Affordability is the aim of countless proposed higher-education policies. The question is, affordability for whom?
In North Carolina, that’s what the university system’s Board of Governors is trying to sort out. The board is considering a policy that would cap the amount of tuition revenue the state’s public universities could put toward need-based financial aid. Under the plan, each of the system’s 16 campuses would be allowed to apply just 15 percent of its total tuition revenue to such aid.
It’s not a theoretical cap: Six of the campuses already exceed that benchmark, including the flagship campus in Chapel Hill, where a little more than 20 percent of tuition revenue is redirected to financial aid, according to figures from the board.
A handful of other states have considered or acted on similar measures, including Iowa, where the legislature and statewide Board of Regents have already barred public universities from using tuition from in-state students for financial aid. In those states, the debate about improving access to public higher education is taking the tone of a class war, pitting the needs of low-income students against their wealthier peers. The case being made: Tuition paid by middle- and upper-income families is subsidizing the cost of serving lower-income students.
That’s a key part of the argument in North Carolina, where the rationale for the proposed new policy is that universities are levying tuition increases to pay for need-based aid—and, in doing so, they are driving up the debt burden of students across the system.
“All students would benefit from restraining growth in the cost of tuition, which contributes to increases in the amount of student debt,” says a working group’s explanation of the proposal, which will be discussed at a board meeting on Friday. J. Craig Souza, a board member leading the working group, did not respond to a request for comment.
The board rejected a similar policy in 2012, but the political climate in the state—and on the board—has shifted. Jenna Ashley Robinson, director of outreach at the John William Pope Center for Higher Education, in Raleigh, said her organization supports this conservative approach, which reflects the state’s political climate.
“There is a new emphasis on fiscal responsibility” by the Board of Governors, said Ms. Robinson, in part because the composition of the board has changed. She wrote last year that new appointees to the board would make it overwhelmingly Republican, with 29 of the 35 members—including Mr. Souza—affiliated with the party.
The current system of using tuition as a key source of financial-aid money has created a vicious cycle in which tuition increases are needed just to provide more aid, Ms. Robinson said. But, she argued, middle-class families are bearing the brunt of that approach: Because they don’t qualify for the aid, they can’t keep up with the increased costs. The board, she said, “wants to make low tuition a priority for everyone, rather than focusing on one part of the student body—the part that needs aid.”
Ms. Robinson cited another problem: Students from out of state, who generally pay much more in tuition, are benefiting too much from the tuition revenue of North Carolina residents, she said.
Over all, however, nonresidents pay more in tuition than they receive in aid. Nonresident undergraduates contributed about 29 percent of the tuition revenue put toward financial aid and received about 24 percent of the grant assistance that came from that pool of money. Including graduate students, however, nonresidents contributed 43 percent of the financial-aid dollars from tuition and received a quarter of that money.
By contrast, resident undergraduates contributed 46 percent of the overall aid pool, and they received 70 percent of the aid.
Other higher-education experts said a cap on aid allocation would result in higher costs for low-income students without any real benefit for students at higher income levels.
David W. Strauss, a consultant with the Art & Science Group, said a policy limiting tuition for financial aid is a purely ideological move. Most flagship universities are actually priced too low, he said. Instead of pursuing a one-tuition-fits-all approach, he argued, they should use the strategy employed by many private institutions and charge wealthy students higher rates. In his vision, those students should provide the revenue that improves the college experience—and offers more financial-aid dollars—for both lower- and middle-income students.
“The best practice is not to hew to an arbitrary percentage,” he said, “but to figure out which pricing strategy is better for your institution and students.”
Mr. Strauss and others questioned a case made by proponents of aid caps—that using more tuition for financial aid can be linked to increased student debt. At the University of North Carolina at Chapel Hill, which uses more than 20 percent of its tuition revenue for financial aid, students, on average, borrow less than $5,400 per year. At North Carolina Central University, which applies 15 percent of tuition revenue to financial aid, the average debt is about $2,000 greater. Ms. Robinson said this is because the Chapel Hill campus raises much more money to provide scholarship support to students.
But Amy Laitinen, deputy director for higher education at the New America Foundation, disagreed. “One of the stated reasons for the change is to address student debt,” she said in an email. “But this policy just shifts the debt burden to lower-income students.” That’s easier to accomplish politically than, say, persuading state legislators to provide more money through state appropriations, she said.
“This policy,” she said, “is a real departure for a state that prides itself on affordable higher education.”
