A Longitudinal Analysis of Student Fees: The Roles of States and Institutions

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A Longitudinal Analysis of Student Fees: The Roles of States and

Institutions

Robert Kelchen1 Assistant Professor

Department of Education Leadership, Management and Policy Seton Hall University

March 1, 2014

PRELIMINARY PAPER: Please do not cite without permission of the author. Keywords: Student fees; tuition; state policies; intercollegiate athletics

Abstract: Student fees are used to finance a growing number of services and programs at colleges and universities, including core academic functions, and make up 20% of the total cost of tuition and fees at the typical four-year public college. Yet little research has been conducted to examine state-level and institutional-level factors that may affect student fee charges. In this paper, I use state-level data on tuition and fee policy, the role of state governments and higher education systems, and partisan political balance combined with institutional-level data on athletics programs and selectivity to create a panel from the 1999-2000 to 2011-12 academic years. I find that some state-level factors that would be expected to reduce student fees, such as fee caps, do reduce fees at four-year public colleges, but giving the legislature authority to set fees results in higher fees. Additional state grant aid and higher-level athletics programs are also associated with higher fees in my primary model.

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I would like to thank Andy Carlson of the State Higher Education Executive Officers Association (SHEEO) for helping me locate prior SHEEO state tuition and fee surveys and Carl Klarner at Indiana State University for collecting data on the partisan balance of state legislatures and governorships, as well as Sisi Li for her able research assistance. All errors remain my own.

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The cost of attending college has risen faster than inflation over the past several decades. Between the 1983-84 and 2013-14 academic years, inflation-adjusted tuition and fees increased by 153% at private four-year colleges, 164% at community colleges, and a whopping 231% at public four-year universities (Baum & Ma, 2013). As colleges and universities scramble for additional revenue to fund academic and non-academic pursuits, student fees (separate from tuition) have become an increasingly common funding source. Increases in tuition and fees can be examined separately beginning in 1999, the first year in which colleges were required to separately report tuition and fees to the U.S. Department of Education.

Between the 1999-2000 and 2012-13 academic years, inflation-adjusted fees grew faster than tuition (in percentage terms) at the median institution in all sectors of nonprofit higher education. The median amount of fees increased by 117% at community colleges, 81% at four-year public colleges, and 61% at four-four-year private colleges (author’s calculations using IPEDS data). Fees at the median institution in 2012-13 were $1,280 at four-year public colleges, $516 at four-year private colleges, and $353 at two-year public colleges. These fees add on over 20% to the cost of tuition at the median four-year public college.

Student fees have traditionally been used to fund specific campus programs such as student unions and recreational facilities, but the number and types of fees have increased substantially over the past two decades (Wang, 2013). As an extreme example, the University of California-Santa Cruz has over thirty separate fees, including fees for “seismic safety,”

“community and resource empowerment,” and “community and resource empowerment,” totaling over $2,000 per academic year.2 Separating fees for these services from tuition has the

2_{UCSC’s complete list of fees can be found at} http://registrar.ucsc.edu/fees/registration/undergraduate-student-fees.html#undergraduate-fees.

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added benefit of making tuition increases appear smaller while still getting the revenue from fees (Hearn, 2003).

An institutional-level concern at both public and private colleges is the use of fees to fund auxiliary enterprises such as recreation centers, student union buildings, and athletics in order to keep up with their peers or become more prestigious (e.g. Armstrong & Hamilton, 2013). While colleges and universities, as labor-intensive industries, point to William Baumol’s (1967) “cost disease” hypothesis as the primary driver of cost increases in higher education, Martin and Hill (2013a, 2013b) found that the importance of institutional actions outweighed Baumol’s cost disease.3 This spending on “college consumption amenities” helps to attract relatively low-achieving, high-income students who do not receive large institutional aid packages (Jacob, McCall, & Stange, 2013), but raises the cost of attendance for other students. While NCAA Division I athletics programs may help recruit students (Pope & Pope, 2009), they almost always require university subsidies and/or student fees (Berkowitz, Upton, & Brady, 2013).

The growth in student fees at public institutions may be partially explained by state-level and institutional-level factors. Public institutions in some states may have strong incentives to use student fees as a revenue-generating source, as caps on tuition increases are more common than caps on fee increases and institutions tend to have more control over fee revenue than tuition revenue (Carlson, 2013). In some states, fees have been used as a revenue-generating source for core instructional activities when state governments have limited tuition increases. At the same time, some state grant programs have stopped paying for fees as program costs

increased.

3_{Archibald and Feldman (2008) found that Baumol’s cost disease is a far more important cost driver when looking} over the past 80 years, but did not specifically examine the most recent trends.

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An extreme example of state behaviors regarding tuition and fees is Massachusetts, where tuition at the four University of Massachusetts institutions (a maximum of $1,714 per year) has not changed this century while fees have tripled (author’s calculation). Cohodes and Goodman (forthcoming) noted that the reason behind this may be that institutions get to keep all fee revenue, while tuition revenue goes directly to the state. Other states have limited the scope of need-based or merit-based grants to cover tuition only instead of fees. An example of this is the Georgia HOPE scholarship, which no longer covers fees due to rising program costs (Sielke, 2011).

State-level factors such as partisan political control and higher education governance structures have been shown to impact tuition rates. For example, Tandberg (2010) found that more liberal states tend to fund higher education more generously, but this relationship is weaker if Democrats control the legislature and the governor’s office. Additionally, Knott and Payne (2004) showed that states with more centralized governance structures tend to have higher tuition. However, these studies did not specifically examine trends in fees, a gap which my study seeks to fill.

In this paper, I examine the following research questions:

(1) What are the trends in inflation-adjusted student fees since 1999? How do they vary by institutional control and sector?

(2) Are changes in student fees at public institutions affected by state-level factors including:  The size and scope of state merit- and need-based grants?

 The authority of the institution, state coordinating/governing boards, and elected officials to control tuition and/or fees?

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(3) Are changes in student fees affected by institutional-level factors, including the magnitude of the athletics program and selectivity?

