Baby Carrots and Twigs

Yesterday, a key Congressional education committee took a groundbreaking albeit modest step on a top flight concern of parents and students ever escalating college tuition.

For years, the federal governments main role in higher education finance has been to bankroll student aid and research. Although there are exceptions, federal funds have come with few strings attached for colleges and universities. In the form of the College Opportunity and Affordability Act, the House education committee aims to take an important step toward changing this paradigm by using both carrots and sticks to get colleges to keep their tuition either flat or with modest increases.

The Carrots

Section 801 of the bill (page 536) authorizes rewards for schools who have kept their tuition either constant or in line with increases in a higher education price index for four consecutive academic years (one and a half years for schools that are not four-year institutions). Schools meeting this requirement would receive an unspecified amount of “bonus” money to be distributed among Pell Grant recipients and other low-income students.

In theory, these competitive grants sound like a great idea schools that keep their tuition increases low receive additional help that can go to their neediest students. Theres just one problem: the bill only authorizes, but does not actually appropriate money for the program, and any actual money is apt to be small. Absent substantial funding, it’s not an incentive as much as a reward. Still, it’s a step in the right direction.

The Sticks

Some of the sticks in the legislation, however, also have a disconnect between appearance and impact. One provision of the legislation (in Section 132) requires states to keep their own higher education funding at or above a five-year average. Failure to do so would result in a loss of matching federal grants for college access and persistence.

At first glance this maintenance of effort provision seems like a tough punishment states could lose a source of federal funding that is used to provide need-based aid and early notification of financial aid eligibility to low-income students. Theres just one problem: the grants the legislation threatens to take away do not actually exist yet! Just like the competitive grants discussed above, the grants for access and persistence are only authorized and an appropriation funding has never been provided.

One noteworthy stick especially worth supporting, however, is the inclusion of Higher Education Price Increase Watch Lists. Based on an index of higher education prices, which will be located on the Department of Educations College Navigator Web site, these lists will shine a spotlight on those colleges and universities that habitually raise their tuition and fees by large amounts. Coupled with required quality efficiency task forces designed to identify unnecessary sources of costs, these lists do hold some, albeit small, promise for reining in ever-rising tuition and fees. It’s a small promise, however, because already we know when individual colleges jack their listed tuition and we know how much listed tuition is rising overall nationally.

Helping Parents Plan

All of these carrots and sticks contain a common flaw: none do anything to help families plan for the cost of college. A retrospective look at cost is informative, but it does not tell families how much they can expect to pay in their childs four years of school. In contrast, truth-in-tuition proposals, which require multi-year college pricing schedules, would help families at least plan a little for costs that can jump 4 percent one year, 39 percent the next, and 14 percent the year after that.

If Congress is serious about providing actual incentives to keep college costs down it needs to put significant money behind the effort, and it needs to adopt some form of truth in tuition legislation. Truth in tuition helps families with both predicatability and planning. An entering freshman knows exactly what their education is going to cost over the next four years and so can budget accordingly. A college meanwhile, has to commit itself to a preset price schedule, giving it a reason to develop restrained budget spending plans. This approach has already been used in Illinois, while individual colleges, such as George Washington University, Baylor, Central Michigan University, and The University of Minnesota, have fixed four year tuition rates.

Despite the lack of truth in tuition and other flaws, we’re happy that Congress is taking active steps to both push and prod states and colleges to keep their tuition and fees from growing at unmanageable rates. Absent action, efforts to increase financial aid are too often and easily characterized as “pushing on a string” and thus undermined. Increases in federal financial aid are important, but unless Congress does more, record gains for students could easily be eaten up by the ever-rising cost of college. There are two sides to the college access and affordability financial picture student aid and price. They go hand in hand.