Demonizing State Universities

Well, maybe that is an exaggeration, but a New York Times piece on higher ed quotes a lot of people who are furious that their state U is taking more and more out of state students. This is rapidly becoming one of those “as you sow, so shall you reap” kind of stories.

Let’s start with the cost of going to college.  Here is what the CollegeBoard found for in-state students attending 4-year public universities:


Published and net costs in constant 2015 dollars for in-state students attending a public 4-year college.  Source: College Board

OK, over the last 20 years published fees have about doubled while the net cost has only gone up about 60% in constant dollars.  [There is an interesting story lurking in the increase in the cost eaten by room and board, but let’s save that for another day]. But many might look at this and say “wow–what a deal!”.  And indeed it is:


Published and net costs for attending a private, not-for-profit 4-year college.  Source: CollegeBoard.

So going to a private school the net cost is more than triple a state university. Now private schools didn’t have their net costs rise nearly so much as state schools, and in fact their net costs dropped in the Great Recession for quite awhile while state schools’ costs rose. The obvious reason was that states were pulling back from funding higher education.

We here in Colorado are familiar with this kind of math.  Although the CollegeBoard doesn’t track out of state tuition the same way, they do plot up the current out-of-state rates and compare them to in-state; not surprisingly, out of state rates are pretty much in line with private universities.

Awhile back, GG did the math comparing the University of Wisconsin at Madison, which was being told to face a big budget cut, and CU Boulder. Of the difference between in-state and out-of-state tuition, only a quarter of the difference was covered by the state of Colorado while all of the difference in Wisconsin was made up by state monies sent to the university.  In essence, the state of Wisconsin subsidized education of its students and those who came from out of state simply paid full freight.  In contrast, in Colorado, out of state students are paying more than full freight and supporting the in state students.  Put another way, if CU went private and set a single tuition and took no state money, the tuition for out of state students would drop considerably. If a year and a half ago, when GG did the math, Wisconsin did the same thing, their out of state cost would stay exactly the same.

When the rug was pulled out from under the University of California in the Great recession, they lost about 2/3 of the money they had gotten from the state. (Nationwide, state support per student has dropped a third since 2000, and eleven states–including Colorado–were paying more to run prisons than universities). UC had a very low out-of-state student fraction. At the same time, there was tremendous pressure to limit the rise in tuition (which was pretty steep as it was).  UC did what CU had already been doing for years: balancing the books on the backs of the out of state students. So tuition went up, but not nearly to the level out of state students would pay. Most public schools were already charging out of state rates near that of private schools, so they couldn’t get much by increasing those tuitions more than the private schools, so the only variable left was the fraction of the student body paying out of state tuition.

What the Times article is essentially reporting is that this dropped a bunch of state schools that had been focused on serving their state’s population into the cauldron of competition for out of state students.  And not just any out of state students, but those who could afford to pay top dollar, which can mean that upgrading dorms becomes a high priority. And as we considered recently, when you are competing for students, you will do things like offering merit-based scholarships that, arguably, might be steering your available scholarship money away from financially needy students to those who can afford to pay full freight.

Of course, the Times also focused on the UC system, which has a special cross to bear.  For many years the university’s overall capacity grew more slowly than the state’s population; this gap accelerated when UC Merced went on the back burner awhile back. So it was always going to get harder to get into the UC system with time; toss in this recent shift to use classroom seat space to make money and you can see how anger could emerge.

And so it is that state legislatures and the public need to decide what they want.  If they want universities that serve their states by offering a low-cost education, then they are going to have to fund that mandate as they did years ago. They can, of course, see about limiting the number of out of state students (as Colorado does) and they can choose to limit how much they will send to the university and they can demand a cap on tuition costs, but such cost limiting steps can backfire.  Most flagship universities are research schools, and research schools bring in more money to the state.  Start chopping faculty pay enough and your research school will suddenly become non-competitive.

States could also say, it is time to get out of the university game and cut the cord.  Frankly, many state schools would be delighted to go private. States could then focus what money they have on community colleges.

But when you demand low taxes, and you demand low tuition, and you demand the students be in state, you are demanding a lower quality school. Just so you know, before you have buyer’s remorse about such a deal.

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