Types of student fees

Student fees can be used to support a wide range of institutional priorities, but they generally fall into one of two categories. They are increasingly used to directly subsidize core instructional priorities such as maintaining information technology and library services, something which used to be included in the price of tuition. They are also used to pay for

spending on student services or auxiliary enterprises designed to meet actual or perceived student demands, such as campus union facilities, recreation centers, and athletics.

Fees for instructional priorities

The operating budgets for many key institutional priorities are being squeezed both on the revenue and expenditure sides. At the same time that many institutions are facing reductions in per-student appropriations, operating costs continue to rise. This has led institutions to enact or increase student fees to pay for core instructional priorities. These fees can be used as general instructional fees to supplement tuition or can be targeted toward specific endeavors such as libraries.

An example of student fees being used to help support instruction is the Georgia Board of Regents’ implementation of a special instructional fee at all institutions in the University System of Georgia starting in the spring of 2009. Sterritt’s (2011) case study of the implementation noted that the fee was implemented directly by the Board of Regents; students did not have a direct

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opportunity to voice their opinion on the subject. Once implemented, the fee quickly increased from an average of $75 per semester in spring 2009 to $250 per semester by the fall of 2011 (Sterritt, 2011). This fee had an additional appeal to the state of Georgia, as its popular HOPE scholarship no longer covered fees (Sielke, 2011). For that reason, administrators interviewed by Sterritt noted that the instructional fee, although officially listed as temporary, would be unlikely to go away.

Student fees can used to fund certain instructional activities, such as libraries. For example, a report by the American Library Association (2013) noted that the cost of providing access to academic journals has increased from 21% of a library’s budget in 1989 to 30% in 2009. Cullier and Stoffle (2011) described how several universities have enacted fees to pay for libraries over the past decade, including their own University of Arizona. They discussed how Arizona’s libraries requested a fee of $30 per year that began in 2007 and grew to $120 per year by 2010. Some published research even counsels administrators about how to successfully increase student fees in order to increase revenues. Keppler (2010) discussed how student fees can be used to increase revenue for student services, particularly by switching salaries to the new fee-supported positions. Cullier and Stoffle (2011) also provided suggestions about how to successfully get a fee increase, such as talking with students, being accountable, and using data to support claims.

Fees for student services and athletics

While student fees for key instructional activities may not make students happy, they generally do not receive the same amount of scrutiny as do fees for auxiliary enterprises (such as campus recreation centers and campus union buildings) and athletics. Fees for these items have

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gained greater scrutiny in recent years as many institutions have constructed new facilities in order to compete with peer institutions or to become more prestigious (e.g. Armstrong & Hamilton, 2013). This spending does seem to pay off for a number of institutions. As Jacob, McCall, and Stange (2013) noted, the students attracted by “college consumption amenities” such as student activities and athletics tend to be relatively low-achieving, high-income students—the type of students who do not receive large institutional aid packages. They demonstrated that students appear to be willing to pay more for an additional 1% in student spending than an additional 1% in the SAT score distribution.

Spending on athletics is prioritized at some colleges, as they chase the dual goals of increasing their public presence through successful programs and raising revenue (e.g.,

Weisbrod, Ballou, & Asch, 2008). Athletics programs are fueled by student fees that can reach $500 per year at some institutions, particularly NCAA Division I schools outside of the big-name football conferences such as the Big Ten and Southeastern Conferences (Denhart & Ridpath, 2011). A recent USA Today report by Berkowitz, Upton, and Brady (2013) noted that only seven of the 228 public universities in NCAA Division I were truly self-sufficient, relying on no

institutional subsidies or student fees. However, there may be other benefits to athletics programs that go beyond direct revenue generation. Pope and Pope (2009) showed that student applications increase with football and men’s basketball success, while Perez (2012) found that success in these two sports induces more local students to enroll at California State University campuses.

State conditions and student fees

Student fees at public institutions may be affected by state conditions and policies, although little research exists in this area. As a result, I consider the literature on the impact of

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state policies on tuition and fees combined before testing for the separate effects of tuition and fees later in this paper.

Figure 1 below shows the average amount of student fees by state (not weighted for enrollment) for the public four-year and two-year sectors in the 2012-13 academic year. Among four-year institutions, the median fee across states was nearly $1,300 for first-time, full-time students, with five states (Connecticut, Massachusetts, New Jersey, South Dakota, and Virginia) having an average institutional fee of more than $2,500 and Massachusetts institutions charging the highest average fee of $8,280. Four states (Hawaii, Kentucky, Michigan, and Mississippi) charged less than $500 per year in fees, with Mississippi institutions having the lowest average fee of $238.

[Insert Figure 1 here]

Community colleges tend to have much lower fees than public four-year institutions. Six states (Arizona, California, Hawaii, Kentucky, Mississippi, and North Carolina) had average fees of $200 or less across their community colleges, with Kentucky having the lowest fees at only $23 per year. Four states (Kansas, Massachusetts, Montana, and South Dakota) charged more than $900 in fees in the 2012-13 academic year, with Massachusetts again having the highest fees at $3,250.

The decline in state funding effort for public higher education over the past several decades has been well-documented (e.g. Archibald & Feldman, 2006; Hossler, Lund, Ramin, Westfall, & Irish, 1997), as flat or slowly declining per-student appropriations have generally failed to prevent sizable increases in tuition (e.g., Ehrenberg, 2006). However, the research examining the extent which state-level appropriation levels are associated with tuition and fee

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levels is less clear due to the presence of different philosophies regarding tuition and financial aid policies (e.g., Hearn, Griswold, & Marine, 1996; Koshal & Koshal, 2000). The only existing study examining the relationship between state appropriations and student fee levels is by Arnott (2012), who used data from the Integrated Postsecondary Education Data System (IPEDS) from the 2008-09 academic year for public universities and found that a one percent increase in government appropriations was associated with a 0.45% increase in fees paid by the average undergraduate student.

