Bloomberg News

Perry’s Fixed-Rate Tuition Given Poor Marks in Georgia

October 11, 2012

Perry’s Fixed-Rate Tuition Given Poor Marks

Should Texas Governor Rick Perry, the longest-serving governor in the second-most populous U.S. state, succeed, Texas would join Illinois in providing four-year fixed tuition rates at publicly funded colleges. Photographer: Scott Eells/Bloomberg

Texas Governor Rick Perry is promoting fixed-rate tuition plans for all four-year state colleges and universities, an approach abandoned by schools in Georgia and Michigan because of declining budget support.

The Republican is pitching the concept after lawmakers from his party cut about $1 billion from higher education in the two- year budget through September 2013. Spending reductions made in Atlanta derailed the Georgia program after just three years.

“Not only will this give students cost certainty heading into their education, it also will provide a powerful incentive for them to finish their degree on time,” Perry said in a speech at an Oct. 1 event in Dallas.

Should Perry, the longest-serving governor in the second- most populous U.S. state, succeed, Texas would join Illinois in providing four-year fixed tuition rates at publicly funded colleges. He has been pushing the plan in public appearances, along with initiatives such as $10,000 degree-granting programs, as ways to make postsecondary education more affordable.

“As interest in pursuing a college degree is increasing, state officials have to do everything we can to remove the roadblocks and enable students to pursue their dreams,” Perry said in an opinion article printed this week in several Texas newspapers. He cited sharply rising numbers of Latino and black Texans taking SAT college entrance examinations.

Providing Predictability

“We must give our students affordable and predictable options, and reduce the debt that they carry with them as they start their careers,” Perry said in the article, which was posted on the governor’s website. “That’s why I’m calling for a four-year tuition freeze for incoming freshmen, so that the amount students pay when they first arrive on campus will be locked in through what should be their senior year.”

Public colleges across the U.S. have raised student costs to offset declines in state aid. Tuition rose 12 percent last year at the 23 California State University campuses, with more than 400,000 students, after a $650 million budget cut by the Legislature and Governor Jerry Brown, a Democrat.

Apart from government-supported schools, where the plans are rare, institutions such as the nonprofit George Washington University in Washington offer four-year tuition locks, with the rate reset for each incoming freshman class. Among states, only Illinois has a fixed-rate plan at its 12 four-year colleges.

Georgia Failure

Regents overseeing the University System of Georgia adopted a statewide fixed-rate plan in 2006. The organization oversees 35 institutions, including the flagship University of Georgia and Georgia Institute of Technology. It serves about 318,000 students

Declining state support made the plan unsustainable and it ended three years later, according to John Millsaps, a system spokesman in Atlanta. Lawmakers cut higher-education funding by about 10 percent for fiscal 2009 and 2010, and the tuition lock left administrators with fewer options to offset the reductions.

“When we announced the program, we made it clear that the long-term viability was dependent on continuation of current levels of state support,” Millsaps said. “Then, boom, two years later, we have this big economic recession.”

In Illinois, then-Governor Rod Blagojevich, a Democrat, signed a bill in 2003 that created a mandatory, statewide fixed- rate plan at public colleges and universities, to give families a clearer picture of costs. Students are guaranteed a fixed rate for four years, and pay the same as the freshman class that followed them for a fifth and sixth year, if needed.

Rising Costs

Yet the change hasn’t prevented costs from rising for the next class of students -- tuition for those entering this year’s freshman class at the University of Illinois Urbana-Champaign, rose 4.8 percent from 2011, after a 9.5 percent increase for the 2010 entering class. The school with 42,600 students will cost $11,636 annually, plus fees and expenses, for the next four years for the freshmen who started this semester.

The state also has cut support for higher education and student financial-aid grants, said Dan Mann, director of student financial aid at the state’s flagship campus about 138 miles (220 kilometers) south of Chicago.

“It does make it very hard to estimate what tuition should be from year to year,” Mann said. “It’s a challenge for the administration and board to think that through.”

Providing four-year fixed tuition costs hasn’t led to substantial improvement in graduation rates at the school, where almost two-thirds of students graduate in four years, Mann said.

‘Nice’ Theory

Fixed-rate tuition “sounds nice in theory but in practical application has not been fantastic,” said Joseph Orsolini, president of College Aid Planners in Glen Ellyn, Illinois. Cost projections used to set rates sometimes turn out to be too low, leading to large increases for future classes, he said.

Such plans can be “politically appealing, a good sound bite,” said Daniel Hurley, director of state relations at the 400-member American Association of State Colleges and Universities in Washington. Yet he questions their workability.

“It places institutions in very difficult fiscal straits,” Hurley said, because while they’re guaranteeing rates for students, there is no certainty about future state funding levels for higher education. Central Michigan University in Midland abandoned its three-year-old fixed-rate program in 2008 because of questions surrounding budget allocations.

Trade Off

For some colleges, offering a fixed-rate plan can be a boon to a significant portion of students. Yet it can also increase their costs beyond what other entering students must pay, in exchange for the guarantee of no increase.

“More than a third of our students have family incomes of $20,000 or less,” said Diana Natalicio, president of the University of Texas at El Paso, which has about 22,600 enrolled. “These are working class people who don’t have the luxury of thinking out four years and making that commitment.”

The school started its optional fixed-rate plan in 2006.

“At the time, there were rather significant increases in tuition on annual basis, the picture was a lot more volatile,” Natalicio said. “We felt there were at least some students whose parents would find it an attractive option.”

Yet just 30 students were in the plan for the current semester, down from 110 in September 2010.

“We’re very cautious about a one-size-fits-all approach,” Natalicio said.

Most Participate

The University of Texas at Dallas started its fixed-rate plan in 2007. At the time, President David Daniel said it would provide certainty for students and give them an incentive to graduate in four years.

In the 2011-2012 school year, more than 13,000 of almost 19,000 students participated, according to Robin Russell, a spokeswoman. This year’s entering freshmen who take 15 hours or more of classes will pay $11,592 for each of their four years, the highest cost among the state’s public universities.

LaToya Mitchell, a junior majoring in speech pathology, said the plan wasn’t part of her decision to choose the school.

“But knowing that my costs are not going to change helps me budget and plan,” Mitchell said. “It gives me peace of mind.”

Mitchell is using loans and scholarships to pay her way. After earning about a semester’s worth of advance credits as a high-school student, she said, “I was always going to graduate in four years.”

Among members of the class that entered the school in 2008, the second to have access to the fixed-tuition program, 51 percent graduated this year, according to Russell. That was up from 46 percent who graduated in 2011, four years after starting, she said.

Perry wants fixed-rate plans to be offered by all state colleges and universities eventually, according to Lucy Nashed, a spokeswoman.

“Currently less than 30 percent of students at Texas’s four-year institutions graduate in four years, and only 58 percent have their degree in six,” Perry said Oct 1 in Dallas. “Clearly, the system can, and must, be improved.”

To contact the reporters on this story: Kathy Warbelow in Austin, Texas, at kwarbelow@bloomberg.net;

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.


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