Paying for College The Rising Cost of Higher Education

JAY CURLEY, BLUE CROSS BLUE SHIELD OF MASSACHUSETTS: We are pleased at Blue Cross to be a supporter and a partner with MassINC in the research they do. It’s something we really count on. The New England Council is a great partner. This project hits home for me. We had three kids in college at the same time in my family and I will have the same on my own nickel. We talk about education as the great equalizer. Now we have to think a little harder about how to finance health care, I mean education. (Laughter) It is going to be much more challenging. Folks scrap together money from families, loans, working a few jobs. It’s not going to be that accessible for all. I hope there is a lot we can learn. Education is the best investment. It’s well worth the money.

JOHN SCHNEIDER, MASSINC VICE PRESIDENT: I will be moderating the discussion and I would like to introduce Dr. Long. Her work is having an impact in higher ed policy circles and beyond. She certainly is a rising star in the policy world. She is here to present the key findings of the report.

BRIDGET TERRY LONG, HARVARD GRADUATE SCHOOL OF EDUCATION: It’s a pleasure to be here. We have been saying how important education is. I’d like to put numbers to it. College is the key gatekeeper to the middle class. If you can figure out how to make it to a degree, you can pretty much guarantee a middle class. So many are kept back from entering the gates. Think about affordability. It impacts who goes, where they go, whether they can stay and do they stay after they leave college with their debt burden and we know the cost of living here is quite high. This report gives a picture of what is happening in Massachusetts and New England. I want to give a sense of actual affordability, not just in theory. I will talk about conclusions, cost trends, affordability and the growth of loans. Our enrollment patterns are different. We send many more to four-year institutions, private institutions and out of state colleges. Forty three percent of residents are at private institutions. We have 29 percent of students going out of state and this has grown 23 percent in the last decade. What does that say about affordability in the state? Families are going to more expensive institutions and they are more expensive in New England than nationally. The average in New England is $7,000 in tuition, up 40 percent over ten years. On to the revenue side, state support for higher education in Massachusetts that goes to public institutions – this is the reason why public colleges cost less than private colleges. There has been a great deal of volatility in support with huge swings up and down. We have growing numbers of students going to college every year, just increasing numbers period. Appropriations are not keeping pace with what’s going on in enrollment. Massachusetts is a more expensive state. In 1991-92 we ranked 40th in the nation in terms of support. Then six years later we increased and were up to ranking number nine. Then with the recent recession we are falling again, to 14. Why are costs increasing? State appropriations are directly related. There has also been growth in expenditures. Are they justified and are we getting more bang for our buck? There is growth in faculty salaries, student supports, financial aid. You know what’s going on with health care costs. Benefits are more expensive. Higher education is so labor intensive. The number one expense is paying for instructors. Students are asking for more tutoring, career advising. Financial aid is a third reason. Colleges funnel money back into financial aid to subsidize low-income students. Some reasons for expenditure increases might be justified while in other things it’s more difficult to discern whether the expenditure was necessary. Comparing Massachusetts to institutions nationally, we spend less in instruction per student, more in student services and operations and maintenance and less than half on scholarships. How are families meeting these costs? We don’t have lots of good publicly available data. A great number of students, 70 percent, receive financial aid. The average amount is $10,000 in grants and loans. There is the price in the catalogue and aid from your family and financial aid. How much debt would a family have to take on? After all the grants, we see public two-year colleges at $4,000, public four-year institutions at $11,000 and $22,000 for private four-year institutions. Incomes are not keeping pace with this net cost. Another way to look at this is to take the net price and compare that to annual income. What percentage of income do they need to pay? In 2003-04, it was 17 percent at a public two-year, 21 percent at a public four-year and 33 percent at a private four-year. Costs are increasing for families quite rapidly. Nationally families are not facing such rapid increases. We see increasing numbers of students taking out loans, 44 percent on average in New England. The cumulative amount of debt is $23,000 at a private four-year, $15,000 at a public four-year. Students are delaying decisions about getting married, having children, and not as anxious about public service careers that don’t pay as well. The implications for the future focus on financial aid policy, college savings plans – there are tax benefits to savings, but the programs can be complicated – costs savings initiatives like consolidating back office activities, negotiating contracts together and other legislative initiatives. We also need to look at graduation rates. We are finding at many institutions that significant numbers of students are not graduating. They don’t have the degree but they have that significant debt. Thank you very much.

