Transcript 2005613151149118

Tuition Fees and Student Financial
Assistance: Issues and Questions
D. Bruce Johnstone
International Conference on Higher Education
Finance: Cost -- Access -- Assistance
Wuhan PRC May 30-31, 2005
D. Bruce Johnstone
State 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 Policies
 Student 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
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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 & semiprivate tuition-dependent institutions
2. 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 & regular
5. “Depoliticization” of tuition fees
Cost sharing:
Critical Issues / Questions
A comprehensive program of costsharing – 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?
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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
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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
Critical Issue / Question #8
8. For Tuition Fees (and however they
are to vary), by whose / what authority
are they to be set and increased?
( government
 The
 The university management or board
 Some publicly established and
accountable entity (other than
government)
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 equitable
 The only way to protect low earning borrower
 Preferred by borrowers
 Features 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?
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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 subsidies
Or 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 loans
1. 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 Project
State University of New York at Buffalo