Top-up fees are neither our saviour nor Satan

December 19, 2003

US experience shows that a focus on access must not be lost in the debate on variable fees, says Jamie Merisotis

The political storm in Parliament over top-up fees in many ways mirrors the US debate over paying for higher education and the public and private benefits of such investment. The antagonists might use the US experience to avoid the pitfalls of variable fees and to strike an equitable balance on who should pay for higher education.

Allowing different universities to charge variable fees has long been a part of the US higher education landscape and a key strategy to encourage universities to compete for student enrolments. Higher education functions in a complex and competitive market, where the price charged can vary from less than $1,000 (£574) to more than $30,000 a year. Under this pricing system, students are able to make tuition-fee levels a key part of their decision about which university to attend. Variable fees also can lead to efficiency improvements among institutions competing for similar types of students by ensuring that price increases are not spent on frivolous activities.

But one of the challenges of the US system is that price competition can drive the overall averages higher, making access to higher education for low-income and minority students increasingly difficult. Public sector tuition fees have increased faster than the rate of inflation for more than 20 years, yet enrolments have continued to rise. The cost of attending a public university for four years is increasing more rapidly as a proportion of income for the poorest quintile of families compared with other income groups.

The steady drumbeat of rising tuition fees is a key driver of a proposal working its way through the House of Representatives to deny federal aid to institutions - and therefore students - that fail to keep their advertised tuition prices below a federally determined level set at two times the rate of inflation. The Affordability in Higher Education Act would impose a series of reporting and other requirements on non-compliant colleges and universities. The ultimate penalty would be to deny eligibility for the institutions in certain federal student-aid programmes. This means that efforts to penalise institutions would instead have a negative effect on the very students for whom the federal aid programmes are designed to help.

Part of the reason for such a topsy-turvy debate is that those who believe that higher education results in great public benefits have failed in their arguments over the past decade. Significant research exists to demonstrate that increasing educational opportunities results in tremendous public, private, social and economic benefits - from improved health to less welfare dependency to greater contributions to the tax base. Unfortunately, many of the public pronouncements about why higher education matters, including those from university presidents, almost always focus on the fact that going to college enhances personal economic status. The rich combination of societal and individual benefits of higher education is largely overwhelmed by the reality that degree holders make an average of $1 million more over their lifetimes than non-degree holders.

One consequence of this obsession with private economic benefits has been that tuition fees have continued to rise rapidly, with an increasing share of the financing burden shifting to students. As a result, concerns about student access have grown. While overall enrolments have increased substantially over the past 30 years, the gap between the lowest and highest income groups, and between minorities and others, has remained virtually unchanged. US students are indebted at levels unthinkable on an international scale: they borrow more than $50 billion a year.

The most important aspect of a change in the financing balance lies not in whether fees can vary across institutions, but rather whether sufficient investment is being made in needs-based student grants. If the student share of the financing equation continues to rise for disadvantaged groups, the net result will be a less-educated citizenry, and a failure of the government's efforts to equalise educational opportunity. A lesson from the US experience, then, is that variable fees are neither a great salvation for higher education's ills, nor are they a great evil that will destroy the basic fabric of the academy. Instead, the focus must be on ensuring that access to higher education remains a priority. Failing to ensure this will surely result in a diminution of any nation's public, private, social and economic stability and prosperity.

Jamie P. Merisotis is president of the Institute for Higher Education Policy, Washington, US.

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