JOHN SCHNEIDER, MASSINC VICE PRESIDENT: I will ask Sen. O’Leary to kick things off.

SEN. ROBERT O’LEARY, HIGHER EDUCATION COMMITTEE CO-CHAIRMAN: This is a timely report. Dr. Long’s remarks evoked the weather a bit, dreary drizzle interspersed with a downpour. None of the news we hear this morning is particularly good news. Institutions are heading down a path that is not particularly promising and we are at the same time realizing the growing need for institutions for families and for economic development. The Legislature has begun to acknowledge that. We created the Committee on Higher Education for the first time. We can’t afford to underinvest any longer. We put together a task force and concluded we need to turn this around. The Senate passed a reform package that now sits in the House. We’re optimistic that the House will approve it and we will reshape our relationship with public higher education. It adds $400 million over seven years, divided in half between the university system and state and community colleges. This is new money for institutions that have been grossly underfunded. We think it will make a significant difference in the quality of public higher education. We limit the ability to raise tuition and fees over inflation over three years without going to the Board of Higher Ed. I am optimistic we will see some of these trends turn around a little bit.

BLENDA WILSON, NELLIE MAE EDUCATION FOUNDATION: I’ve been jotting notes about the history of American higher education and the way institutions have been increasingly populist. You think about land grants or the GI bill or the National Defense Education Act, the Higher Education Act. We have been moving up through the 80s toward increasing populist with the notion that higher education benefited all of us. It’s a service, a way to invest in the intellectual capital of our country. At some point we changed our ethic around higher education and began to treat it like a consumer good. If you have a lot of money, you can buy a good one. If you don’t you lose out. It’s a very, very serious shift. If the cost of higher education is prohibitive, added to the fact that those who are poor and immigrants and students of color are the increasing part of the workforce of Massachusetts – so we have the biggest population of young people growing and in the most need of education and what they perceive is that college is not something they will be able to pursue. We need to think of ways to construct a policy framework that would reunite our state, our policy makers, our public around higher education serving us all.

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: Costs are at the forefront of the board’s agenda, thanks to collaboration with the campuses, the Legislature and the governor’s office. The work is stronger and everyone is realizing that we depend on a strong system of higher education. The report gives attention to the complexity of the issue, and includes the price of tuition and fees and room and board, student demands, state supports. It states that if the cost of attendance cannot be addressed by state and federal aid, we must take a look at operational costs and ways to provide greater savings to the way we operate. We must do so by looking at credits in high school dual enrollment programs. Many of the recommendations are already being implemented. Transparency in campus expenditures is supported in the legislation the senator mentioned, and new fiscal accountability measures at the BHE. Our institutions are collaborating on program offerings, service delivery, backroom operations. The BHE and the DOE are working to strengthen the relationship between pre-K through 12 and higher education. As noted in the report, the system of public and private higher education is a complex one and our public colleges are smaller than the national average, but if you look at the size of colleges in New England it is clear that we are in a position where the costs is not exorbitant, the one we must closely monitor. There is a great deal of work that needs to be done on access opportunities. There are benefits to having so many campuses throughout Massachusetts including the benefit that campuses provide as an economic engine. Financial aid is the focus of a task force that will meet this morning and was convened 18 months ago. The task force was established to answer the question of is state financial aid being used effectively to provide access and affordability? The answer requires further development of a database to include unit record data on all students receiving financial aid. This database was critical. It’s the only way to understand the complex system of financial aid for full time and part time students. The database was not available to researchers who prepared the MassINC report. We are still refining it. Dr. Long agreed to work with the board in further analyzing the data we have and in helping us prepare recommendations we will discuss throughout the summer and present to the board this fall. This will be done in time for the development of the budget for public higher education and in time for discussion before the Legislature’s Higher Education Committee.

