Public flagship universities appear to have become less affordable over the past five years to the very people they were created to serve — the residents of their home states.
Affordability at public colleges depends on two factors: the price, which is itself partly a function of state support, and students’ ability to pay it. And as this Chronicle analysis shows, in nearly four out of five states, the average net price of the flagship university now makes up a greater proportion of the median household income for state residents than it did five years earlier. Put another way, the average net price at flagships increased at a far faster pace than did median household incomes.
You can plainly see that in this simple chart. Or, maybe not so simple, so stick with us for the full breakdown of the findings.
Source: U.S. Census Bureau’s Current Population Survey and U.S. Department of Education’s IPEDS
The Chronicle undertook this broad-brush and admittedly wonky analysis in response to experts who have noted the importance of measuring public-college affordability in the context of individual states, because states differ not only in their approach to tuition, financial aid, and state support, but also in income levels.
We looked at the net price of the flagship institution relative to median family income in each state because we wanted to consider affordability from the vantage of families whose incomes stagnated — or worse, fell — during the Great Recession, which hit hardest beginning in 2009.
As a matter of public policy, “universities should be priced according to what people can pay rather than what institutions spend,” says Arthur M. Hauptman, an independent consultant who writes frequently on college finance.
Our analysis is in no way comprehensive or conclusive. (Mr. Hauptman, for one, takes issue with our use of net prices rather than sticker prices.)
Still, state higher-education policy experts like David A. Longanecker say a measurement that compares college prices with incomes, rather than with say, inflation, make sense. “It captures what families have to pay for college rather than what colleges want to charge,” he says.
And if the findings show that costs are out of whack, adds Mr. Longanecker, who is president of the Western Interstate Commission for Higher Education and a former top official at the U.S. Department of Education, “it is incumbent on policy makers to ask why. I think it is important for states to think about, and maybe have a threshold.”
The analysis shows that in 29 states, the change in that all-important ratio of net price to income grew because the median household incomes declined at the same time net prices at the universities rose. You can see that represented by the dots in the upper left quadrant of this scatter-plot chart.
Incomes Down, Net Price Up in 29 States
The combination of rising net prices and falling incomes hit hardest at the University of Oklahoma, the institution that also recorded a 39.9-percent increase in its net price between 2008-9 and 2012-13 — the largest of any of the flagships. At the same time, median household income in Oklahoma fell by 12.1 percent. The university’s net price as a share of income increased by 14.3 percentage points over the five years.
The University of Alabama at Tuscaloosa was also notable. There, the average net price increased by 26.2 percent between 2008-9 and 2012-13, while the state’s median income fell by 4.7 percent. In 2012-13 the net price represented 46 percent of median income, the highest of all states. The increase in this ratio over the five years was the second highest; it increased by 11.3 percentage points.
The average net price is what students pay after federal, state, and institutional grant aid is taken into account. It is calculated based on all full-time beginning students who pay in-state tuition and — importantly — receive grant or scholarship aid, but not those who pay full price.
The dot representing the University of Florida shows that net prices increased by 37 percent even as the median household income in the state fell by 3.4 percent.
The 2008-9 net price of $11,025 (in January 2013 inflation-adjusted dollars) at the University of Florida was equal to about 22 percent of the state’s median income that year; by 2012-13, the net price of $15,157 was equal to nearly 32 percent, an increase of 9.45 percentage points.
For all 50 flagships (we got the list of flagships from the College Board but used net price numbers from the federal Integrated Postsecondary Education Data System, or IPEDS) net price was equal to 26.3 percent of the median national income in 2008-9. By 2012-13, it had grown to 29.1 percent.
But looking at national statistics obscures the very real differences that students and families face depending on which state they live in and which flagship institution they want to attend.
For example, the net price at the University of New Hampshire of $21,545, in a state where the median household income was over $71,000 in 2013, would sting a lot more if that’s actually what it cost at, say, Louisiana State University, where the state’s median household income was $39,622. (For the record, the net price at LSU was actually $12,882.)
Louisiana’s median income fell by more than 19 percent over the five-year period while the net price to attend LSU increased by a little more than 8 percent. Over the five-year period, the net price as a proportion of median income at LSU went from 24.2 percent to 32.5 percent, an increase of 8.3 percentage points.
