ON COLLEGE AFFORDABILITY: Are New Financial Aid Policies at Major Public Universities Working?

June 28, 2016

June 28, 2016 - In an era of significant disinvestment in public higher education by state governments, many public universities are moving toward a “progressive tuition model” that attempts to invest approximately one-third of tuition income into institutional financial aid for lower-income and middle-class students. The objective is to mitigate the cost of tuition and keep college affordable. But is this model as currently formulated working? What levels of financial stress are students of all income groups experiencing? And are they changing their behaviors?

A new study by Patrick Lapid and John Aubrey Douglass utilizes over 130,000 responses from the 2014 Student Experience in the Research University (SERU) Survey of undergraduates and other data sources to explores these issues, focusing on students at the University of California and ten AAU institutions that are members of the SERU Consortium. They also compare the results of an earlier SERU study on affordability based on 2010 data. The post-2008 era is marked by the onset of the Great Recession and significant increases in tuition. The SERU database provides a unique source for understanding the experience and financial stress and behaviors of students by income groups and other variables.

“In this era of a sharp decline in public investment in higher education, forced reductions in university operative costs, and rising tuition and fees,” the authors note, “the University of California experienced an increase in the number of lower-income students – a counterintuitive finding to the general perception that higher tuition equals less access to the economically vulnerable.” The net cost of attendance diverged greatly by family income since the introduction of UC and state financial aid plans starting in 2009–2010 that include returning approximately 33 percent of all undergraduate tuition income to aid for low-income students. As a result, “lower-income UC students have had little change in their net costs, while higher-income students are paying significantly more to attend.” Other conclusions of their study:  

  • Student loan borrowing among lower-income students has only increased slightly; middle- and upper-income students are both more likely to borrow and have borrowed more since 2009.
  • Students’ concerns for paying for higher education and accumulated student debt in the 2014 SERU are predictably higher among lower-income students, but that upper-middle income students (with annual family incomes from $80-125,000) are the least likely to agree that the cost of attendance is manageable.
  • University of California students are less likely to work for pay versus their non-UC peers in the 2014 SERU survey, across all income groups as well as among independent students.
  • UC students were more likely to report skipping meals to meet college expenses.
  • Middle and upper-middle income students at UC in 2014 took slightly more actions to meet college expenses compared to similar UC students in 2010.
  • Higher-income students and non-UC AAU students in the 2014 SERU survey are more likely to express satisfaction with their GPA, even though GPA distributions are only slightly higher for these students.
  • Majorities of low-, middle-, and high-income students express academic and social satisfaction with their college experiences; higher-income students and non-UC students are slightly more likely to express satisfaction and to agree with statements on student belonging.
  • Underrepresented minority students, followed by Asian students, had higher concerns over debt accumulation than White students, again across income groups.

The authors note, “With some qualifications, the progressive tuition model appears to be working in terms of affordability and with only moderate indicators of increased financial stress and changed student behaviors. These results are not necessarily predictive of the future if tuition rates go up further, or if financial aid support declines relative to the cost of tuition and living expenses. But they do indicate that higher tuition rates at public universities, if accompanied by robust federal, state, and institutional financial aid, is a viable path for maintaining access to lower-income students, and for generating income needed for institutions to maintain or improve student to faculty ratios and other measure of quality.”

They also note that, “Freezing tuition, as currently demanded by state lawmakers in California, does not appear to be based on any clear analysis of the correlation of tuition and affordability. It appears more as a politically attractive way to appeal to voters while ignoring the financial consequences for public colleges and universities and the quality of the student experience.”

Lapid and Douglass observe that their study is exploratory and outline a research agenda for the future. “We still do not know much about the elasticity of tuition pricing and its effects when accompanied by robust financial aid policies, or, the effects of debt eversion and similar behaviors among socioeconomic groups. This points to a significant gap in the research in an age where public universities must develop a dramatically revised funding model if they are to provide access that promotes much needed socioeconomic mobility.”

 They conclude by stating that the US is “in a relatively new and not yet completed transition from a network of public universities with relatively robust public subsidization and low tuition and housing costs, to the new world of public disinvestment and an increased focus on funding via students and their families. How successful research-intensive universities are in generating this new model will significantly influence the nation’s socioeconomic mobility rates and, more generally, their economic viability.”

For access to the article, please visit: ROPS

Info on Authors:

Patrick Lapid is a doctoral candidate in Economics at the University of California – Berkeley, a SERU Research Associate, and a Gardner Fellow at the Center for Studies in Higher Education.

John Aubrey Douglass is Senior Research Fellow – Public Policy and Higher Education at the Center for Studies in Higher Education at UC Berkeley and the UC Berkeley PI of the Student Experience in the Research Consortium. His latest book is The New Flagship University: Changing the Paradigm from Global Ranking to National Relevance (Palgrave Macmillan 2016).


Patrick A. Lapid


John Aubrey Douglass