In addition to substantial differences in tuition and fee levels by state due to different higher education funding philosophies, there are differences in the generosity of state grant aid programs. Some states (such as Massachusetts and Georgia) limit their grant aid programs to tuition only, which can impact the rate of fee increases. The value of grant programs in the 2011-12 academic year varied considerably across states, ranging from $24.65 per person between the ages of 18 and 24 in Arizona to $680.36 per young adult in Tennessee (National Association of State Student and Grant Aid Programs, 2013).4 The typology of appropriations and financial aid policies by Toutkoushian and Shafiq (2010) into high and low state appropriations and grant aid categories helps to explain state funding mechanisms, which could potentially impact

institutional tuition and fee structures. Only eight states provided high levels of both state appropriations and financial aid in the 2005-06 academic year, while most states either emphasized one of the two funding strategies or provided relatively little funding to higher education.

4_{New Hampshire was the only state not to have any type of state grant program in 2011-12. Additionally, the} NASSGAP report combined undergraduate and graduate aid, which I disaggregate in my analyses.

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The structure of state public higher education systems varies considerably across states. While all public institutions in some states (such as Wisconsin and California) are a part of a larger statewide system, colleges in other states have much more autonomy regarding tuition and fee policies. These differences in governance structures have been shown to impact combined measures of tuition and fees. Lowry (2001) concluded that states with coordinating boards of higher education had lower net prices in fiscal year 1995 than states where institutions had more autonomy. Knott and Payne (2004) used data from master’s-level and doctoral-level public universities from 1987 to 1998 and found that states with more centralization and less institutional autonomy had lower tuition. Additionally, Tandberg (2013) showed that the

presence of a consolidated governing board was associated with lower appropriations using panel data from 1974 to 2004.

A large body of literature has examined the relationship between state-level political conditions and college pricing. Doyle (2012) found that states with more liberal legislators have lower tuition, conditional on the percentage of students enrolled at public institutions being relatively high. Other studies have demonstrated positive relationships between Democratic political control at the state level and more state appropriations for public institutions (Archibald & Feldman, 2006; McLendon, Hearn, & Mokher, 2009; Weerts & Ronca, 2006). Other research has come to a different conclusion. Tandberg (2010) showed that more liberal states tend to provide more funding for higher education, but Democratic control of the legislative and executive branches led to more K-12 spending at the expense of higher education. Finally, Weerts and Ronca (2012) linked additional state funding for public institutions to Republican legislative control; this finding was driven by increased funding to community colleges.

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Data, Sample, and Methods

To explore trends in student fees over time and possible mechanisms influencing their increase over time, I used 14 years of data on undergraduate tuition and fees combined with information about state-level and institutional-level conditions over the corresponding period.

Data

The United States Department of Education first collected tuition and fees separately in the 1999-2000 academic year.I used data from the Integrated Postsecondary Education Data System (IPEDS) through the 2011-12 academic year for the panel regressions and through 2012-13 for selected tables and graphics. Tuition and fee measures are adjusted for inflation to 2012 dollars using the Consumer Price Index. For four-year institutions, I included the level of the athletic conference in which the college’s basketball team participated, with separate categories for NCAA Division I, II, III, and NAIA affiliations.5 NCAA Division I is divided into two categories based on football: the higher-revenue Football Bowl Subdivision (formerly Division I-A) and the lower-revenue portion of Division I, consisting of the Football Championship

Subdivision (formerly Division I-AA) and Division I conferences that do not sponsor football. All colleges except those participating NCAA Division III and a select number of NAIA conferences are allowed to offer athletic scholarships.

Three measures of institutional selectivity in IPEDS data were used for four-year institutions: the median ACT score, the percent of applicants who were accepted, and the yield

5_{I used basketball affiliation instead of football affiliation because nearly every college with athletic programs has a} basketball team, while football programs are not universal.

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rate (the percentage of accepted students who matriculated).6 Future versions of this paper will also include a measure of local and regional competition faced by four-year institutions based on these same measures of selectivity, whether public institutions are a part of a larger higher education system, and state/local appropriations to public colleges.

For my analyses focusing on public institutions, I supplemented IPEDS data with four state-level sources. I used five waves of surveys on state-level tuition and fee policies from the State Higher Education Executive Officers Association (SHEEO). These surveys were given to state fiscal officers in the 1998-99, 2002-03, 2005-06, 2010-11, and 2012-13 academic years. I used the following questions from the survey, with the wording from 2013 provided below (Carlson, 2013):

 “Which of the entities (governor, legislature, statewide coordinating/governing agency for multiple systems, coordinating/governing board(s) for individual systems, local district governing board(s), and individual institutions)…has the primary authority for establishing tuition?” [Asked separately for four-year and two-year sectors]

 “Has there been a curb, cap, freeze or other limit placed on tuition or fees at any time in your state in the past three fiscal years?” [Tuition and fees asked in separate questions]  “Please indicate which entities in your state (governor, legislature, state

coordinating/governing agency, individual/system governing board(s), and local district governing board(s)) have the authority to set mandatory fees. (Check all that apply.)” [Asked separately for four-year and two-year sectors]

6_{I used the median score for the ACT composite and SAT math and verbal scores; this was calculated by taking the} average of the 25th and 75th percentiles. SAT scores were transformed into their ACT equivalents using the

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For the first question, I collapsed the group of entities into governor/legislature, governing or coordinating board, and individual institutions. The response options for the first question were collapsed into full authority, some authority, and no authority—excluding a small number of “other” responses; multiple responses were allowed to this question. I collapsed the group of entities for the final question into governor/legislature, state governing or coordinating board, and individual or system governing board. Note that individual institutions was not an option for the question on setting mandatory fees, as that was likely assumed to be the default setting, and that multiple responses were an option for this question.

I made two sets of simplifying assumptions with the SHEEO data. First, because the SHEEO data did not always ask questions separately for the two-year and four-year sectors within a state across surveys, I consolidated responses by state by taking the highest level of authority when multiple responses existed. For example, if the legislature and/or governor were reported to have tuition-setting authority at one public university system within a state, I

assumed that to be the case across all systems. In years between surveys or when a state did not respond, I used the most recent year of data available. The number of states represented ranged between 35 in 2012-13 to all 50 in 2005-06; at least 44 states were represented in four of the five surveys.