EVAN DOBELLE, NEW ENGLAND BOARD OF HIGHER EDUCATION: The New England Board was established 50 years ago. Ed Muskie was the governor of Maine, Christian Herter in Massachusetts. We have 10,000 students in New England saving millions of dollars by going to schools in other New England states. We are dedicated to a program launched in Vermont and Maine called College Ready, a report card on increasing the opportunity for youngsters to go to college, to increase high school preparation and to be able to succeed in college. We have never ever made a serious commitment to higher education in this country. A community college degree is the entry point as the high school diploma used to be. We still don’t have universal pre-school. Thousands of youngsters still can’t get into Head Start. I was the only mayor since World War II who lowered taxes. We have a system of remediation from pre-school on up. There is not an elite institution in this country that does not have remedial courses. We have to capture in a holistic way pre-K through 20 if you will. You need to appreciate that there are 270 colleges and universities in New England. There is not a more dense concentration anywhere in the world. We employ as an industry 270,000 people and educate 1 million students and have annual payrolls of $20 billion, excluding capital construction of $1 billion in Boston last year. What’s Boston without the 33 colleges and universities? The banks are in Charlotte. The insurance companies are in Canada. If one third of single mothers had associate degrees you would decrease welfare costs by $400 million. Higher education is in a crisis because it has never been celebrated in this country. We are not funding higher education as we should. It is an investment in the future with economic multipliers that sustain cities and towns. I have just finished a manuscript that talks about the economic impact of colleges and universities. There are colleges and universities that sustain economies and are the saviors of our cities and towns. We are the growth industry and we need to have that recognized by our leadership. In public education we need to have leadership from the top. I say with all respect, this Commonwealth has never had a graduate of a public university ever serve as governor. There is not a link at the senior level that I have ever seen.

MICHAEL WIDMER, MASS TAXPAYERS FOUNDATION PRESIDENT: I want to focus on public higher education and a point we give lip service to. The future of the system is closely tied to our economic future and our workforce. In an environment when we are losing population and the 25-44 cohort. Five percent in that cohort is a dramatic drop in the future of this state. Individuals in public higher education stay here at a much higher rate. The tension between the publics and privates has always been the backdrop to struggles in the public system. We pay the price on the public side because of the strength of the private side. We can no longer pay that price. We need to attract more of our students in high schools to our public institutions. On funding, if you look at since 1988, our funding for public higher education adjusted for inflation is below today where it was in 1988. The inflation-adjusted dollars do not reflect the increased costs. That’s a very sobering statistic. I applaud the leadership of Sen. O’Leary. It is absolutely critical to make public higher education funding a priority. We are not running multi-billion surpluses. The only way to do what Sen. O’Leary is suggesting is to make public higher education a priority and that means some other things are not going to be a priority. That’s the world we live in. Parenthetically, we have to pay attention to the capital needs of public universities. We have disinvested at an alarming rate at UMass and the state and community colleges over the last generation. Given the kind of picture we see we clearly need to attack the cost structure in a comprehensive and thoughtful way even if we make funding a priority. On financial aid, I am a member of the task force and we are going to have a powerful set of recommendations I hope. We are giving scholarship aid at less than half the national average. That is a shocking and sobering statistic and we clearly need to expand our funding for scholarship assistance for those who cannot afford public higher education. We are getting a much more diverse population, an immigrant population and it’s critical to bring them into public higher education.

JOHN SCHNEIDER, MASSINC VICE PRESIDENT: There are significant demands on the budget – health care, early child education, transportation and infrastructure, K through 12. How can we commit $400 million over seven years? What needs to be cut?

