Only six states report a unified strategy for addressing affordability
Many states believe tuition should be as low as possible but leave institutions in control of creating their own tuition-setting philosophy. Most states also do not have a statewide unified strategy for addressing affordability and don’t have a formalized relationship between financial aid and tuition-setting policies. State higher education offices shared these and many other insights into tuition, fees, and financial assistance policies in a survey distributed last year.
SHEEO’s new Tuition, Fees and Financial Assistance Report provides details on policies and practices that differ between two-year and four-year public institutions. It also includes specific information about the tuition-setting process for graduate students, details on state policies for setting nonresident student tuition, and more information on state policies regarding student fees. While the report does not provide actual tuition costs, it focuses on the policies that establish and regulate tuition, fees, and financial aid amounts. This year’s report provides more enhanced data to include years in which each state had tuition freezes and/or limitations, the institution types subjected to those limits, and the amount of those limits. A new longitudinal dataset, with survey responses back to 1979, has also been published to give a more historical view of these policies.
Across sectors, nearly half of survey respondents indicated that their tuition-setting philosophy was not formalized in statute or policy. The remaining states either formalize their tuition-setting process in legislative statute or through board rule or policy.
While tuition philosophy often guides a state’s process and intention in setting tuition rates, other factors, such as state budget levels, cost of instruction, and inflation, may take a controlling lead in influencing the tuition-setting process. In both sectors, the factors with the most influence were: ensuring affordability for students, the level of state general fund appropriations, and the cost of instruction. In most states, boards of individual institutions or the system-level coordinating/governing agency is primarily responsible for setting undergraduate tuition rates.
However, states have recently increased their efforts to control public institutions’ tuition rate increases. In the last five years, 40% of states placed restrictions on tuition rate increases in the two-year sector, and 60% of states placed a limit or a freeze on four-year tuition rate increases. This is up from 54% of states between 2014-2017 and 43% of states between 2010-2014. Most tuition limits capped tuition rate increases between 2-4%.
“When states were asked to clarify the relationship between tuition and financial aid policies in their state, the most common response was that there was no relationship between the two,” said Jessica Colorado, SHEEO policy analyst. Thirty-four percent of the two-year sector and 31% of the four-year sector said there is no intentional relationship between tuition and financial aid policies in their state. For states with an intentional relationship between tuition and financial aid, the most common relationship was to have low tuition and high aid (19% of two-year, and 14% of four-year). Of the states who selected a relationship, 63% of two-year and 72% of four-year respondents reported that the relationship between tuition and financial aid was more of an informal policy or goal.
States have considered, proposed, or adopted several strategies to improve student affordability in the last five years. When compared to the last iteration of this survey, more states have recently implemented or adopted free college or promise programs for the two-year sector (20) than what was reported in the 2017 survey (3). Following free college programs, the next most common programs states adopted were statewide financial literacy programs (15), which include FAFSA completion programs, and open educational resource programs (15). Two states adopted debt-free college, a twist on the traditional free college program.
While affordability has become an increasingly influential factor in tuition-setting policies for state policymakers, codified strategies on affordability that consider tuition rates and availability of financial aid together are absent in most states. Only 10% (six states) of respondents reported a statewide, unified strategy for addressing affordability, down from 32% in the 2017 survey.
A key recommendation from the report is for states to take a multiyear, transparent approach to tuition policy. States should allow for longer-term, multiyear strategies around tuition rate setting. In many states, limitations on how much tuition can increase vary from year to year. One year, the legislature may limit tuition increases to an inflationary adjustment, followed the next year by a freeze on the allowable rate increase.
“In this environment, there is little incentive for institutions and systems to raise tuition to an amount below the allowed limit in a single year since they can’t anticipate what the future will allow,” said Rob Anderson, SHEEO president.
A more rational approach would provide allowable increases for three to five years and be based on state revenue projections and policy direction from the state with respect to expected higher education funding for institutions and state financial aid. This would allow for better planning by institutions and create a more transparent environment for the students and families who ultimately must pay the tuition costs.
The full State Tuition, Fees, and Financial Assistance Policies 2022 report, survey instrument, the longitudinal dataset, and technical report can be found online at https://sheeo.org/project/tuition-and-fee-survey/. Additional reports, which focus on changes states made to tuition policy following the COVID-19 pandemic and tuition policy for undocumented students, will be released in the coming weeks.