States Can Learn from Texas’s Response to Tuition Hyperinflation

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By Mario Guerra

College tuition hyperinflation is causing a crisis in higher education, ranging from deterring low-income students from applying to school, to student-loan debt surpassing our national credit-card debt. The price of college is increasing at an alarming rate, and it is crucial to understand the causes in order to formulate a viable solution.

When looking at how much students paid in the United States in tuition and fees for the 2015-2016 school year, we find that the average in-state student attending public college paid $9,140, and the average out-of-state student attending public college paid $23,893. These prices do not reflect the overall satisfaction students are looking for while attending these universities. In fact, more than 75 percent of American adults do not think that college is affordable for everyone who needs it.

Public opinion on the affordability of a college education is understandable, given how fast tuition prices have increased in such a short period of time. National prices in college tuition have increased 45 percent over the past decade, whereas household income has declined by 7 percent within the same time frame. Tuitions are steadily increasing year after year, despite the adverse effects these tuition hikes have on students. After evaluating these statistics, it is evident that institutions of higher learning need to spend more time addressing their students’ financial complications. In order to find a solution to the problem of tuition hyperinflation, we must first take a look at what causes these tremendous upsurges.

There are various hypotheses regarding hyperinflation in tuition prices. Although it is popular to argue that the hike in prices is directly attributed to cuts in state financial support, there is a sufficient amount of evidence to question this theory. Examining Texas data from 2000-2010, statistics show that over this decade state funding dropped by 15.9 percent, whereas college tuition and fees prices skyrocketed by 76 percent. These public universities are raising tuition prices at a much faster rate than the rate at which funds are being cut.

William J. Bennett, former Secretary of Education under Ronald Reagan, turns the “cuts in financial support” hypothesis on its head. According to Bennett, the more financial aid an institution of higher education receives, the higher the incentive for said institution to raise its tuition. Bennett foresaw the unintended consequences of increased financial aid in 1987 when he formulated what has come to be called the Bennet Hypothesis: “…increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase.…Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.”

A 2015 study conducted by the Federal Reserve Bank of New York, offers data that supports the Bennett Hypothesis. It was found that for every dollar increase in Pell grant funding, the average college tuition price increased by fifty-five cents, for every dollar increase in subsidized loans, tuition prices increased by seventy cents, and for every dollar increase in unsubsidized loans, tuition prices increased by thirty cents. This data shows that there is a sixty-five percent pass-through effect on these appropriations, meaning that for every three-dollar increase in loans, tuition and fees are raised by two dollars.

Bennett predicted that an increase in federal student aid programs would highly incentivize universities to spend more on the expansion of their campuses and departments, all while assuring these universities that all of their expenditures would be paid. Although this may sound like a great opportunity for universities, students are hurt by the increase in tuition.

Moreover, universities are no longer preparing their students for the real world. A 2015 survey conducted by InsideHigherEd finds that “…college students think they are being well-prepared with the skills and qualities needed for careers….Employers are dubious.” What skills are universities unable to instill in their student body that are crucial for acquiring a decent career after graduation? The skills that employers and students showed most disagreement over are: critical/analytical thinking, a written communication, working with others in teams, and last but not least, locating, organizing, and evaluating information. Is it acceptable for a student to pay a substantial amount of money to have an opportunity for a decent job, only then to graduate without the basic skills required to be successful in their field of study?

All things considered, the hyperinflation of tuition is not a problem that can be solved at the state level; this is a problem that would need to be fixed at the federal level. However, the federal government has not taken appropriate measures to solve this issue. Texas has responded by developing accessible and affordable degree programs at the state level in order to enable students of low socioeconomic backgrounds to pursue a college degree.

Texas’ very own Rick Perry understood how difficult it is for low-income students to put themselves through college. Therefore, in 2011, he challenged all Texas institutions of higher learning to develop a $10,000 bachelor’s degree. This challenge prompted the Texas Higher Education Coordinating Board (THECB), along with Texas A&M University—Commerce and South Texas College, to launch the Texas Affordable Baccalaureate Program in the spring of 2014.

This is a competency-based degree program, which offers a seven-week flat-rate fee in order to help students earn their degree at an affordable price, and to ensure that students get to keep course credits they have already earned. The program costs $750 for each seven-week period of enrollment, and the price of a 120-hour degree is between $7000 and $14,000. This is an affordable alternative to current prices that institutions of higher learning in the state of Texas offer. In addition to its impressive commitment to providing Texas students with an affordable alternative to traditional degree programs, the Texas Affordable Baccalaureate Program wants to ensure that at least 80 percent of matriculating students complete the program, maintain an annual retention rate of at least 80 percent, and achieve sustainability by the fifth year of the program’s implementation.

This degree program does not attempt to address all of the flaws within our current public postsecondary education system. The solution for hyperinflation of tuition rests in the hands of the federal government and the universities themselves. Though this may be the case, the states can follow Texas’s example and take steps to ensure that students are offered bona fide alternatives to the average Bachelor’s degree plan.

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