MICHAEL WIDMER, MASS TAXPAYERS FOUNDATION PRESIDENT: The key thing is to phase it in. That is absolutely critical. On health care, I do not believe – it’s a terrific piece of legislation – we don’t need to break the bank at the state level. We reallocated a billion dollars plus that we spend for free care and safety net hospitals and appropriate $200 million in fiscal 2007. Aid to cities and towns is a priority and public higher education – we have identified those at MTF. The income tax cut – we are in a political season. Reducing it to 5 percent is $700 million on an annual basis.

SEN. ROBERT O’LEARY, HIGHER EDUCATION COMMITTEE CO-CHAIRMAN: We can’t afford the tax cut that the governor is peddling out there, some candidates as well. The issue is one of the things we did with this commitment is establish a formula not unlike Chapter 70 for K through 12. We can’t bind a future legislature but once you set up a formula it moves the debate in terms of future Legislatures. We have seen the pattern that when times get tough, public higher education takes the biggest hit. That threat is not going to go away but it’s less likely to play out. That’s been part of the thinking of those advocating a formula.

EVAN DOBELLE, NEW ENGLAND BOARD OF HIGHER EDUCATION: I was personal secretary to Gov. Volpe and in 1966 he ran for reelection on the platform of a 5 percent sales tax. He told the truth that we needed more money. Leadership in this country has constantly played to the base fears of people. We have lost confidence in our government to do the right thing and in political figures to do the right thing. We do not have the resources to do the things we need to do. Since 1986, when Reagan changed tax laws, Medicare has spiked 43 percent, there has been a decline in higher education and a spike in tuition at a time when Pell Grants have been changed from grants to loans and at the very same time I pay, which I am astonished by, tuition and room and board is $52,000 at George Washington University, which I have to pay in full. I know half that money will be paid for students who don’t have the means to go to that college. Perhaps the federal government, though they will not write off tuition on the income tax, ought to consider that we know it is at least a charitable contribution. Thirty to 50 percent of a full-paying student is there to subsidize a student who could not go to BC, Suffolk or Emerson.

JOHN SCHNEIDER, MASSINC VICE PRESIDENT: What assurance do taxpayers have that new money is helping to improve institutions?

SEN. ROBERT O’LEARY, HIGHER EDUCATION COMMITTEE CO-CHAIRMAN: We do build in some accountability in the legislation that I hope is about to become law. The board has been looking at this issue and attempting to develop criteria. It’s an area where we need to do much more. Once we get through more of a money than accountability piece, that is the aspect of public higher education that we will look at most carefully.

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: The board and boards in other states are concerned about the issue of what is the student learning. It’s a difficult issue. The campuses are willing to attack this issue. We began to develop an accountability system a decade ago. It has been slow in coming but the last three years have been remarkable and we will continue to work on this. One issue raised in the report was the issue of graduation rates. The board attacked this in collaboration with the institutions. We established a task force. One reason we have done this is the recognition that it is a degree that is indeed important. One thing we have also learned is we have an incredible gap between the success of students from middle incomes and students who are minorities or low income. We need to know what we need to do to help these students. Many reports show we are losing residents and we know the workforce of the future will be those coming from a low economic income group and they must be able to attend, be prepared for, and graduate from college.

BLENDA WILSON, NELLIE MAE EDUCATION FOUNDATION: You are doing a great job John raising provocative questions that we are managing not to answer. All of the demands made on the executive and legislative branch, the missing link is the connection with economic policies. The countries that are eating our lunch are making the connection with math and science. We know allied health and medicine will drive our economy but we don’t say give a stipend or something to institutions that contribute to that need. We have had loan forgiveness programs. We say if you go to the military you can become a doctor and we will pay for it. We have been providing money and worrying about the economic future but without the carrots.

EVAN DOBELLE, NEW ENGLAND BOARD OF HIGHER EDUCATION: I hope that from now on no business will ever hire someone without them having a high school diploma or committing to getting a GED. The incentive to go – we can drive five minutes from here and you can feel like you have two options, work or joining the Army. We culturally in this country have got to say to youngsters you must understand the value of higher education economically. Nobody votes anymore. Are we a third world or are we the first world? It’s all about higher education when it comes to political participation.

