Runaway tuition: A challenge for students, parents and schools
Iowa's two largest universities expect to pocket millions of dollars in extra tuition revenue next fiscal year, with the vast majority going to pay for additional faculty, programs aimed at lowering dropout rates and other student services, officials said.
That decision comes as the cost of earning a four-year degree in Iowa at a public university continues a steep march upward and pushes students to take on more debt, which, at $26,066 per graduating student, is the fourth-highest average in the country.
In the past 30 years, the average cost of tuition and fees at an Iowa public university has jumped 707 percent, more than four times the rate of inflation. College costs have increased each of the past 30 years for students and their families.
Meanwhile, a new survey shows families and students saddled with rising tuition and debt, stagnant wages and an uncertain job market are questioning whether a traditional college education is their ticket to the American dream.
Some universities are trying to respond to the converging forces with innovative classroom approaches and three-year degree programs.
But the question - should extra tuition revenue go back to students or stay with the universities? - represents the high-stakes challenge facing higher education.
"Why not give it to the students and their parents?" asked former Iowa Board of Regents member Michael Gartner, who in March voted against increasing tuition and room and board fees at the state's three universities for the 2011-12 academic year. "They're the ones who have all the debt. The universities have shown they can live with the cuts."
Regent Bob Downer of Iowa City said he would be interested in learning by how much tuition could be reduced if a portion of the money were returned to students.
"When we have more than was projected, all should share in that excess, in my opinion," he said.
But the Board of Regents would need to approve any return of tuition money already collected from students. Board President David Miles said the board could consider doing so, but he would prefer to use the money to maintain academic quality.
"Right now I wouldn't be very excited about it, because that extra tuition isn't for nothing," Miles said. "A good portion needs to go to educating that student."
Three out of four say most can't afford college
Americans are reassessing what they get for their tuition dollars.
Fifty-seven percent of those surveyed by the Pew Research Center say the higher education system does not provide a good value for the money they spend, and 75 percent say college is too expensive for most Americans to afford, according to findings released last week.
"We're nearing some sort of threshold," said Richard Vedder, an economics professor at Ohio University who warned that universities risk pricing low-income Americans out of higher education.
Salaries make up the largest portion of universities' budgets - typically around 40 percent - so calls to trim waste often center on increasing faculty efficiency, along with slashing administrative budgets.
Vedder said the quickest step universities can take to lower undergraduate tuition is to increase the teaching loads of professors. Not filling open positions, for example, would require faculty to gradually increase teaching levels over time, he said.
But he and other higher education experts say that universities and colleges must dramatically change how they teach, operate and finance degree programs.
Ideas include linking public funding to graduation rates, abolishing the college lecture as the sole delivery system of information, offering three-year bachelor's degrees and encouraging governments to provide college savings accounts for everyone entering public schools.
Cutting expenses such as administrative costs, though, can only go so far, the experts say. Even the few universities that did not increase administrative costs in the past 15 years tended to increase tuition rates above the rate of inflation, according to research by Jay Greene, a political science professor at University of Arkansas who heads that school's Department of Education Reform.
"Right now we're just talking about slowing the rate of increase," he said.
Calculating the schools' extra tuition revenue
How much extra tuition revenue have Iowa's public universities wound up with?
For the current fiscal year, Iowa State University, the University of Iowa and the University of Northern Iowa will take in $7.6 million more in tuition than officials estimated when a 6 percent tuition increase was approved in February 2010.
The excess amounts to about $104 per student.
For next fiscal year, university officials estimated in March they would take in about $51.1 million in tuition revenue with a 5 percent increase in tuition rates.
Since then, higher-than-expected student enrollment and retention means the U of I is projected to receive about $7 million "in tuition revenues that we had not counted on, or had expected," according to university spokesman Tom Moore.
ISU Provost Elizabeth Hoffman said enrollment at the Ames university was also expected to be above projections. However, Hoffman did not have an estimate on how much more money that would mean for ISU.
University of Northern Iowa officials said tuition revenues were expected to be close to original projections.
Returning money to students isn't unprecedented. In April 2010, then-Gov. Chet Culver signed a bill that returned $6 million to students after the state landed federal stimulus money. The amount refunded was $100 per student - the same as an emergency surcharge assessed to help cover state budget cuts.
