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UC Needs to Rethink Tuition and Innovate

John Aubrey Douglass, Senior Research Fellow - Public Policy and Higher Education, Center for Studies in Higher Education | May 20, 2019

students passing through Sather Gate

In their most recent meeting in San Francisco, the UC Regents approved a 2.6 percent increase in tuition for nonresident students, but left in-state undergraduate tuition steady. UC is still struggling to make-up for the huge cuts in state financing that came on the heels of the Great Recession. But why increase only nonresident tuition, and not something similar and predictable for California residents?

One reason is that Californians and their lawmakers have real and significant concerns regarding the impact of rising tuition and student debt levels. But another reason is that Governors, Sacramento lawmakers, and the Regents, perceive increases in tuition as bad politics — even if it is incremental. UC, in turn, is often faced with an ultimatum not to increase tuition as part of a budget deal with Sacramento.

Another impact: UC resorts to short-term, year-to-year negotiations with lawmakers on tuition and fees. In the current era, the usual pattern is that the university proposes a marginal increase in tuition and then attempts to bargain with lawmakers to buy-out those increases. The record is mixed regarding this tactic: often volatile tuition rates and income for the university and unpredictable costs for students and their families.

At the same time, there is a misunderstandings about the relation of the “sticker” price at a UC campus and what students actually pay. The counter-intuitive fact is that increased undergraduate tuition rates at UC over the last decade for Californians did not lead to decreased access for low-income students. Their numbers and as a percentage of all UC undergraduate enrollment actually went up. Further, the ability to increase tuition will likely be a decisive factor in UC’s ability to create a more stable funding model and grow in enrollment and programs with California’s population and labor needs.

In this disjuncture between perception and the actual impact of tuition lies a potential solution.

A Progressive Tuition Policy

How did tuition go up dramatically in the wake of state disinvestment while access to low-income students went up? UC pursued what I call a “progressive tuition model” that raised tuition while providing significant financial aid to low-income and middle-class students. Approximately 33 percent of all tuition income goes back to financial aid. This return-to-aid policy emerged in the 1990s, with the beginning of a persistant pattern of state disinvestment in public higher education.

As state funding on a per student basis (called “workload funding”) continued downward, and enrollment increased dramatically, the role of tuition has gone up. In 2000, UC enrolled just over 183,000 students; today it enrolls over 280,000.

However, this funding model was partially disrupted when UC entered a political agreement with then governor Jerry Brown that included a five-year freeze of in-state undergraduate tuition beginning in 2014, and then only allowing UC to increase tuition at the rate of inflation beginning in 2017-18. The governor’s assumption was, in part, that higher tuition made a UC education unaffordable for the economically disadvantaged, even though the number and graduation rate of low-income students increased since the Great Recession. This political deal essentially further starved UC. Where there is action there is a reaction: to cut operating costs and accept more and more students, UC has suffered large increases in student-to-faculty-ratios and the problem of under-resourced campuses.

As I have noted in earlier publications, in societies with substantial disparities between the rich and poor, like California, a low tuition rate represents a substantial subsidy for more wealthy students. Depending on the financial aid model, free tuition may make sense in Sweden, but in the US not so much.

This brings me to my main point: UC’s tuition and financial aid model should be revisited. The lack of a coherent and long-term approach to tuition and fees is a major political and financial obstacle for developing a long-term funding model for UC.

Exploring a New Pricing Model

Tuition rates might be more clearly stated for middle- and lower-income undergraduate students (under the university’s Blue and Gold Opportunity Plan, students with family incomes below $80,000 pay no tuition or fees).

But how to do this in a politically acceptable way? UC’s leaders should consider a revised tuition pricing model that offers five (or so) tiered tuition rates for students depending on their family income, with federal Pell Grants for low-income students, university-sourced financial aid and Cal Grants (also for low-incomes students) directly reflected in the pricing. Student eligible for these forms of financial aid are not difficult to identify.

Clarity of costs could enhance access to disadvantage groups who, like all students, are often confused by complicated sticker price tuition, which can only be mitigated by complicated pathways for financial aid. Just as importantly, It could also change the dynamics of often misinformed debates on the real impact of tuition on students and affordability.

Because of UC’s high return-to-aid rate, when an increase in tuition and fees is proposed, there is an assumption that it is an increase for all students, when only about 50 percent of students are affected. Explicitly raising tuition for high-income groups while, for example, maintaining or even reducing costs for middle and lower-income students, would change the contentious politics and symbolism of the tuition debate in California.

Repacking and consolidating existing financial aid sources, combined with additional tuition income from those who can afford it, should also be modeled to actually increase funding for need-based-aid and generate additional income for academic programs.

The fact is that housing and living costs pose the greatest challenge to middle- and lower-income students and their families – a much more significant policy issue than tuition and fees. UC must also secure additional  sources to support housing and other living expenses. State lawmakers need to find the political will to pass a bond act to specifically fund student housing or mixed housing near UC campuses and the huge backlog of differed maintenance.

They should also return to the model of providing state funding for specific capital projects (buildings) – at the insistence of the previous Governor, Jerry Brown, UC must now pay for new academic buildings partly thru tuition income which diverts funding away from academic operational costs including financial aid.

Governor Gavin Newsom’s initial budget proposal for the upcoming fiscal year shows an understanding that an increased investment in UC, and California higher education in general, is key to reducing inequality, boosting socio-economic mobility, and meeting future research and labor needs. Unlike Brown, he also acknowledged that the state needs to help fund UC, CSU and California’s Community colleges enrollment and academic program growth.

This is a good beginning with a new governor. State reinvestment is vital for both the operating and capital side of the budget for public higher education. But we are not likely to return to the funding levels of the distant past when state monies represented over 50 percent of UC’s academic operating budget — it now is less that 17 percent. UC needs to diversify even further its revenue sources while, of course, continuing to look for further efficiencies in its operating costs. Additional tuition income must to be part of any realistic future funding model.

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Comment to “UC Needs to Rethink Tuition and Innovate

  1. This is a good, compact explanation of the reality of tuition costs — but how can reality compete with sound bites and memes, especially in the run-up to an election year? ‘Free tuition for all’ fits on a button, a caption, and a demonstration sign, where ~tiered tuition rates for families within certain criteria boundaries with aid sources factored into the final figure~ does not.

    I myself am part of the bureaucracy yet it still raises an eyebrow to see how convoluted it appears when we claim that a well-tuned system of taking families money away from them and then re-labeling it and shuffling it around and then putting parts of it back where it came from is the royal road to equity. We have to wonder if there isn’t a shorter route, or at least a way for it to pass through fewer hands.

    It’s certainly true that housing and living costs are an even bigger problem than tuition so our energies need to be turned towards those, but in the same vein the disinvestment of state funding is too important for us to just shrug our shoulders and keep telling each other that a return to earlier support models isn’t realistic. Here’s where we do make our own reality. Were post-WWII Californians any less shortsighted or selfish than today’s Californians? I prefer to believe that they were just as shortsighted and selfish then as we are now, yet they made better communal decisions (except for transit and energy, ha) than we are making? Why? Let’s tackle those rather than throwing up our arms.

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