AUDIENCE QUESTION: I want to connect this all, economics and access. What are we doing to connect higher education policy to civic leadership policy?

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: We had an initial conference to gain the data. This fall the board will host a summit meeting to discuss programs existing on our campuses with respect to service learning. The comment of tying higher ed policy to social policy, I think it’s going to be a while. There is a commitment among presidents to move in this direction.

AUDIENCE QUESTION: I am from Mass Rehab Commission, a counselor there. We have to look at the national scene and politics that have affected education. We have lost international students who are afraid to come to this country.

EVAN DOBELLE, NEW ENGLAND BOARD OF HIGHER EDUCATION: Sen. Kennedy is hosting a luncheon meeting on immigration today. It’s a crucial situation. Students are not coming to the United States anymore. They are going to Vancouver, Melbourne, New Zealand. The capital formed there and the relationships made there are going to be in other countries and those students are not going to be in Boston in 20 years.

AUDIENCE QUESTION: I am from Salem State College. In many respects the private sector and public sector of higher education are more dependent on one another.

BRIDGET TERRY LONG, HARVARD GRADUATE SCHOOL OF EDUCATION: The distinction between public and private institutions is going away in many respects. Public institutions are turning out fantastic graduates. Students think about quality programs, not public or private. Publics are starting to cost like private institutions. In some cases there is no cost distinction. We have to think about partnerships in this state. If we want to have a skilled labor force, we have to think about partnerships. The government can coordinate between these institutions.

JOHN SCHNEIDER, MASSINC VICE PRESIDENT: Judy, I just went through the college choice process, and students look at the publics not as a first choice. How do we change that?

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: It is starting to change. We need to talk about the outcomes and benefits and that there is a quality system that exists and we have not been able to provide that kind of data. It is coming. The first choice of man in high school will be a private institution but I do believe it is beginning to change.

AUDIENCE QUESTION: I work for MassPIRG. I am concerned about sticker shock and affordability. We haven’t answered the aid access question yet. Tuition is going to go up. What is the threshold of affordablity for families and how do we take debt into consideration?

SEN. ROBERT O’LEARY, HIGHER EDUCATION COMMITTEE CO-CHAIRMAN: I am one of six kids. My father had a good job but it was single income. All six of us were in college or grad school. I wonder how he did it. There’s no question that there’s a problem. While the state has been cutting appropriations, public colleges and universities have been raising fees. There was a cap on tuition. We are trying to reverse that trend. At some level it’s really about money. In this legislation, we do begin to build in caps in terms of affordability. There is kind of a contract here – we are going to give you more money and in return we insist that colleges cap tuition and fees at a level that parallels the cost of living. If there is a need to go above that you need to make the case. Public colleges and universities, there’s a shabbiness to them as a result of the fact that we have underfunded them for so many years. Students are conscious of that. They look at the campus and the buildings and they know they are not quite where they need to be. I know the quality is good. The instructors are good. There is a vitality there. But perception is important. That perception is there and we need to change that.

BRIDGET TERRY LONG, HARVARD GRADUATE SCHOOL OF EDUCATION: The report puts numbers in front of people to motivate them and help them have better discussions. Bring it down to the family level and when they see the price and don’t know about financial aid, the process matters a great deal. Information, it’s so complicated. There are so many hoops to jump through academically, signing up for SATS, applications. As we make policy we need to think about making it simple.

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: We have reached the threshold in terms of what students and families can afford.

AUDIENCE QUESTION: I am with Boston’s largest financial aid program. There is a focus on merit-based aid over need-based aid. I think it’s a huge problem for low income and middle class kids.

BRIDGET TERRY LONG, HARVARD GRADUATE SCHOOL OF EDUCATION: There is tremendous growth in merit aid. Colleges care about prestige. When it’s US News and World Report or a community college that wants to offer four-year degrees, it trickles down. Can we reward colleges that enroll more Pell Grant recipients or graduate more low-income students? The middle class has been largely ignored, given all these loans and the merit aid is going to these kids who come from families who are voting. Not educating a large portion means people on your doorstep in terms of crime and social dependency.