In Nevada, another state where median income declined precipitously during the five years, the average net price at the University of Nevada at Reno increased by 4.6 percent. But because of the declines in income, the average net price as a share of income increased from 26.4 percent to 34 percent.
The period studied deliberately includes the years of the Great Recession, when household incomes suffered, so that the analysis could partially reflect how states and institutions responded. (A table showing 2013-14 net prices and the share of median income they represent can be found below this article.)
The University of North Carolina at Chapel Hill also had a large increase in net price relative to median household income from 2008-9 to 2012-13: It increased by nearly nine percentage points. (Again, on a nationwide basis the average change for this was 2.8 percentage points.)
But while Chapel Hill showed a significant increase on this measurement over the five-year period, officials there note that it still remains relatively affordable because its net price started out a lot lower.
Indeed even with an increase in net price of more than 30 percent over the five years and a 9.5-percent decline in household income in North Carolina, in 2012-13 Chapel Hill’s net price amounted to 29.1 percent of median household income. Recall that nationwide, net price as a proportion of state median income averaged 29.1 percent for all flagships. So even with that change, by this measure Chapel Hill still ended up being right at the average.
Chapel Hill officials said that they have actually increased spending on financial aid over the past five years to include more students, and that as a result, an analysis based on its average federal “net price” figures doesn’t do the institution justice. The university began offering financial aid to a greater number of students, and its financial-aid spending went from $51-million a year in 2008-9 to $91-million in 2012-13, according to data the university supplied. Some of that money was in the form of small awards to students who had not previously been receiving any aid at all, according to Shirley A. Ort, associate provost and director of scholarships and student aid.
Because of the way the net-price figure is calculated in the federal database, “it causes us to look like we’re not doing nearly what we’re doing,” says Ms. Ort. Had the university not increased the number of students receiving relatively small financial-aid awards, its overall average net price would have been lower. (The federal formula calculates net price only for students receiving financial aid, so as more students get added into the calculation the overall average net price could come out higher.)
Incomes Up, Net Price Up in 14 States
In 14 other states median incomes rose, but net prices did too. That’s visible on the top-right quadrant of the scatter plot. But for some the increases in net prices outpaced the increases in income. One example of that came at the University of Georgia, where the median income increased by barely 1 percent but the average net price increased by nearly 29 percent. In South Dakota, the median income increased by 9.4 percent, and the average net price at the state’s flagship increased by just over 4 percent.
For Georgia, the share of median income represented by the net price went from about 21 percent in 2008-9 to 27 percent in 2012-13. But for the University of South Dakota, rising levels of income more than made up for the increases in net price; there the net price as a proportion of the median household income actually declined by more than one percentage point.
Incomes Down, Net Price Down in 4 States
In four states, both the average net price at flagships and the median household incomes fell: Alaska, Michigan, New Mexico, and Ohio. But in some cases, incomes fell at a faster rate than net prices. At Ohio State University, for example, the average net price represented 36.2 percent of household income in 2008-9 but about 37.5 percent in 2012-13.
The best combination of circumstances for families — median incomes up and average net prices down — was found in three states: Idaho, Montana, and Texas.
Incomes Up, Net Price Down in 3 States
In an ideal world, states concerned about the affordability of their public colleges would find a way to keep them affordable to families during economic downturns. While it’s true that such an effort would be difficult to achieve because state finances would also be affected by the downturn, it appears that most states didn’t manage to stave off the effects. What’s worse, according to Dennis P. Jones, an expert on college finance, “I don’t think there has been any attempt to do so in most states.”
Until states develop pricing policies specifically tied to affordability, families will get squeezed when the economy declines, says Mr. Jones, president of the National Center for Higher Education Management Systems, a nonprofit consulting organization. “When state appropriations go down, there’s a strong pressure for tuition to go up,” says Mr. Jones. The same economic factors drag down income levels of families, he notes, but families “still have to pay more.”
His formula for a holistic approach to affordability: States should consider appropriations, tuition, and financial aid, along with the savings they might achieve from increased productivity at colleges, and then “put all those factors in the mix” to determine what combination does the best job of maintaining affordability for both families and the state.
