The High Cost of Low Tuition

Editor’s note: This article appeared in the Summer 2007 edition of the Journal of the James Madison Institute and is republished with permission. For more about the Institute, see

The Florida legislature voted this spring to allow three universities to raise tuition well above the average for Florida’s state universities – up to 40 percent over four years for the University of Florida and Florida State, up to 30 percent in the case of the University of South Florida. Although Governor Charlie Crist had threatened a veto, he changed his mind, and tuition is going up in the fall of 2008.

When it comes to setting tuition, who is right – the legislators, following the lead of university administrators, who want significant increases in tuition–or the governor, who signed that bill reluctantly and vetoed another bill calling for a system-wide 5 percent increase in tuition this fall? (Editor’s note: The legislature eventually overrode the governor’s veto.)

Answering that question forces us to think philosophically about the issue of tuition for public universities. As the head of a higher education policy center in North Carolina, I have been looking at the same topic in my own state. Unlike Florida, North Carolina has a constitutional requirement stating that tuition shall be “free of expense as far as practicable.” That tends to dampen efforts to raise tuition.

Florida has no such constitutional limitation–but in-state tuition to its flagship schools is even lower than ours ($3,330 compared to $3,705 at UNC Chapel Hill). Furthermore, Florida charges essentially the same tuition (but not necessarily the same fees) at its less prestigious schools as it does at its flagships.

Low tuition gives Florida some “bragging rights.” The University of Florida and Florida State are among the lowest of the “Top 100 best value” public universities, as ranked by Kiplinger’s Personal Finance magazine (on the basis of cost and quality, the magazine says). The University of Florida came in second (after UNC-Chapel Hill); New College of Florida, sixth, and Florida State University, sixteenth.

Should tuition at Florida’s public universities stay low, as Governor Crist contends?

The biggest argument in favor of low tuition is the obvious one: it makes going to college more affordable for students, many of whom are undoubtedly deserving individuals. It may seem churlish to argue that this is a bad thing, begrudging young people a shot at a successful future. After all, many people assume that higher education is something everyone needs (Margaret Spellings, the federal secretary of education, has been arguing this), so anything that helps students attend college tends to strike a favorable chord.

Adding to this sympathy argument is the fact that the average debt load of a college graduate–even of public universities–exceeds $15,000 and is approaching $20,000. It’s troubling to think that students who gave up four years of earning power to attend school have to carry a financial load of this size.

But should we feel so sorry for students?

When we look at Florida’s flagship schools, we find that most students come from middle-class or affluent families. According to an article in the St. Petersburg Times (Feb. 5, 2007) a “voluntary survey” in 2004 reported that the median family income of in-state freshmen at the University of Florida was between $95,000 and $100,000 – many families earned more than $150,000. Furthermore, said the Times, 95 percent of in-state freshmen have Bright Futures scholarships, which cover a large portion of their tuition, sometimes all of it. (Under the new law, however, Bright Futures scholarships will not cover the tuition increases, except for low-income students.)

The median family income in Florida was $45,625 in 2004. And, according to the U.S. Census, 25 percent of the adults in Florida have college degrees.

Putting these facts together reveals that many taxpayers who never went to college–welders and retail clerks and construction workers–are paying to send students to college, even students who come from families earning much more than they do.

Thus, subsidizing everyone’s education so heavily–to the tune of two-thirds or more of the actual cost–may not be as fair as it seems at first blush. And perhaps tuition should be higher at the schools that attract such affluent students, with more funds going to need-based aid than to Bright Futures scholarships.

And is that debt-load figure really so out-of-bounds? College graduates earn far more than those who don’t complete college — one estimate is that income for a college graduate is 60 percent higher, on average, than for someone with just a high school degree. Thus, a $20,000 debt after college is not necessarily a big burden, especially since the student doesn’t have to repay the loan until he or she is out of college. (Indeed, the four or more years of a “free ride” may explain the sticker shock that comes when graduates finally have to start paying up.)

A $20,000 loan for a student who doesn’t finish college is another story, however, and that brings us to another reason why low tuition may not be good public policy.

Many students in the Florida university system don’t finish college. Although the board of governors boasts that its 57 percent overall rate is better than many state university systems, graduation rates at the 11 state university institutions vary dramatically. The six-year graduation rate for Florida International is 44.8 percent; for the University of South Florida, 46 percent; and for the University of Western Florida, 37.6 percent. (Rates vary slightly depending on which year one is using.)

Pulling up the average are the University of Florida’s 76.6 percent rate and Florida State’s 61.9 percent. Yet are even these rates all that impressive? Again, consider that the taxpayer is funding about two-thirds of the cost, maybe more, for each student who doesn’t graduate. Although some students may benefit from taking courses even though they don’t graduate, think about the buildings that are built and the teachers who are hired in order to educate students who never get a degree.

Why are graduation rates so poor? Ironically, low tuition may be a contributing factor. With tuition costing around $3,400 per year, students can drift–take a few courses, stop and work awhile, then go back to school, puttering along. Students who really shouldn’t be in college because they lack either the motivation or the ability are seduced into going by relatively low tuition and the availability of aid that they don’t have to pay for until they leave school.

Indeed, experts are becoming concerned about the number of students attending college who don’t really want to learn. Peter Sacks, who returned to college as an adult and wrote about what he saw in Generation X Goes to College, found “a generation of students who had become increasingly disengaged from anything resembling an intellectual life.”

Low tuition poses problems for students in another way. It changes the incentives of university administrators. Forced to seek most of their operating funds from the state legislature and the federal government, public universities do not make the needs of the student the highest priority.

There is evidence already that student instruction is declining in importance. Economist Richard Vedder, in his book Going Broke by Degree, uses federal statistics to point out that the proportion of public universities’ spending going to instruction has fallen over the past thirty years. During the 1976-77 academic year, about 40 percent of public university spending was devoted to instruction. In 1999-2000, that figure had fallen to 34 per cent.

As long as lobbying the legislature and federal research dollars are the way to wealth, universities will concentrate on them. Legislators may want handsome buildings (with vote-getting “photo opportunities”) and glamorous research centers rather than money spent on faculty who emphasize teaching. And administrators reward faculty who can bring in major research grants more than those who spend their time teaching.

So, following the trend among other states–reducing the percentage of state dollars supporting universities and relying more on tuition–might be good for both taxpayers and students. This was the experience in Montana, says the head of a department at a state university there. Emphasis on teaching rose as state dollars shrank as a percentage of the university budget. Faculty members who were poor communicators in the classroom could no longer rely solely on their research record to obtain tenure and promotions. They had to be good teachers.

If students and their parents want college to be a genuine learning experience, they should remember the adage, “Who pays the piper calls the tune.”