President Obama in his State of the Union tonight "put colleges and universities on notice" about rising tuition, proposing to cap federal financial aid eligibility for students at institutions which increase tuition.

While this sort of cost control measure clearly has populist appeal, keep in mind that the same approach to capping Medicare reimbursement rates, which is part of federal budget law, is annually circumvented through the so-called "doc fix" precisely because medical providers are in a position to decline Medicare patients if the reimbursement rates are below the cost of providing care.  

The President is right to call for greater access to affordable, quality public higher education. But it would appear from the President's rhetoric tonight that he does not believe the actual cost of providing education at many institutions is rising, only the price charged students. If there are institutions where that is the case, his approach seems sound and salutory.

But as is abundantly clear  from the recently published 2011 College Board report on Trends in College Pricing especially the section on "Institutional Revenues -- Public Appropriations", the most significant driver for increases in student tuition at public colleges and universities, not just since 2007 but going back to at least 1998, is declining public support, while the cost of delivering education has risen below the rate of inflation. (Since 2004, the report shows, 4-year public colleges and universities have seem a reduction nationally of about 5% in state and local support, while the national average for increases in student fees over that same period is only 4%).

 

Thus, the increases in student tuition are not a reason, as the President proposed, for reducing the amount of "public taxpayer dollars" invested in higher education -- but the result of already reduced public investment. 

The case of Nevada is telling. According to the same College Board report, as reported in the SF Chronicle and elsewhere, NSHE institutions charged as of 2010-2011 the lowest tuition in the country in their categories, with University of Nevada, Reno, identified as the least expensive public 4-year university in the nation (for in-state fees). The cost of a 4-year degree at UNR, with UNLV only marginally higher, is only a fraction -- as little as 1/10th of some private institutions that were singled out for praise for cutting tuition and about 1/4th of the amounts charged by the University of California system.

The significant increases in-state fees imposed at UNLV, UNR and other NSHE campuses  over the past four years have been entirely in response to the over $200 million in state support cut from higher education in Nevada in that period.

 

So while the President's proposal to cap financial aid in response to tuition increases may have merit, keep in mind that it will apply primarily to those colleges and universities whose high costs result in their students becoming eligible for federal aid, either in Pell Grants or subsidized loans. Nevada's in-state students qualify in much lower numbers than students in other states for Pell Grants and incur significantly less indebtedness due primarily to our low in-state tuition (even after the sharp increases of the past few years). So that this proposed cap would not actually apply to most Nevada students, because students at Nevada's public colleges and universities generally qualify in lesser numbers and for lesser amounts of federal aid due to our comparatively low in-state fees.

 

The more direct way to keep college affordable is, as he put it in the prior line of his speech, for states to restore the massive amount cut from public higher education allocations in the past few years. 

 

Another would be to revive an idea that only four years ago was supported by most Democratic candidates for President and a majority of 2008 primary voters, making community colleges and public colleges cost-free for all qualified students. Long before he became a national laughingstock for his personal failures, John Edwards proposed a policy of "College for Everyone" that would have given every qualified student aid for full in-state tuition through a combination of direct aid, work-study and direct loans repaid based upon a proportion of future income. While that proposal did nothing to address costs, it did not need to -- because the cost of delivering education is not what is making college unaffordable, especially in Nevada. Declining public support for our colleges and universities is.

(As for the case made by Richard Vetter that colleges and universities spend far too much on non-educational expenses (a case he will make this morning on KNPR), he may or may not be right depending on whether students consider those expenses necessary for their college experience. But either way, as Professor Vetter has acknowleged, those costs are borne on most campuses -- and certainly at UNLV this is true -- by student fees and are funded neither by instructional fees (commonly referred to as "in-state tuition") or by state general fund appropriations. Effectively, students make -- individually and collectively through their student government -- market decisions to pay for those services, and while students could reduce their cost by not paying those fees, those fees have nothing to do with the cost of delivering education and therefore do not reflect any sort of inflation. They simply reflect rising student expectations for services, just as most of us expect more health care services than our parents or their parents did.)

Another way the state of Nevada could cut in-state fees is to reduce state subsidy for out-of-state students who attend NSHE institutions on exchange scholarships, which allow students from California and other neighboring states to enroll for 150% of in-state fees, less than half of regular non-resident tuition. Currently there are more than 1800 such students enrolled at UNR (about 1/8th of their undergraduate student body) and another few hundred at UNLV (about 2% of UNLV's student body). The current discussion concerning a new funding formula for higher education in Nevada is a good occasion to address this problem.

So yes college is getting more and more expensive in Nevada, and that is something the President and our state government ought to stop and reverse. But blaming colleges and universities that have done more with less for years is neither economically sound nor going to solve the problem.