Annual surveys from the National Association of State Student Grant and Aid Programs (NASSGAP) provided annual information on state need- and merit-based grant programs between the 1994-95 and 2011-12 academic years. From these surveys, I used the percentage of state aid given to undergraduates based on need and the inflation-adjusted amount of total aid per year in 2012 dollars. I combined the latter measure with annual state-level population data

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American Community Survey.7 This resulted in a measure of state aid funding per traditional college-age students—a measure of funding effort for grant aid.

Finally, I used a dataset on state partisan political balance created by Carl Klarner at Indiana State University, including detailed information on the political party of the governor, as well as the number of legislative seats held by each party. I employed annual measures of

partisan control of the governor’s office and both legislative chambers through 2012. These data notably excluded Nebraska on account of its unique unicameral legislature.

Sample

I began with all 2,478 Title IV-participating nonprofit colleges and universities in the United States that had tuition and fee data available for each year from 2010 to 2012.8 For-profit colleges were excluded due to their different governance structures and modes of course delivery that may not make student fees as relevant, and just over 100 two-year private colleges were excluded due to their number being too small for panel analyses. During the time period

examined in the panel analyses (1999-2000 to 2011-12), 170 of the colleges “reset” their student fees by dropping fees by at least $500 and raising tuition by at least $500. For example,

California State University System institutions charged zero tuition in the 2010-11 academic year, but charged $5,472 in 2011-12. During this period, fees dropped from about $5,000 to $1,000 at the typical CSU institution.

7_{The state-level Census data by age before 2000 provided data for the 15-19 and 20-24 age group. To get an} estimate of the number of residents between the ages of 18 and 24, I added two-fifths of the 15-19 age group to the 20-24 age group.

8_{I eliminated colleges with basic Carnegie classifications of 24 or higher, including theological seminaries, medical} schools, and other special-focus institutions.

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I addressed the concern of colleges changing fee policies by dropping years of data prior to the change in fee policies in order to examine institutions with consistent fee policies. This resulted in 63 colleges being dropped from the sample for resetting fees in 2010 and 2011, most notably the California State University institutions and colleges in the University of Minnesota System. The analytic sample included 2,415 colleges, including 506 four-year public colleges, 1,005 two-year public colleges, and 906 four-year private colleges. These institutions enrolled approximately 15 million undergraduate students during the 2011-12 academic year.

The summary statistics of the sample can be found in Table 1. About 36% of the four-year institutions in the sample are public, and less than one in five are classified as research universities. The average tuition at four-year institutions was just over $19,000 in the 2012-13 academic year, and the average amount of fees was around $1,000. The median ACT score in the sample was 23, just under two-thirds of all applicants were accepted, and about one-third of students chose to attend the typical college in the sample after being accepted. Only 23% of four-year colleges were in NCAA Division I conferences, representing the highest levels of

intercollegiate athletic competition and spending. The average tuition at public two-year colleges was just over $2,700 per year, and the average amount of fees was just under $500.

[Insert Table 1 here]

Just over half of public colleges in the analytic sample were in states that had a tuition cap in effect during the past three years, while just over one in four colleges were in states with a fee cap. The governor and/or legislature had primary tuition-setting authority over one in five colleges, and a similar percentage of colleges had the primary authority to set their own tuition. System or coordinating boards had primary tuition-setting authority for three in four public

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colleges.9 For about one in four colleges, the governor and/or legislature had at least partial authority to set fees, while both state governing/coordinating boards and individual or system boards had the authority for about 70% of colleges.

State undergraduate grant aid per state resident age 18-24 averaged $294 in the 2011-12 academic year, with values ranging from $0 (New Hampshire and Wyoming) to $679 in South Carolina. Notably, the top five states for per-resident grant aid (Arkansas, Georgia, South Carolina, Tennessee, and West Virginia) are all in the same region and have large merit-based aid programs. However, the average institution is located in state where about three in four dollars were allocated based on need. As of 2011, a majority of public colleges were in states with Republican executive and legislative control.

Methodology

My first research question (trends in tuition and fees over time) is purely descriptive in nature, so I graphically described trends by institutional sector between 1999 and 2012 (four-year public, four-year private, and two-year public). In future versions of this paper, I will also

examine institutions or types of institutions with unusually large or small changes in fees to see whether the change is related to tuition policies or other factors.

To answer my second and third research questions, I used mixed effects panel regression techniques using data from the 1999-2000 to 2011-12 academic years. The model for my second question (state-level factors for public institutions, run separately for two-year and four-year colleges) is the following for institution j in year t:

9_{Recall that multiple responses were allowed for this question, meaning that the percentages may add up to more} than 100%.

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where Fee represents inflation-adjusted student fees (replaced with tuition for a second analysis),

Carn is a set of vectors reflecting Carnegie, TFPol is a set of state-level tuition and fee policies (from SHEEO), Grant is a set of need- and merit-based grant program characteristics (from NASSGAP), Party is a set of partisan political control measures, Ath represents the college’s

athletics division (four-year institutions only), State is a set of state-level fixed effects, is the institutional-level effect, and is an idiosyncratic error term. I added these variables to the

regression in three blocks. Model (1) included Carnegie classification and state tuition/fee policies, Model (2) added data on state grant aid and partisan political control, and Model (3) added information about athletic conference participation.

My primary set of analyses excluded Massachusetts, as they are an outlier in tuition and fee policy over the time period analyzed. Fees in Massachusetts were between 50% and 100% higher than the next highest state (South Dakota) during this period. It appears to be an informal state policy that tuition will never increase and instead any additional revenue will be collected through fees. I present analyses including Massachusetts in the Appendix; although the point estimates can be substantially affected by including Massachusetts, the general pattern of results remained similar.

The model for my third question focused entirely on institutional-level measures’ potential influences on tuition and fees for four-year institutions only, with public and private institutions estimated separately:

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where Carn represents the Carnegie classification, Select is a set of institutional selectivity measures (ACT/SAT scores, admit and yield rates), and Ath is a set of dummy variables reflecting the institution’s NCAA athletics division or NAIA participation status.The

institutional selectivity measures were available for 2001 and 2003 through 2011 only, resulting in ten years of data instead of 13.

