Analysis: The price of study in the land of opportunity and in the land down under

January 10, 2003

United States

Halfway through the academic year, and days before students were to leave for the winter holidays, public universities in California announced a 10 to 15 per cent increase in tuition fees effective within weeks, writes Jon Marcus .

Fees at four-year universities in the US rose this year by 10 per cent, five times the rate of inflation and the highest jump in a decade, according to the College Board, a national association of universities. Attending a public university now costs an average of $4,081 (£2,535) a year excluding room, board and other fees. The cost of going to a private university increased 8 per cent, to an average of $18,3, not including room and board.

The stagnant economy has reduced state tax revenues and forced across-the-board spending cuts that resulted in the tuition fee hikes.

Private universities have also increased costs, and have directed more of their student aid to merit-based scholarships, rather than scholarships based on financial need, in what critics say is a bid to improve their standings in national rankings.

The National Center for Education Statistics says that changes in state appropriations have the biggest impact on public university tuition fee increases, while private university price hikes are closely tied to the cost of paying for student scholarships, and for faculty salaries.

Private universities are also increasingly resorting to tuition fee "discounting", charging the advertised amount to students who can afford it and using some of that money to charge lower rates to poorer students. Large universities gave an average discount of 30 per cent last year, up from 21 per cent a decade earlier, according to the National Association of College and University Business Officers.

Universities in Delaware, Michigan, Oregon and Virginia have raised their prices midway through the academic year. In addition to raising fees, California's public universities are cutting spending on administration, libraries, student services and research.

The trend shows no sign of slowing. A report by the National Center for Public Policy and Higher Education says tuition costs are swallowing bigger portions of US families' incomes and low-income students are being priced out of a university education.

For low-income families, fees at four-year institutions now eat up $1 out of every $4 earned. Fees have risen faster than family income in 41 of the 50 US states, and student financial aid has not kept pace. The poorest students leave school with an average debt of about $13,000.

Universities have responded to the spending cuts by deferring building maintenance and freezing wages, but have taken few significant steps to change the way they do business, say critics.

The government is proposing an independent group to investigate why fees have risen so much and to try to contain average annual increases to 2.5 per cent by 2004.

Universities have objected to the government's involvement. "The quality of higher education is the responsibility of institutions, accrediting agencies and, for public institutions, state governments," Terry Hartle, a lobbyist for the American Council on Education, wrote to the department of education, "and this approach has served the nation well."


The country's Higher Education Contribution Scheme was introduced in 1989 by the Labor government in breach of its policy of free tertiary education. Substantial fees were imposed for the first time since 1972, writes Geoff Maslen .

Now nearly 40,000 Australians owe the government A$30,000 (£10,600) or more for attending university, and 1.1 million have liabilities ranging from A$1,000 to A$50,000 from Hecs charges.

The charges were limited to 25 per cent of the average cost of a course. An interest-free deferred payment system allowed students to put off repaying the fees until they graduated and were earning a decent wage.

What they owe is paid back via a tax surcharge until the debt is cleared over five to 15 years, depending on the course, the graduate's salary and voluntary repayments. The government pays the students' Hecs fees direct to the universities. These amount to more than A$1.4 billion a year - or 18 per cent of total operating revenue - although as this sum has grown, the government's contributions have fallen.

To ensure equity of access, Labor singled out six groups on the basis of their histories of relative disadvantage in higher education. Universities are required to report annually on the progress made in bringing each group enrolled to a level commensurate with their proportions in the population.

The groups are Aborigines, those from poor families, those from non-English-speaking backgrounds, the disabled, rural and isolated students, and women - particularly in non-traditional studies.

The federal education department says progress for each group has been mixed. While the total number of students has increased significantly, the equity groups have not greatly improved their share. The ratio of students from poor families has barely changed. Those from non-English-speaking families comprise a smaller proportion than they did in 1992.

After the election of prime minister John Howard's Conservative government late in 1996, higher Hecs charges were imposed. Universities were also allowed for the first time to offer full-fee, non-Hecs places to Australian students - as long as enrolments did not exceed 25 per cent in any one course.

Only 17 of the 39 public universities offer full-fee places for undergraduates, but all charge most postgraduates the full cost of their courses. Undergraduate and postgraduate fees add A$300 million to university coffers - 2 per cent of their revenue - compared with the 10 per cent, or nearly A$1 billion, they collect in fees from foreign students.

Under reforms to be unveiled this year, the government is expected to allow universities to increase charges and lift the limit on full-fee students to 50 per cent of enrolments on a course. Bruce Chapman, the academic who designed Hecs, said the decision to allow upfront fees without a loans scheme to help disadvantaged students could not be supported on economic or social grounds.

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