AUDIENCE QUESTION: We heard about how loans can drive life decisions. Is there a way to encourage a student loan repayment benefit?

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: I hope so. We must have a closer relationship with business and industry.

JOHN SCHNEIDER, MASSINC VICE PRESIDENT: The Sunday Times will have a piece on this that is kind of interesting.

EVAN DOBELLE, NEW ENGLAND BOARD OF HIGHER EDUCATION: All colleges and universities need to focus on the undergraduate, the first-year student. We don’t do that. When I was president of Trinity, the New York Times called about unionizing teaching assistants. The question really was, why were there so many teaching assistants? We have great brands in America but there is a stigma on other kinds of higher education. Great teaching goes on in the two-year college. We should implement what Truman said – the first 14 years are free. College costs are cut in half. Either we have a commitment or we don’t. Everything else is rearranging the deck chairs on the Titanic.

AUDIENCE QUESTION: The cost of having higher education affordable is expensive, but given the presence of the private colleges, we have to be unique and design policies to allow students from Massachusetts who would like to attend.

SEN. ROBERT O’LEARY, HIGHER EDUCATION COMMITTEE CO-CHAIRMAN: I agree. There has been a significant falloff in need-based aid. It mirrors a falloff in funding for publics. We are struggling to turn that around. Our immediate focus has been on the public sector. We all recognize the significance of the private institutions. There is a tension. There is only so much money and there are tradeoffs.

JUDITH GILL, BOARD OF HIGHER EDUCATION CHANCELLOR: The Board of Higher Education is working cooperatively on financial aid and we are looking at what residents of Massachusetts need.

BLENDA WILSON, NELLIE MAE EDUCATION FOUNDATION: All higher education institutions receive public money. The first obligation of those in office is to make higher education possible for the poorest citizens of the state. We need an ethic that says those who cannot afford to go to expensive colleges will have a chance to go because it’s affordable.

MICHAEL WIDMER, MASS TAXPAYERS FOUNDATION PRESIDENT: The pie of financial aid has shrunk dramatically. That is hugely self-defeating for the Commonwealth. We need to invest in financial aid in a very major way.

EVAN DOBELLE, NEW ENGLAND BOARD OF HIGHER EDUCATION: Massachusetts is becoming older and colder. We peak in high school graduations in 2008 and start a steep decline. We lost population for two years. We have thousands of young people who have to be inspired to go to college. This is a crisis in Massachusetts. We cannot sustain a competition with the south and southwest. We are at a watershed. I have yet to see a leadership plan that celebrates access for every child and a tie with business.

JAMES BRETT, NEW ENGLAND COUNCIL: I want to thank everyone. Everything has been said. The council is very concerned about affordability. We promote economic activity. What’s been discussed is a challenge. The total economic impact for New England on higher education is some $66 billion. You would have to add all our state governments and you still would not find $66 billion. Evan alluded to about 1 million students, about six percent of the entire population. Employment is more than seven times the pharmaceutical industry, five times the publishing industry, and 17 times the Internet industry. It’s a driver and when we hear that college is no longer affordable, that is a concern for all of the business community. Bristol Myers is coming to Fort Devens. A key component, they said, was workforce. The workforce is I think our greatest economic strength. While China and India graduate 600,000 engineers, we graduate 60,000. The competition to be the innovator has increased. We are trying to pass STEM legislation to do more in that area. I recommend an article in June 12 Newsweek about early college high schools. It’s a very interesting article. The council is trying to provide more partnerships and scholarships. The 529 plan expires in 2010. The federal government can play a role with additional money for the Pell Grant and work study. We are seeing a decline in funding at the NIH that many colleges need. Michael Collins from UMass Boston is here. Comments were made about perceptions, appearances of buildings. Chancellor Collins is finishing his first year and you will hear a lot of positive things coming out of the urban campus. If we all work together, we can make a difference in making this issue not an obstacle and in promoting economic development.