Limitations

The primarily limitations in this study were that data on key measures were aggregated to the state level or not available for each year. The SHEEO surveys, which I used to create

measures of tuition and fee oversight and policy, were completed by one representative of a higher education system in per state in some waves. This made creating sector-level measures through the panel impossible and may affect the results for two-year colleges. Additionally, the SHEEO surveys were given every two to four years, resulting in less current data than annual surveys.

My ability to include institutional-level measures was substantially reduced due to the limited nature of IPEDS data collection. For example, I would have liked to include a measure of whether a public institution was a part of a system of higher education, but that variable was first collected in the fall 2006 semester and was answered differently across years for colleges that remained in a system. Other measures, such as the percent of students receiving Pell Grants, also were not collected during the full period of the panel and hence had to be excluded. Finally, data for some colleges had to be dropped due to their “resetting” of fees into tuition during the period. I did not explore the reasons why colleges chose to reset fees, as that is beyond the scope of this paper.

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Results

I first examined inflation-adjusted trends in tuition and fees between the 1999-2000 and 2012-13 academic years. A graphical description of the trends can be found in the two panels of Figure 2 (levels over time) separated by sector (four-year public, four-year private, and two-year public). Among institutions in the analytic sample that had tuition and fee data available each year, inflation-adjusted fees both steadily increased between 1999 and 2012. Fees rose faster than tuition across all sectors (in percentage terms) even after excluding the small number of colleges that collapsed most or all fees into tuition during this period. Between 1999 and 2012, inflation-adjusted fees rose by 104% at public 4-year colleges, 75% at 4-year private colleges, and 96% at community colleges while inflation-adjusted tuition increased by 66%, 45%, and 50%, respectively.

The average annual inflation-adjusted percentage increase in tuition and fees for each of the three sectors is presented in the two panels of Figure 3. Tuition increases for public colleges peaked at approximately ten percent in 2003, before leveling off to around five percent per year above the rate of inflation for the remainder of the panel. Annual tuition increases for private colleges increased at between two and five percent above inflation between 2000 and 2012. Fee increases followed a broadly similar pattern, with rates approaching ten percent for public colleges in the early 2000s and similar rates for public and private colleges after 2005.

The results from regressions predicting fee and tuition levels based on Carnegie classification and state-level characteristics with state fixed effects for all states except

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Massachusetts can be found in Table 2. (Results including Massachusetts, which is an outlier for its tuition and fee structure, are in Appendix 1.) Colleges in states with a tuition cap in place charged $45 more per year in fees in the model with all covariates (Model 3), while a fee cap was associated with charging about $45 less per year in fees. Being located in a state with primary tuition authority belonging to the governor or legislature (compared to the reference group of campus authority) resulted in a $60 decrease in fees, while giving primary authority to a system or coordinating board resulted in a $60 increase. In the full model, there was no

statistically significant relationship between fee levels and the governor and/or legislature having at least partial fee-setting authority (compared to an individual campus or system board), but a state governing/coordinating board having some fee-setting authority was associated with a $56 increase.

Each dollar in state grant aid (need- or merit-based) was associated with a $1.90 increase in student fees, while each percentage point increase in state aid allocated based on need was predicted to increase fees by $6.15. Republican political control of the governor’s office and state Senate was estimated to result in fee decreases of $128 and $102, respectively, while Republican control of the state House did not have a significant relationship with fee levels. Finally, compared to the reference group of NCAA Division III (non-scholarship) athletics programs, colleges with major Division I programs charged an average $256 more in fees, smaller Division I programs charged $184 more in fees, and NAIA programs charged $135 less.

The relationships between institutional- and state-level measures and tuition are broadly similar, although typically larger in magnitude due to the average tuition rate being

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approximately four times as large as average fees. However, there were some differences. Net of other factors, Carnegie master’s and bachelor’s-level colleges had significantly lower tuition than research universities, while the relationship with fees was insignificant to weakly positive. Not surprisingly, colleges operating in a state with a fee cap tended to charge higher tuition and lower fees, whereas colleges facing a tuition cap charged $105 less in tuition while not significantly impacting fees. Giving fee-setting authority to the governor or legislature was associated with $224 higher tuition, while Republican control of the state House was associated with $367 lower tuition. The relationship between athletic program affiliation and tuition was weaker than with fees, with no statistically significant relationship between tuition and smaller NCAA Division I programs and a negative relationship with Division II programs.

The regressions predicting fee and tuition levels at two-year public colleges based on state-level characteristics are found in Table 3, with results excluding Massachusetts in

Appendix 2. Some of the relationships with respect to tuition and fees were similar to four-year public colleges, although the magnitudes were typically smaller due to community colleges having lower tuition and fees. However, there were some important differences. While state-level tuition caps were associated with higher fees at four-year colleges, the relationship was not statistically significant at two-year colleges.

State-level fee caps were estimated to result in slightly higher fees ($10 per year, p<.05) at community colleges, while they resulted in lower fees at four-year colleges. Gubernatorial and/or legislative influence (compared to institutional control) in the fee-setting process resulted in an additional $16 of fees at the typical community college, while there was no statistically

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significant relationship at four-year public colleges. State-level tuition caps were estimated to raise community college tuition by $41 per year, while tuition caps resulted in lower tuition for four-year public institutions. However, a fee cap was associated with $122 lower tuition at community colleges, while the relationship was not significant at four-year colleges.

Table 4 contains the results of regressions predicting fee and tuition values based on institutional characteristics including Carnegie classification, athletics program characteristics, and selectivity measures separately for public and private four-year colleges (excluding

Massachusetts public colleges). There was no statistically significant relationship between fees at four-year public colleges and Carnegie classification, although public bachelor’s-level

institutions had significantly higher tuition than public research universities. At private

universities, master’s and bachelor’s-level universities charged much less in tuition and fees than research universities.

