They Have to Get Money Somehow

UNC and other institutions may soon attempt to raise student fees.

When students and parents plan for the cost of college, they mostly consider “tuition and fees” as a single expense for the academic part of university attendance and “living expenses” as an additional and separate cost. In fact, tuition and fees are two completely separate things that shouldn’t be lumped together.

One reason most people think of fees as part of overall tuition is that IPEDS, the Department of Education’s main repository of education data, considers “tuition and fees” to be one entity. Thus, most others, like the U.S. News rankings and the institutions themselves, do so as well.

Another reason for this misapprehension is that it benefits institutions, who can thus obscure the extra costs they are adding to students’ bills. Generally speaking, tuition is supposed to cover the costs for the academic or educational part of college attendance: professors’ salaries and classroom buildings. Fees are meant to cover extra services and amenities like intercollegiate sports, recreation centers, and technology. Fees have become an important part of funding at public institutions, with 90 percent of public universities now charging some kind of fee. In some cases, fees now exceed tuition.

Fees have become an important part of funding at public institutions.Students and parents typically start paying attention to fees when they get their itemized bills. Students may complain about not using the recreation center or not being interested in intercollegiate athletics, but such fees are mandatory and are paid by all students. To counter this phenomenon, students are increasingly signing up for 100-percent-online courses even though they live locally, in order to avoid the mandatory fees paid by residential students. In most states, scholarships, especially state-sponsored scholarships (like Georgia’s HOPE), cover only tuition, leaving students to cover the cost of fees out of pocket. Many institutions are holding down increases in tuition while sharply increasing fees.

In North Carolina, for example, between 2015 and 2020, fees went up 16.9 percent even as tuition remained flat. As a result of this trend, which is by no means limited to the Tar Heel State, some legislatures and governing boards have taken note and have put policies in place to limit new fees and fee increases. In 2022, the Georgia Legislature eliminated the “special instructional fee” put in place in 2009 to augment institutions’ budgets in compensation for lower state appropriations that year. Eliminating that particular fee saved students anywhere from $170 to $544 per semester.

Students are generally in favor of building new student centers and recreational facilities. But many institutions have added fees for items that should be covered by tuition, such as “student success fees” and “technology fees.” These are a back-door way of increasing tuition. State university systems (like Georgia’s) often ask student committees to approve new fees or fee increases. Such committees almost always approve the fee increases suggested by administrations. This is true in part because the fee increases are often incremental, and improvements to facilities and services are sold to the student committees as desirable. One state university had a student committee vote for a “student success fee” in order to reduce class sizes, but the effect was mainly to subsidize faculty salaries, which should have been paid from tuition dollars.

As previously suggested, legislature and governing-board restrictions on fee increases are a severe impediment to institutions adding new services or building new buildings. One reason for fee increases is a reduction in state funding for higher education. The growth of fees at state institutions tracks with the decline in funding from legislatures. As a recent academic paper on the state of university fees points out, “As states have reduced funding for public higher education, many colleges and universities have responded not by increasing tuition, but rather by offloading expenditures to mandatory fees—fees that have the same economic effect on students as tuition, but may be more difficult to understand and debate.” In other words, public institutions are starting to push back against the restrictions imposed on them by the public.

Price-sensitive students and restrictive legislatures are running headlong into a massive university spending spree. “We will not trim our aspirations,” University of Kentucky president Eli Capilouto said in 2016. “But we do have to find more creative ways to power our progress.”

The University of North Carolina System is a good case in point. In September 2020, the system’s Board of Governors established a task force on “Pricing, Flexibility and Affordability” to give “campus leaders more flexibility to budget and plan; give students and families more transparency about costs and more options for how they want to participate in campus life; and give lawmakers and taxpayers more clarity about how we’re managing costs.” Unfortunately, the flexibility sought may well turn out to be an attempt to escape North Carolina’s statutory restriction that limits student-fee increases to no more than three percent per year.

UNC institutions that need new buildings may well use up their entire allowed fee increase on so-called debt-service fees.One way to get around that statutory limitation is to broaden the pool of students who pay fees. For instance, an early proposal of the UNC task force was to regularize the definition of “distance education,” thus expanding the application of fees to students taking online courses. In a 2020 presentation, the task force proposed that “students enrolled in on-campus programs … [be] assessed all mandatory fees regardless of how their courses are delivered in a given semester.” (As the UNC-Chapel Hill cashier’s page indicates, online students do indeed pay many student fees.) I expect institutions nationwide to continue to narrow their definition of distance education—and to create additional fee categories—in order to capture more revenue from students trying to escape fees by taking online courses.

Another way for the UNC System to be creative is to recommend that certain fees be exempted from the statutory cap. For example, UNC institutions that need new buildings may well use up their entire allowed fee increase on so-called debt-service fees, in which students finance building projects indirectly. At an August meeting, the UNC task force asked, “Does the inclusion of the debt-service fee under the statutory cap on fee increases (3%) preclude campuses from borrowing for critical needs, particularly small campuses and those with low debt service fees currently?” Of course, exempting debt-service fees from the overall cap would be a reasonable step for institutional flexibility. But it would not be good for student pocketbooks.

Reached for comment, “Pricing, Flexibility and Affordability” task-force member (and UNC-System CFO) Jennifer Haygood told the Martin Center,

The Task Force has not yet made a decision on whether to recommend seeking any type of change related to the 3% cap. The Board has demonstrated its commitment to affordability by holding tuition flat for years, scrutinizing fee increases and focusing on total student cost. North Carolina residents in the UNC System are graduating with less debt than before the pandemic, and the average student debt is on the decline. Therefore, I expect affordability to be an important consideration in future deliberations on this topic.

I have written before about how college finances are coming under increasing stress. Institutions are going to come up with creative ways to increase revenue. Consequently, students, parents, and legislatures need to pay attention to fee increases disguised as “reform.”

Chris Corrigan was Chief Financial Officer at Andrew College (1998-2005), Emory College (2005-2008), and Armstrong State University (2015-2017).