The Widening Gap
Who gets left out when tuition rises?
Colin Kramer did everything right.
He researched his college options, scored well on the ACT, and socked away as much money as he earned—working 25 hours a week during the school year and full time in summers—ever since he was 16. He wanted to be the first in his family to achieve an education beyond a few courses at a community college, even if that meant paying for it himself.
“I watched my mom struggle to pay for parochial school for me and my brother when she couldn’t afford it and keep us in a home when it was way more than she could afford.... I wanted to remove some of the burden from her.”
So when this freshman from River Grove, Ill., was accepted into the chemical and biomolecular engineering program at U of I, he thought the hardest part was over.
Until he applied for financial aid. Now Kramer worries about how he’ll pay for next year. After receiving $2,000 in grants and scholarships, taking out all the federal loans for which he is qualified, and working two part-time jobs to meet his payments, he watches his bank account dwindle by $2,000 a month.
As with a growing number of students, rising tuition and fees are threatening to price him out of Illinois.
For the first time in the University’s history, it now receives a larger portion of its operating budget from tuition than from the state appropriation. In 1970, U of I received $12 in direct state tax support for each $1 in tuition revenue; in 2010, it was 80 cents from the state for every $1 in tuition. Families are filling the ever-widening gap left by the state in the form of higher tuition payments. The question facing everyone concerned with public higher education is, “How long can they continue to do so?”
Dan Mann, director of U of I’s Office of Student Financial Aid, is seeing more students like Kramer—from families whose earnings place them just above the cut-off for federal and state grant aid yet for whom the rising cost of college is increasingly difficult to absorb.
“We sailed past the point a couple of decades ago when you could work your way through college,” says Mann. And for all practical purposes, he says, the dividing line for whether a family of four qualifies for any grant aid is about $75,000. At Illinois when the total costs of college—including room, board, travel, and books—are taken in consideration, the ticket price for a year is between $27,000 and $32,000. “That’s half a year’s salary based on the average income data in Illinois,” says Mann who is seeing problems in families earning as high as $100,000-$125,000. “That’s just not manageable for these families.”
In the past decade, tuition and fees at U of I has tripled, from a base average of $4,770 in 2000 to $12,528 in 2010. This year, the base rate is $13,508, earning U of I a rank of third in the Big Ten in cost, behind Northwestern, which is a private university, and Penn State.
Unquestionably, U of I is a more costly enterprise to run than in the past. However, the unprecedented increases in the cost of attending have one primary cause: plummeting state support. Since 2002, the University has lost 30 percent of its direct appropriation—in adjusted dollars, it is now 26 percent below 1969 levels.
“There’s a point at which we can’t continue increasing tuition if we want to remain true to our landgrant mission—the belief that ability, not wealth, should be the primary criterion for attending U of I,” says Ruth Watkins, dean of LAS. “We are nearing that point.”
Rewriting the Social Contract
Landgrant universities sprang from the Morrill Act, signed by Abraham Lincoln in 1862, that allocated land to each state to sell and use the proceeds in creating a university. With few exceptions (Cornell University and the Massachusetts Institute of Technology), all are public and have long depended upon generous state subsidies to offer college educations at below market rates. The original genius of this low tuition model is that it vested large segments of society in the democratic system by providing them a means of upward mobility. At the same time, it supplied the states and nation with the educated workforce they needed for economic growth.
Although distinguished by their egalitarian approach to education, many landgrant universities have long competed with their private counterparts in reputation and quality. With the erosion of state support, U of I and other “people’s universities” are scrambling to find their niche in an arena in which they never intended to compete: net cost versus sticker price.
“Playing the high-tuition, high-aid game is something the private schools do really well,” says Randy Kangas, associate vice president for planning and budgeting for the University of Illinois system. “They announce a giant sticker price but everyone gets something, everyone feels special. I don’t think it serves us as well as the strong state support model. However, to protect quality and be competitive for top faculty, we have had to move in that direction.”
Many private universities have large endowments and relatively small student populations that enable them to flatter students with scholarship offers yet still maintain a higher price tag than their public school peers, says Keith Marshall, director of admissions at U of I, who points to cost and lack of scholarships as the top reasons students give for attending another college.
“A student says, ‘I got a $10,000 scholarship from X private university and nothing from you.’ Well, we try to point out that they’re at $50,000, so even if they are given $10,000, the cost is still higher, but the student still says it made them feel special.”