Student fees at NCAA Division I public and private institutions were not significant than their non-scholarship peers in Division III when only considering institutional characteristics, a surprising result given the substantial level of athletic subsidies at many Division I institutions. (This is also the opposite result of that found in Table 2, when state-level characteristics and fixed effects were included.) Fees are lower at NCAA Division II and NAIA public colleges, which offer some athletic scholarships, than NCAA Division III public colleges. Tuition is lower at all other levels of athletic competition among public colleges compared to Division III, while tuition at private colleges is highest among Division I schools in the Football Bowl Subdivision.

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Institutional selectivity was strongly correlated with higher tuition and fees at both public and private colleges. Each additional point on the institutional median ACT score was associated with a $30 increase in fees and $184 increase in tuition at public colleges in addition to an increase in tuition at private colleges of $642. A one percentage point drop in the percentage of students accepted (a measure of selectivity) resulted in an increase in fees of $3-$4 for public and private colleges along with an increase in tuition of $16 at public colleges and $82 at private colleges. The influence of a one percentage point drop in the yield rate (which is correlated with higher average ACT/SAT scores) resulted in an even larger increase in tuition and fees,

including tuition increases of $33 at public colleges and $104 at private colleges.

Conclusion and Future Work

Both state-level and institutional-level characteristics have a clear impact on the amount of tuition and fees paid by students at four-year and two-year public colleges. The results of my panel regressions suggest that tuition and fee caps imposed by states were somewhat effective for four-year public colleges, but colleges appeared to charge more tuition to cover the lost fees when a fee cap is put into place. State-level tuition and fee caps were not effective at two-year public colleges, although this could be a function of the relatively low cost of community colleges and their local governance structures in many states.

The higher education governance structures within the state also impact tuition and fees. Compared to giving some or all authority to individual institutions, public colleges in states where tuition or fee authority rested with state governing or coordinating boards charge more in tuition and fees. Giving tuition-setting authority to the governor or legislature decreased both tuition and fees, but giving them fee-setting authority appears to have increased tuition and fees.

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Additional state grant aid funding increased tuition and fees, which is consistent with high-tuition, high-aid models. Finally, Republican political control was associated with lower tuition and fees.

In my model with state fixed effects, four-year public colleges that participated in NCAA Division I athletics charged about $200 more in fees than their non-scholarship Division III peers. This is consistent with the documented examples of student fees being used to subsidize college athletics and is a topic worth additional research. However, my panel estimates using only Carnegie classification, athletics participation, and institutional selectivity for public and private four-year colleges did not find the same effects. Given the additional years of data in the model with state fixed effects and the model’s larger explanatory power, I view the estimates of increased fees to fund athletics as being more likely; I will continue to investigate the differences in future versions of this paper.

This research has the potential to provide insights about how colleges and universities set fees relative to tuition, market conditions, and state political and economic constraints. In spite of the growing amount of student fees, relatively little is known about how they are set and what factors influence their amounts. I provide some information about factors associated with increased tuition and fees, but more research needs to be done to examine student fee policies and practices—particularly in public higher education.

In future versions of this paper, I will add three more measures that could help explain the increase in fees and tuition over time. First, I will consider a measure of state and/or local appropriations for public colleges and universities (from IPEDS) as an explanatory variable. I will also create a measure of whether a public college or university is a part of a broader system.

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As previously discussed, the IPEDS measure of system membership only goes back to the 2006-07 academic year and is inconsistent across years. I will use a combination of Office of

Postsecondary Education IDs (OPEIDs) and university/system records to create the measure. The third measure will be an estimate of institutional competition for four-year public and private colleges. This will be constructed based on the number of selective institutions within a certain distance of the college.

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Table 1: Summary statistics of the sample institutions.

Characteristic Mean St. Dev. Min Max N

Four-year institutions (2012) Public (pct) 35.9 48.0 0 100 1410 Carnegie research (pct) 18.7 39.0 0 100 1410 Carnegie master's (pct) 42.3 49.4 0 100 1410 Carnegie bachelor's (pct) 39.0 48.8 0 100 1410 Tuition ($) 19,404 12,346 0 45,900 1410 Fees ($) 1,027 1,166 0 11,516 1410

Median ACT score 23.0 3.4 14 34 1190

Percent of students accepted 63.6 18.5 5.8 100 1288

Yield rate (pct) 34.2 15.0 0.9 100 1288

Athletic division (pct)

NCAA Division I FBS 8.7 28.1 0 100 1410

NCAA Division I non-FBS 14.5 35.2 0 100 1410

NCAA Division II 16.3 37.0 0 100 1410

NCAA Division III 26.7 44.3 0 100 1410

NAIA 16.2 36.9 0 100 1410

Two-year institutions (2012)

Tuition ($) 2,728 1,455 0 12,474 1005

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Table 1: Summary statistics of the sample institutions (continued).

Characteristic Mean St. Dev. Min Max N

State-level characteristics (2012, public institutions only)

Tuition cap in last three years (pct) 51.3 50.0 0 100 1511

Fee cap in last three years (pct) 27.6 44.7 0 100 1511

Primary tuition-setting authority (pct)

Governor and/or legislature 19.4 39.5 0 100 1511

System or coordinating board 74.9 43.4 0 100 1511

Campus 23.2 42.2 0 100 1511

Has fee-setting authority (pct)

Governor and/or legislature 25.9 43.8 0 100 1511

State governing/coordinating board 69.5 46.1 0 100 1511

Individual or system board 72.3 44.7 0 100 1511

State aid per 18-24 year old (2011, $) 294 171 0 679 1511

Pct aid as need-based (2011) 76.0 33.1 0 100 1491

Partisan political control (2011, pct)

GOP governor 54.7 49.8 0 100 1511

GOP state House 58.8 49.2 0 100 1498

GOP state Senate 59.7 49.1 0 100 1498

Sources: State Higher Education Executive Officers Association annual surveys (tuition and fee caps, tuition- and fee-setting authority), National Association of State Student Grant and Aid Programs (state need and merit aid), U.S. Census Bureau (age 18-24 population), Carl Klarner (state partisan political control), IPEDS (all others).