ISU's Hoffman defended the current decision to spend most of the extra tuition money to bolster academic programs.
A 20 percent cut in state funding in the past two fiscal years - $141 million - has resulted in tuition increases and cost cutting in the form of increased class sizes and fewer faculty and staff members at Iowa's three public universities. Only two states handed down deeper cuts than Iowa, according to Board of Regents data.
Despite this, tuition remains low when compared with peer research universities, Hoffman said. ISU and the U of I both charge the second-lowest tuition among 11 comparable institutions, which includes flagship public universities in Illinois, Minnesota and Arizona.
In addition, the universities set aside 21 percent of all tuition money for merit and need-based scholarships.
"I think we have eased the burden for students," Hoffman said of tuition rates. "I don't think it's appropriate to say we have quite a bit of money left over."
How college costs keep pinching family budgets
The affordability of Iowa's public universities has significantly declined in the past decade, a period in which the tuition significantly increased, according to a state report issued last fall by the Legislative Services Agency.
Since the late 1990s, the percentage of family income needed to pay for college expenses at Iowa's public four-year institutions - even after financial aid - increased from 23 to 33 percent, according to a 2008 report from the National Center for Public Policy and Higher Education in California.
That the Pew research shows Americans question the value of an advanced education is astounding, because college remains a good investment, said David Feldman, an economics professor at the College of William & Mary in Virginia.
"The worry about the debt people take out is completely overblown," Feldman said. "As an investment, higher education is a slam dunk."
The typical Iowa student graduates with $200 to $300 of monthly college loan payments, usually repaid over 10 years, he said. In return, college graduates will earn an average of $19,550 more per year than someone with only a high school diploma, according to newly-released census figures.
Many college graduates recognize this advantage, even as they say college is unaffordable. The Pew survey found 86 percent of college graduates called their degree a good investment.
State government gets more, education gets less
As students and parents have been asked to pay more for tuition, the amount of state money used to educate students at Iowa's public universities has plummeted over the past 30 years.
In 1981, state money accounted for 77 percent of the universities' budgets. This year, that number dipped below 40 percent, according to Board of Regents figures.
Over the past decade, funds for state government have grown by 28 percent, while money appropriated for public universities has been cut 24 percent, according to board figures.
This reflects a national shift in attitude toward viewing higher education as a private good and not a public one, university officials in Iowa and the nation said.
"It all comes back again to, for whatever reason, the states seem to no longer realize that an educated population is just as much of a public good as highways or other kinds of civic infrastructure," said James Duderstadt, former president and current science and engineering professor at University of Michigan.
Duderstadt, who proposed several reforms in a March report, believes universities must convince people of the value of higher education as a public good in order to increase state funding.
But with states burdened by aging populations, public colleges and universities shouldn't expect significantly more money for about the next 30 years, he said.
Can schools solve budget problems through cuts?
The University of Michigan, which has become a largely a privately funded university, serves as a national model for those who advocate slashing administrative staff.
Hit hard by a recession before the national economic downturn, Michigan has decreased state funding to only 7 percent of the university's total budget. This forced the state's flagship school to cut costs and aggressively pursue research grants.
The result? Between 1993 and 2007, the University of Michigan kept tuition increases well below the national average, and reduced administrative staff by 5.5 percent, according to a report Greene published in August for the Goldwater Institute.
"I think most state university administrators, in honest moments, will tell you that this is where they're headed," said Greene, the University of Arkansas professor.
Schools nationwide, on average, increased administrative staff - defined as all professional positions not in teaching and research - by 39 percent.
But Greene's research, which is based on self-reported federal data, also shows that Iowa State reduced its administrative costs even more than Michigan, while the University of Iowa increased its costs at slightly less than the national average.
Even so, Iowa regents such as Downer and Bruce Rastetter, who joined the board this month, have said more efficiencies can be found in duplication of programs, purchasing and services.
Some of these recommendations were made by a regents task force in February, but no action has been taken on the items, Downer said.
"I think we really need to get serious about this and focus our resources in directions that will achieve the greatest benefits for our students," he said.