Public universities in states less hard hit than Illinois are already learning how to play the scholarship game. Several from surrounding states—Indiana, Iowa, Missouri, Wisconsin—are trying to raise their student profiles by targeting scholarships at high-achieving students in Illinois and undercutting U of I’s tuition. U of I is poorly positioned to retaliate because it has few merit scholarships to offer, and most aren’t awarded until after the student is on campus, defeating their value in recruitment.
The latter is a structural issue that can be addressed; the former—a lack of scholarship funds—is more pernicious. Says Mann, “It’s hard to explain to someone who has always wanted their child to come to Illinois, and their child is obviously meritorious, but we simply don’t have enough need- or merit-based scholarships to offer.”
Leaving Money on the Table
Many economists argue that the high-tuition model is more efficient at matching costs to income because scholarships can be awarded as a kind of rebate to those of lesser wealth, says Jennifer Delaney, an assistant professor of education policy, organization, and leadership at U of I. In the state-support model, everyone pays the same rate.
“We have wealthy students attending U of I that could pay two, three, or even four-times the current tuition rate,” says Delaney. “Some economists will argue that we’re essentially leaving money on the table by not charging the higher rate. But the concern is that you are squeezing out students at the lower end if student aid isn’t keeping up.”
Which is what is happening now.
For Illinois’s poorest students, the two major sources of financial aid for students who qualify—the federal Pell program and Illinois’s venerable Monetary Award Program, or MAP, one of the oldest and most-generous aid programs in the nation—isn’t keeping pace with increases in tuition and fees. When MAP was established in 1969, its awards paid up to 100 percent of tuition and fees. In 2003, the same year that state aid to universities began to plummet, the agency that oversees MAP, Illinois Student Aid Commission, tried to rein in its costs by no longer calibrating its award amounts to tuition. As a result in 2010 the largest MAP grant at a four-year university in Illinois covered only 48 percent of tuition and fees.
For families with incomes above the cut-off for grant aid, like Colin Kramer, students and families are borrowing at unprecedented rates. U of I’s Mann says that the average indebtedness for the approximately 50 percent of families who borrow for college is $21,543, up from $15,000 in 2003-04.
Average student loan indebtedness for graduating seniors at U of I is just above the amount that Mann and other Big Ten financial aid directors generally agree is manageable.
“The $20,000 to $30,000 range is what we call the yellow light, or warning light,” says Mann. “Depending on your major and your expected salary range, that may or may not be a manageable debt load. The red light, where you begin to have significant risk, is when you get over $30,000. As of 2009-10, 17 percent of U of I students who borrowed (one in ten graduating seniors) were above the $30,000 rate.”
Building Institutional Aid
The most discouraging aspect of the funding trend for U of I is that even with back-to-back tuition increases of 8.5 to 9 percent, the increases do not keep up with losses in tax support, says Kangas. “When adjusted for inflation, the University now receives $1,028 less per student than it did in 1980,” says Kangas.
To fill the gap thus far, U of I has reallocated resources, deferred hundreds of millions in maintenance, and cut popular programs that are no longer central to the University’s mission, such as its Police Training Institute.
The University system has also made modest strides in providing student aid, increasing the amount of dollars available for the neediest students from $1 million in 2000 to $45 million today. That sum, however, is divided among all three campuses. The Urbana campus alone has nearly $67 million in unmet financial need every year, as defined by what it costs to attend U of I and what students are able to pay.
Few campus administrators believe that the state will abandon the University wholesale. Instead, they foresee rough years ahead and slimmer appropriations in the longer term. As with private universities, alumni support will play an increasingly vital role, particularly in providing student aid.
Towards that end, the College of LAS launched a scholarship campaign this fall to coincide with the renovation of Lincoln Hall—the first state-funded capital program for the University in eight years. The college created naming opportunities within Lincoln Hall—from pavers to classrooms—with all funds going towards scholarships.
“Lincoln believed in a ‘right to rise,’ and that a great nation provided opportunities, such as education, so that people from any income level could rise as high as their ability and drive would take them,” says LAS’s Watkins. “It seemed fitting that a building named in honor of the president who made public universities possible should help to preserve access to opportunity. After all, that’s what’s at stake.”
Other colleges are likely to follow soon with their own scholarship efforts, which can’t come too soon for Colin Kramer.
“It’s scary,” says Kramer about taking out the large loans he’ll need to continue on at U of I. “But I’m working towards a better future, to not have to go through what my mom went through, and to not have to put that burden on my children. It’s an investment—that’s what I have been told, and I firmly believe that.”
By Holly Korab