Notes:

(1) SAT scores were converted into ACT scores using ACT, Inc.'s (2008) concordance guide. (2) Tuition and fees from 1999 were adjusted into 2012 dollars using the Consumer Price Index.

(3) Survey respondents could select multiple values for primary tuition- and fee-setting authority.

(4) The percent of aid as need-based excludes New Hampshire and Wyoming, as they did not offer state aid programs for undergraduates in 2011.

(5) Partisan political control of the state legislature excludes Nebraska because of its unique unicameral legislature.

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32 0 1 0 0 0 0 2 0 0 0 0 3 0 0 0 0 T u it io n (2 0 1 2 $ ) 2000 2002 2004 2006 2008 2010 2012 Year

Public 4-year Private 4-year

Public 2-year

Source: IPEDS, average change within sector

Figure 2a: Inflation-Adjusted Tuition by Year

0 5 0 0 1 0 0 0 1 5 0 0 2 0 0 0 F e e s (2 0 1 2 $ ) 2000 2002 2004 2006 2008 2010 2012 Year

Public 2-year

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33 -1 0 5 0 5 10 15 An n u a l ch a n g e i n t u it io n (p ct ) 2000 2002 2004 2006 2008 2010 2012 Year

Public 2-year

Figure 3a: Annual Inflation-Adjusted Changes in Tuition

-1 0 5 0 5 10 15 An n u a l ch a n g e i n f e e s (p ct ) 2000 2002 2004 2006 2008 2010 2012 Year

Public 2-year

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Characteristic Model (1) Model (2) Model (3) Model (1) Model (2) Model (3) Carnegie master's -25.1 -16.2 144.9* -1361.2*** -1356.5*** -1055.6***

(77.8) (78.0) (85.1) (136.6) (138.1) (155.6) Carnegie bachelor's -297.2*** -299.0*** -97.2 -716.4*** -712.1*** -442.1**

(103.0) (103.3) (110.5) (180.9) (182.9) (200.8) Tuition cap in last 3 years 81.3*** 48.6*** 44.8*** -25.5 -99.4*** -105.4***

(16.1) (15.4) (15.3) (39.5) (36.4) (36.3) Fee cap in last 3 years 16.4 -40.9** -46.7*** 120.6*** -30.8 -40.9 (18.3) (17.4) (17.4) (44.9) (41.3) (41.3) -51.5* -60.2** -59.1** -353.0*** -317.4*** -308.7*** (30.0) (28.4) (28.4) (73.8) (67.3) (67.2) 100.6*** 62.1*** 59.5** 422.5*** 387.8*** 380.9*** (23.7) (23.0) (23.0) (58.1) (54.5) (54.4) 47.0** 19.6 18.9 276.3*** 228.7*** 223.5*** (22.9) (22.0) (22.0) (56.2) (52.1) (52.0) 134.3*** 58.7*** 56.3*** 611.4*** 368.6*** 354.0*** (20.4) (20.3) (20.3) (50.2) (48.1) (48.1) State aid per adult age 18-24 ($) 1.93*** 1.90*** 6.53*** 6.43***

(0.08) (0.08) (0.19) (0.19)

6.26*** 6.15*** 18.66*** 18.38***

(0.51) (0.51) (1.20) (1.20)

GOP governor -127.8*** -127.6*** -320.1*** -316.1***

(13.6) (13.6) (32.2) (32.2)

GOP state House control 15.0 12.7 -366.8*** -367.1***

(17.6) (17.6) (41.7) (41.6)

GOP state Senate control -102.8*** -101.7*** -100.5** -99.1**

(19.8) (19.8) (46.9) (46.8)

255.7*** 296.0*

(73.2) (158.2)

183.9*** -166.8

(48.9) (108.6)

NCAA Division II athletics -19.9 -487.1***

(43.4) (97.0) NAIA athletics -135.0*** -435.9*** (44.3) (101.3) R-squared 0.395 0.408 0.418 0.601 0.632 0.648 Number of institutions 494 488 488 494 488 488 Notes:

(1) * represents p<.10, ** represents p<.05, and *** represents p<.01.

(3) Estimates include state fixed effects (not reported).

Table 2: Regressions predicting fee and tuition levels, 1999-2011 (four-year publics, excluding Massachusetts).

(2) Omitted variables include Carnegie research, institutional control of tuition/fees, and NCAA Division III athletics.

Pct state aid allocated based on need

NCAA Division I FBS (I-A) athletics

NCAA Division I non-FBS athletics

Fees Tuition

Primary tuition authority: governor and/or legislature Primary tuition authority: system or coordinating board

Fee-setting authority: governor and/or legislature

Fee-setting authority: state governing or coordinating board

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Characteristic Model (1) Model (2) Model (1) Model (2)

Tuition cap in last 3 years 5.0 1.3 34.0*** 41.1***

(4.0) (4.0) (10.7) (10.1)

Fee cap in last 3 years 28.4*** 10.3** -36.4*** -122.1***

(5.0) (5.0) (13.4) (12.7) 14.9* 10.5 -165.8*** -141.8*** (8.2) (8.0) (22.0) (20.4) 37.5*** 31.4*** 41.2*** 40.3*** (5.6) (5.6) (15.0) (14.2) 17.7*** 16.4*** 166.9*** 131.7*** (5.2) (5.3) (14.0) (13.6) 46.1*** 37.8*** 193.8*** 190.0*** (5.4) (5.4) (14.5) (13.8)

State aid per adult age 18-24 ($) 0.39*** 2.41***

(0.02) (0.05)

1.93*** 4.25***

(0.14) (0.36)

GOP governor -27.9*** -17.6*

(3.7) (9.5)

GOP state House control 1.4 -82.0***

(5.2) (13.2)

GOP state Senate control -17.9*** -56.8***

(5.6) (14.2)

R-squared 0.391 0.397 0.650 0.662

Number of institutions 989 982 989 982

Notes:

(2) Omitted variables include Carnegie research and institutional control of tuition/fees.

Fees Tuition

Table 3: Regressions predicting fee and tuition levels, 1999-2011 (two-year publics, excluding Massachusetts).

