Congress’s Cost Cure May Have Side Effects

As more and more families worry about the rising cost of a college education, members of Congress believe they have found a way to press institutions to rein in their tuition: federal watch lists.

Their plan, which is included in legislation to renew the Higher Education Act that the House of Representatives will debate this week, would require the Education Department to publish on its Web site and on paper a list of institutions whose tuition and fees outpaced their sectors’ average. The list would be updated annually to reflect fluctuations in pricing.

The thinking behind the list concept is simple: Expose colleges with excessive tuition increases, and they’ll take steps to curb their costs. College lobbyists call it a “wall of shame” approach.

Supporters say the lists would hold colleges accountable for rapidly escalating tuition and enable consumers to compare colleges based on price.

But critics of the approach say it would do more harm than good, punishing many low-priced institutions while leaving some of the nation’s most-expensive colleges off the hook.

To gauge the plan’s potential ramifications, The Chronicle analyzed how Massachusetts — the home state of Sen. Edward M. Kennedy, a Democrat and one of the plan’s chief proponents — would have fared if the list had existed last year. The results suggest that colleges that would land on the list are not necessarily those with the highest tuitions or the steepest price increases.

In the 2006-7 academic year, the average percentage increase for private colleges was 5.9 percent. The state’s most-expensive private institution, Simon’s Rock College of Bard, which increased its tuition by $1,420, or 4.4 percent, to $34,804, would not have made the list. But the state’s cheapest four-year private institution, Boston Baptist College, which increased its tuition by 12.9 percent, or $943, to $8,277, that year, would have been listed.

Similar dynamics would play out across the country.

In New York, Canisius College (where tuition was $24,857 in 2006-7) would have been on the list, but Cornell University (where it was $32,981) would not have been. In California, Point Loma Nazarene University (with a tuition of $21,620) would have made the list, but Pepperdine University (where the price was $32,650) would not have. Concordia College at Moorhead, in Minnesota, (whose tuition was $20,980), would have been on the list, but Carleton College (where the price was $34,272) would have been safe.

Critics of the watch list say such findings point to the flaws of comparing institutions by percentage increases (the Senate bill would also rank institutions by dollar increases). Increases of the same dollar amount at different institutions would yield a higher percentage jump at the lower-priced colleges and often land the cheaper institutions on the watch list before their higher-priced peers. They also say the plan is unfair to public colleges, which are often forced to raise their tuition when state appropriations drop.

The critics warn that the lists could scare low-income students away from colleges that may actually be affordable.

“If you’re put on that watch list, people won’t read beneath the surface and say ‘What kind of financial aid does that school offer?’” says R. Judson Carlberg, president of Gordon College, a small Christian institution in Massachusetts that would have made the list.

The college raised its tuition by $1,354, or 5.91 percent, in 2006-7 but provided its students with an average of $9,000 in institutional grant aid. “They won’t bother applying anymore.”

Carrots and Sticks

Federal lawmakers have been looking for a lever to control rising tuition since at least 2005. That year Rep. Howard P. (Buck) McKeon, a Republican from California who was then chairman of the House higher-education subcommittee, proposed withholding federal student aid from colleges that consistently failed to curb their tuition increases.

The plan provoked an uproar among college lobbyists, who said it would penalize low-income students, and Republican lawmakers quickly replaced the threat of lost aid with the threat of a government audit. Subsequent versions of the proposal softened the sanctions still further.

The latest proposals from Congressional Democrats take a less-punitive, “carrot and stick” approach, offering colleges rewards as well as sanctions. Under the House version of the bill, colleges that limited tuition increases or that froze tuition for each incoming cohort of students would be given extra Pell Grant aid for their students. Colleges that landed on the list would be required to establish committees to identify “cost-reduction opportunities.” (The Senate’s version of the bill does not contain the Pell incentives, but it does not contain as many penalties, either).

The House bill also acknowledges the role that state appropriations play in pricing decisions. Under the bill, states that reduce their appropriations to colleges below the previous year’s level, or a rolling five-year average, would be denied federal Leveraging Education Assistance Partnership grants, which match each dollar that states commit to need-based aid.

That provision could be a boon to colleges in Massachusetts, where appropriations for higher education have lagged behind those in other states, according to the Center for the Study of Education Policy at Illinois State University. Over the past 10 years, the Massachusetts legislature has raised its spending on higher education by a total of only 13.7 percent; only Michigan and Colorado have done worse.

But college presidents in Massachusetts and elsewhere still object to the overall plan, saying it would force them to make cuts that would compromise academic quality and ultimately hurt the financially needy students Congress hopes to help.

Some presidents say one of the first places they would have to look for cuts would be in institutional student aid, since that is one of their fastest-growing expenses and one of the easiest to control.

Other administrators say they would have to cut library acquisitions, replace full-time faculty members with part-time adjuncts, and seek out more full-paying students, a move likely to reduce the diversity of their campuses.