A Florida higher-education leader, Marshall Criser III, said his state is doing just that. In November, the Board of Governors of the State University System of Florida began re-evaluating the system’s approach to funding with a particular aim of increasing college affordability for families making $40,000 to $100,000 a year. “The old mantra would have been to look at where tuition was relative to other states,” said Mr. Criser, the system’s chancellor. But now he said, officials will look at tuition relative to state appropriations and financial aid.
Mr. Criser said the attention is being driven by the affordability push coming from Gov. Rick Scott, a Republican who came into office in 2011 and who was just re-elected.
Considering the price of college in the context of what families can afford, says Mr. Criser, is “the right conversation to have.”
The Limits of Our Analysis
This kind of analysis is far from perfect. Here are some of the issues that we recognized and that others brought to our attention:
Net price is an imprecise measure.
As the folks at Chapel Hill were quick to note, one problem comes from relying on the federal net-price figure. It can “punish” colleges when they give more students modest amounts of financial aid. Mr. Hauptman took issue with using it for another reason: Since it takes into account the value of federal Pell Grants, he says using the net-price figure in effect gives colleges and states credit for reducing costs when it is actually the federal taxpayers providing that aid.
We chose to use the net-price figures for the basis of this analysis, however, because we wanted to acknowledge that the sticker price isn’t necessarily what students would be paying, particularly since we were keying this to median-family incomes, and many families earning the median income would qualify for financial aid. Besides, the federal government is highlighting net price as an important metric for families to consider.
Averages and medians can be misleading.
Even as we tried to home in on issues by using a state-by-state focus, some experts questioned our use of average figures for net price and median figures for household income. They argued that since many colleges focus more of their financial aid on the financially neediest families, a fairer approach would have been to look only at net-price figures for the lowest-income students. (That data is also available in IPEDS.)
We chose the average net price because we felt it was most consonant with our use of the median family income data. Mr. Longanecker said that the use of averages could also hide efforts universities have made. “Perhaps they are maintaining access for the most needy students,” he says. One way to tell that is to look at enrollment of students who qualify for Pell Grants. Indeed over the past five years, in each of the five states where the net price relative to income increased the most, the flagships also increased their proportion of students needy enough to receive Pell Grants. But it is also true that eligibility for Pell Grants expanded nationwide during this period, so most colleges would have seen an increase in students receiving such grants.
Using flagships can distort the picture.
The student population at flagships tends to be wealthier on average than the college population as a whole. That’s because those institutions are the most selective, and upper-income students often have better opportunities to prepare for college. Some officials we talked to noted that some of the other public colleges in the states might have managed to remain more affordable than the flagships. And, they note, there is a good argument for flagships’ increasing their tuition because there is high demand for them. In many cases, says Mr. Longanecker, “these are institutions that by market principles, were underpriced.”
We chose to look at flagships because it gave us a clearly defined universe that could be more readily presented within the confines of a news article, rather than a dissertation. And they are arguably the most prominent institutions in each state and largely represent the most prestigious public-college choice for students.
Goldie Blumenstyk writes about the intersection of business and higher education. Check out www.goldieblumenstyk.com for information on her new book about the higher-education crisis; follow her on Twitter @GoldieStandard; or email her at goldie@chronicle.com.
Lance Lambert writes about data and trends in higher education. You can follow him on Twitter @NewsLambert, or write to him at lance.lambert@chronicle.com.
Beckie Supiano writes about college affordability, the job market for new graduates, and professional schools, among other things. Follow her on Twitter @becksup, or drop her a line at beckie.supiano@chronicle.com.
Correction (4/2/2015, 5:30 p.m.): Earlier versions of this article used data from three institutions that are not flagships: the University of Alabama at Birmingham instead of the University of Alabama at Tuscaloosa, Buffalo State College instead of the University at Buffalo, and Oklahoma State University rather than the University of Oklahoma. Based on our revised analysis, the University of Oklahoma was the flagship that became the least affordable over the past five years. The article, table, and scatter-plot charts have been updated to reflect these corrections.