A study released Tuesday concludes that the increasingly generous financial assistance programs used to make college more affordable for lower income students may be fueling tuition increases nationwide.
"Federal loans, Pell grants and other assistance programs result in higher tuition for students at our nation's colleges and universities," the study reported.
The study, published by the libertarian Cato Institute's Policy Analysis, is entitled "Making College More Expensive: The Unintended Consequences of Federal Tuition Aid." Economist Gary Wolfram, the George Munson Professor of Political Economy at Hillsdale College in Hillsdale, Mich., wrote the report.
"To the extent that we give more people aid and get more people to come we are going to bid up prices," Wolfram said. "If we increase the demand, we are going to drive up prices."
Tuition at the University increased 10.7 percent last year for in-state students, to $6,600 per year. The increase is driven by a number of factors, particularly cuts in state appropriations for higher education that totaled $617 million between 2002 and 2004. The current charter status proposal would continue to hike tuition.
University officials say they do not consider the expanding availability of federal or other assistance programs as a basis for increasing tuition.
"When we build tuition we are looking at costs that we want to fund," University Budget Director Melody Bianchetto said. "We are not anticipating federal financial aid [increases]. Obviously we have certain expectations as to what funds are available to students."
The University currently is implementing an expansive program, Access U.Va., which provides lower income students with grants and loan caps.
Programs such as Access U.Va. amount to price discrimination, whereby different groups pay different prices for the same service, Wolfram said yesterday.
"U.Va. has a certain mission, a certain goal," Wolfram said. "If that's what it wants to do, that's their prerogative. If it is attracting too many of some students and not enough of another, they can do that. It is not necessarily a bad thing."
Like many private and public universities, Access U.Va. allows different students to pay different effective prices in an effort to attract a more diverse student body than might seek to attend the school at its full price, said Colette Sheehy, University vice president for management and budget.
"It's not a new strategy that you charge higher tuition to the general population in order to allow more people with need to attend," Sheehy said. "It's an institutional goal to have a diverse student body. If we wanted to fill entirely from NOVA we probably could do it. There are tons of kids up there, at the best schools in the state, that we could fill the school with. What we are after as a public institution is to serve the Commonwealth as a whole."
The study, however, found a very strong correlation between the amount of funding put into federal financial assistance and tuition increases and concluded financial aid is not merely bridging the gap between what different groups can afford to pay, but driving the overall increase in the cost of higher education.
Wolfram acknowledged the need to make college as affordable to as many students as possible. He said he hopes his study will encourage a debate about how to best achieve that outcome.
"If I make it explicitly clear that I am willing to trade increased tuition for some, so others can go, that's at least something we can debate about," he said.
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