In recent weeks, college presidents from Massachusetts and other states have traveled to Washington to lobby their members of Congress to modify or eliminate the watch-list provisions. Other leaders are lining up behind a counterproposal offered by the State Higher Education Executive Officers that would scrap the watch list and instead require increased federal reporting.

The Sheeo plan, which is backed by the American Association of State Colleges and Universities, would require colleges to report on per-pupil spending and the average “net cost” of attendance for undergraduate students. Paul E. Lingenfelter, executive director of Sheeo, says the plan would provide useful information to parents and policy makers while minimizing the administrative burden on colleges.

At the same time, groups that represent state governments are urging Congress to eliminate the bill’s requirements for state legislatures. They warn the measures would discourage states from increasing their higher-education spending in good economic times, since legislatures would then be held to those levels of financing when their fiscal conditions deteriorated.

“It’s going to have the reverse effect” of what Congress intends, says Raymond Scheppach, executive director of the National Governors Association. “People are going to be reluctant to increase spending.”

Still, some version of both the watch list and the state budget requirement will probably make it into the final version of the higher-education reauthorization bill, given the proposals’ broad political appeal. With Congress coming under increasing pressure to crack down on college costs, lawmakers from both parties are eager to show that they are responding to families’ concerns.

“It’s a political natural,” says Richard K. Vedder, an economist at Ohio University and a former member of the U.S. secretary of education’s Commission on the Future of Higher Education. “This is one area where Congress can put partisanship and bickering aside and everyone can declare victory.”

Mr. Vedder praised the watch-list approach, calling it “consumer-friendly” and “very much in keeping with the commission’s push for more information and transparency.”

But he predicted that the list’s impact on reining in tuition will be minimal, given that colleges are under competing pressures to spend more money to improve their quality.

“It may sting a little for schools that are on the wrong list, but I think it will be more symbolic than anything,” he said.

Unintended Consequences?

The effort to shine a spotlight on rising tuition comes as the leaders of the Senate Finance Committee are pressuring universities to spend more of their endowment assets on student aid. Last month the top Democrat and Republican on the committee sent a letter to the nation’s 136 wealthiest colleges and universities asking for information about their endowment spending, financial-aid policies, and tuition increases over the past decade.

“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” said Sen. Charles E. Grassley, a Republican from Iowa. “We need to start seeing tuition relief for families going up just as fast.”

But in Massachusetts, at least, the institutions that would probably end up on the watch list aren’t those with large endowments to spend. Of the Massachusetts colleges with the 10 biggest endowments, only two — Williams College and Tufts University — would have made the list last year.

Rather, the majority of institutions from the state that would have made the list would have been lower-cost private ones like Gordon College, which has an endowment of about $35-million. Such colleges, many of which serve large numbers of low-income students (95 percent of Gordon students receive financial aid), are typically more dependent on tuition and have less flexibility in managing their costs than wealthier institutions, says Richard J. Doherty, president of the Association of Independent Colleges and Universities in Massachusetts.

But he stresses that the states’ private colleges are “seeking efficiencies all the time,” including consortia to offer language courses, shared transportation systems, and pooled risk-management services.

Indeed, many college presidents bristle at the suggestion that they are not sufficiently concerned about rising tuition.

“I get offended, because that’s the thing that keeps me up at night,” says Robert V. Antonucci, president of Fitchburg State College, where tuition and fees went up by $540, or 10.8 percent, in 2006-7. The college is one of three Massachusetts public colleges that would have made the watch list.

Mr. Antonucci says the Board of Trustees raised fees to hire new faculty members, build a dining hall, and upgrade old facilities, including laboratories for nursing courses.

“For every dollar I spent, I can tell you what improvements were made,” he says. “But how do I put that on a list? Do I put an asterisk saying ‘Here are the reasons tuition went up’? In the end, students benefited from the increase.”

Lobbyists for public colleges fear that if low-cost institutions like Fitchburg State wind up on the list, the resulting headlines will discourage low-income students and those who are among the first generation of their families to attend college from applying anywhere at all.

“It gives a kid in high school the idea that the school is not attainable for them,” says Jennifer T. Poulakidas, vice president of Congressional and governmental affairs for the National Association of State Universities and Land-Grant Colleges. “For some, it may factor out the idea of going to college.”

Advocates for students and parents, though, say it’s unlikely many students would abandon colleges that appear on the list. Rebecca Thompson, legislative director for the United States Student Association, says that while some students choose colleges based strictly on cost, many others make decisions based more on reputation and name recognition, even some low-income students. Such students will attend a highly regarded institution even if it appears on a watch list, she said.

James A. Boyle, president of College Parents of America, agreed, saying institutions that have good reputations “can take a few hits and not really have an impact.”

But lesser-known institutions like Gordon College may not be so lucky.

“Where a school is emerging, and is then placed on the list,” Mr. Boyle adds, “that may be more difficult to overcome.”

http://chronicle.com Section: Money & Management Volume 54, Issue 22, Page A1