Primary tuition authority: governor and/or legislature

Primary tuition authority: system or coordinating board

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Characteristic Public Private Public Private

Carnegie master's 175.2 -172.7** -697.0*** -3350.8*** (114.4) (69.3) (246.8) (558.5) Carnegie bachelor's -129.4 -201.2*** 948.0*** -3576.7*** (149.7) (68.2) (322.6) (550.4) -82.8 68.6 -324.7 -889.5 (95.3) (69.2) (217.2) (698.9) 73.4 44.0 -430.0*** 744.3** (63.0) (33.3) (145.2) (344.1)

NCAA Division II athletics -184.9*** 25.9 -677.0*** -739.2***

(56.2) (23.3) (129.5) (255.6)

NAIA athletics -201.2*** -9.6 -722.1*** -1677.0***

(68.4) (17.8) (158.4) (196.9)

ACT composite score 30.0*** -2.9 184.2*** 642.4***

(8.7) (2.8) (20.0) (30.0)

Percent of students accepted -4.49*** -3.27*** -16.36*** -81.65***

(0.70) (0.25) (1.63) (2.88) -8.95*** -3.66*** -32.61*** -103.6*** (0.73) (0.26) (1.70) (3.01) R-squared 0.082 0.041 0.197 0.600 Number of institutions 456 807 456 807 Notes:

(3) Estimates do not contain institutional fixed effects.

(2) Omitted variables include Carnegie research and NCAA Division III athletics.

Percent of admitted students attending (yield rate)

Fees Tuition

Table 4: Regressions predicting fee and tuition levels based on institutional factors, 1999-2011 (four-year colleges, excluding Massachusetts publics).

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Characteristic Model (1) Model (2) Model (3) Model (1) Model (2) Model (3) Carnegie master's -78.6 -70.8 93.2 -1343.1*** -1338.1*** -1050.9***

(78.5) (78.7) (88.3) (133.4) (134.8) (151.5) Carnegie bachelor's -324.3*** -325.6*** -113.5 -716.9*** -712.6*** -455.2**

(104.0) (104.3) (114.2) (176.6) (178.5) (195.6) Tuition cap in last 3 years -74.4*** -111.4*** -115.3*** 0.5 -85.2** -90.8***

(19.0) (18.7) (18.7) (38.1) (35.0) (34.9) Fee cap in last 3 years 60.1*** 14.4 8.4 113.6** -34.8 -45.1 (22.2) (21.8) (21.8) (44.4) (40.7) (40.7) 5.3 -20.3 -19.1 -362.4*** -320.6*** -311.9*** (36.4) (35.5) (35.6) (73.0) (66.5) (66.4) 107.7*** 73.0** 70.6** 424.5*** 389.2*** 382.1*** (28.7) (28.8) (28.8) (57.5) (53.9) (53.8) 48.8* 39.0 38.4 275.9*** 227.0*** 221.7*** (27.8) (27.6) (27.5) (55.6) (51.6) (51.5) 233.4*** 142.4*** 140.9*** 573.9*** 350.3*** 336.2*** (24.2) (24.9) (24.9) (48.6) (46.5) (46.5) State aid per adult age 18-24 ($) 1.48*** 1.44*** 6.55*** 6.45***

(0.10) (0.10) (0.19) (0.19)

5.48*** 5.36*** 18.73*** 18.44***

(0.63) (0.63) (1.19) (1.19)

GOP governor -217.2*** -217.1*** -307.7*** -303.5***

(16.8) (16.7) (31.3) (31.3)

GOP state House control 82.3*** 79.7*** -373.7*** -374.0***

(22.0) (22.0) (41.1) (41.0)

GOP state Senate control -62.5** -61.0** -104.5** -103.2**

(24.8) (24.8) (46.4) (46.3)

268.4*** 293.9*

(86.4) (155.6)

244.5*** -171.1

(58.8) (107.2)

NCAA Division II athletics -3.3 -489.0***

(52.4) (95.7) NAIA athletics -120.8** -437.2*** (54.3) (100.1) R-squared 0.561 0.570 0.577 0.621 0.651 0.666 Number of institutions 506 500 500 506 500 500 Notes:

(2) Omitted variables include Carnegie research, institutional control of tuition/fees, and NCAA Division III athletics.

Appendix 1: Regressions predicting fee and tuition levels, 1999-2011. (four-year publics, including Massachusetts).

Fees Tuition

Primary tuition authority: governor and/or legislature Primary tuition authority: system or coordinating board Fee-setting authority: governor and/or legislature

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Characteristic Model (1) Model (2) Model (1) Model (2)

Tuition cap in last 3 years -22.0*** -29.6*** 37.2*** 38.6***

(4.4) (4.4) (10.4) (9.8)

Fee cap in last 3 years 38.8*** 25.4*** -37.8*** -121.1***

(5.6) (5.6) (13.3) (12.6) 25.8*** 19.3** -167.0*** -140.9*** (9.1) (9.0) (21.8) (20.3) 40.8*** 33.5*** 41.7*** 41.9*** (6.2) (6.2) (14.9) (14.1) 11.9** 18.9*** 168.1*** 132.4*** (5.8) (6.0) (13.9) (13.5) 74.3*** 63.9*** 186.2*** 186.3*** (5.9) (6.0) (14.1) (13.5)

State aid per adult age 18-24 ($) 0.30*** 2.41***

(0.02) (0.05)

1.83*** 4.27***

(0.16) (0.35)

GOP governor -49.1*** -18.5**

(4.1) (9.3)

GOP state House control 12.0** -81.5***

(5.8) (13.1)

GOP state Senate control -5.1 -56.3***

(6.2) (14.1)

R-squared 0.567 0.572 0.649 0.661

Number of institutions 1005 998 1005 998

Notes:

(2) Omitted variables include Carnegie research and institutional control of tuition/fees.

Appendix 2: Regressions predicting fee and tuition levels, 1999-2011 (two-year publics, including Massachusetts).

Fees Tuition

Primary tuition authority: governor and/or legislature

Primary tuition authority: system or coordinating board