place already. Yet the North Carolina and Illinois initiatives are taking effect at a time of high student need and dwindling higher education budgets. They could hold appeal for policymakers in states facing similar pressures, their backers say.

For high school counselors such as Mary J. Towe, the appeal of the UNC plan, called the “Carolina Covenant,” is obvious. In more than a decade of working with students at Providence High School, in Charlotte, N.C., Ms. Towe has grown frustrated with stories of students forced to take semesters off from college to work, or to hold down 30- or 40-hour-a-week jobs while in school, just to get by.

“It’s discouraging to know a student who has the academic background, but might have to rethink going to school because of cost,” Ms. Towe said. “This [program] is a valuable opportunity that we’ll try to create some awareness about.”

Less Debt for Some Work

Today, in-state residents at the University of North Carolina at Chapel Hill, the state’s flagship campus, pay about $13,000 a year in tuition, fees, and other costs. While the school already provides 100 percent of the financial aid for students who qualify for it, one-third of that assistance typically comes in the form of loans, university officials say.

The Carolina Covenant seeks to rework that equation. Students would be eligible if their family incomes were not more than 150 percent of the federal poverty level: $18,000 for single parents with one child, or $28,000 for a family of four.

Under the program, qualified students entering in the fall of 2004 would be asked to work between 10 and 12 hours a week in on-campus jobs throughout their four-year college careers.

Many of those students already are eligible for federal student-aid programs, most notably Pell Grants, as well as for state-based aid. Under the covenant, the university would cover any of their remaining, unmet costs, through campus-based grants and scholarships. For most students, that unmet amount is between $3,000 and $4,000 a year, UNC officials estimate.

By paying those costs, the university would ensure that low-income students could graduate without any outstanding student loans. The program applies specifically to the state’s campus at Chapel Hill.

University leaders say the covenant represents a turn from the norm. Average student-loan debt nationally has almost doubled over the past decade, to $17,000, and about 20 percent of college students are working 35 or more hours a week, they say—pressures that force many undergraduates to drop out.

North Carolina hopes to counter the barrage of attention paid to rising college costs, said Shirley A. Ort, UNC’s assistant provost for scholarships and student aid. Despite climbing prices, higher education—particularly at public universities—remains affordable, even for students from modest backgrounds, Ms. Ort said.

About 38 percent of the nation’s undergraduates at four-year colleges pay less than $4,000 a year in tuition and fees; nearly 70 percent of them pay less than $8,000, according to national estimates. UNC officials want to make needy students aware of college options. This fall, about 8 percent of the university’s freshman class came from low-income households.

“This program was trying to get a simple message out,” Ms. Ort said. “If you make the grades, you can come here.”

State Shortfalls

The program will cost the university about $1.38 million a year when it is fully phased in, Ms. Ort said. The university’s efforts to cover unmet costs for students is made easier by the relatively large amount of need-based financial aid provided by the state of North Carolina, she said.

The impact of the Carolina Covenant could reach well beyond the state’s borders. College and university officials in at least 12 states have approached UNC with questions about the plan, said Ms. Ort, who declined to identify those schools.

Some of the interest, however, is undisguised. On Oct. 2, the day after the UNC announcement, University of Virginia President John T. Casteen III told other campus leaders that he wanted his institution to begin studying the Carolina model.

Other universities face increasing pressure to keep education affordable, under less-than-ideal circumstances. Across the country, institutions have seen their budgets slashed by cash- bereft state legislatures. To recoup that lost money, many schools have responded by raising prices.

Tuition at public, four-year institutions rose by an average of 10 percent from 2001-02 to 2002-03, according to a study released in February by the National Center on Public Policy and Higher Education, a research organization in San Jose, Calif. In many states, the price hikes were even sharper.

Those cost increases, in turn, have angered some state and federal policymakers, who have accused university officials of doing little to curb prices or improve their academic services, particularly for low- and middle-income students. As Congress begins its reauthorization of the federal Higher Education Act, Rep. Howard “Buck” McKeon, R-Calif., has suggested imposing federal penalties on institutions that fail to control prices.

The fiscal outlook doesn’t look much better for next year, said Travis J. Reindl, the director of state policy for the American Association of State Colleges and Universities, in Washington. Campus officials are expecting states to climb slowly out of the recent recession, he said.

“The common thinking is that it’s going to be a couple years, at least, before we have any stabilization,” Mr. Reindl said. “This is not just another swing in the [economic] pendulum.”

Illinois’ universities, and their students, have experienced those struggles. Funding for state universities fell by 7.7 percent, or $108 million, for fiscal 2004, while tuition for in-state students at four-year state universities rose by an average of 14.2 percent over that time period, according to the Illinois Board of Higher Education.

This past summer, the Illinois legislature responded by passing the “Truth in Tuition” law. Beginning next fall, the plan will freeze tuition for new students at the level they are charged as freshmen, at all nine of the state’s public four- year institutions.

The law allows each of those state institutions to set their own prices. Universities will most likely have to cover their rising expenses by raising tuition for each new freshman class—and then guarantee a freeze on prices for each of those classes, during the remainder of their undergraduate careers, said Chester S. Gardner, the vice president for academic affairs of the University of Illinois system. For example, if a university estimated its costs were rising by 5 percent a year, it might have to increase tuition on the next year’s freshman class by 13 percent, to cover its expenses over a four-year period, he said.

The sponsor of the law, state Rep. Kevin Joyce, a Democrat representing Chicago and suburban Cook County, predicted that price hikes would level off in subsequent years. The law would give families the ability to gauge future tuition and budget for it, which they cannot do now, he said.

“You buy a house, you know what you’re paying for it. You buy a car, you know what you’re paying for it,” Rep. Joyce said. “Education is an investment.”

Price Caps?

If universities do not keep those year-to-year increases reasonable, the legislature could impose stricter price caps, the Illinois lawmaker warned. Mr. Joyce said he hoped the Illinois law would help the state’s universities promote themselves to high school applicants—and spur institutions in other states to control costs.

“Our hope is that our border states will see this, and that it will create some competition,” he said.

The likelihood of that is unclear. Until recently, Rice University in Houston limited cost increases by linking its tuition to the consumer price index. Yet those price limits made budgeting difficult, and they cut into the amount of revenue available for financial aid and other programs, said Ann B. Wright, the university’s vice president for enrollment. Rice decided to drop the policy, beginning with next fall’s freshman class.

“We hoped other colleges would follow our lead on it, and they did not,” Ms. Wright said.

Tuition guarantees at the University of Charleston, a private college in West Virginia, have proved popular since the school began freezing tuition at freshman levels in 2001, Admissions Director Kimberly C. Scranage said. The school touts the program to parents, who say it makes their financial planning easier, she said. “It’s easier for me to market [the school] this way,” Ms. Scranage said.

In Illinois, high school seniors such as Mallorie N. Hejmej hope the Truth in Tuition law brings them the same kind of predictability in pricing.

The 17- year-old from Springfield has been accepted at her school of choice for next fall, the Southern Illinois University Carbondale, where tuition went up by 16 percent from 2002-03 to 2003-04. Tuition and fees now stand at $5,521, plus expenses.

The new law would let Ms. Hejmej and her parents plan for the financial sacrifices ahead, she said.

“We talk about it a lot,” said Ms. Hejmej, who attends Springfield High School. “It costs thousands of dollars now. Who knows what it’s going to be senior year? This [law] would probably save me at least a couple thousand dollars in the long run.”

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