Other Universities Abandoned Guaranteed Tuition – Here’s Why

BY WATCHING ADAMS STAFF – 3/14/16ASUGuaranteedTuitionGraph

Though Adams State University (ASU) has touted itself as being the first in Colorado to offer Guaranteed Tuition, many other campuses have tried this program with lackluster results. While universities claim these programs may boost enrollment, retention and graduation, longitudinal data suggests otherwise. In addition, such programs have led to ballooning revenue shortages and other financial problems. Consequently, several universities have abandoned their guaranteed tuition programs.

A recent ASU Grizzly Video student talk show called Couch Talk interviewed ASU students about guaranteed tuition. Derek “Cappuccino” Brown, the show’s host, stated, “How do you feel about guaranteed tuition? I love it. I’m also graduating.” Brown goes on to interview many ASU students who are not aware of this program. However, several students were aware of this program spoke positively of it. Brown summarized the program by stating, “basically whatever your tuition is next year, it won’t go up or down from there.” Upon hearing this, students react enthusiastically and state their intentions to return next year.

At the February 29th Faculty Senate meeting, ASU President Beverlee McClure explained that ASU’s guaranteed tuition program will introduce an annual 5% increase beginning in fall 2016 with a locked in rate of 2.5% every year thereafter. A student who drops out and re-enrolls will be eligible for the previous year’s rate. President McClure emphasized that this model will be evaluated in the next 10 years to measure its effectiveness.

In our previous report, Guaranteed Tuition a Guaranteed Distraction, we investigated how the introduction of this policy at ASU involved few of those tasked with actually implementing it and some of the initial concerns with the design of the policy, such as the misleading nature of the 2.5% annual increase (not a fixed amount, as many students believe) and the campus fees remaining variable.

In her recent article, Guaranteed Tuition Plans Pose Greater Risk Than Potential Benefit from the John William Pope Center for Higher Education Policy, Stephanie Keaveney observes, “By enrolling in guaranteed tuition programs, students and their families essentially take a gamble, which may or may not pay off. Students who choose a guaranteed program agree to pay a surcharge—often ranging from 5-15 percent over standard tuition—on the assumption that standard tuition will rise beyond that in the ensuing four years. However, if state legislators invest more in higher education, or if the student doesn’t earn a degree, guaranteed plans can cost students much more than standard tuition.”

Given that ASU students have among the lowest degree completion rates in the state, this should be of particular concern to Adams State. But what about the prospect of guaranteed tuition policies retaining more students? Keaveney tracks the implementation of guaranteed tuition policies at Western Oregon University and University of Kansas. Though guaranteed tuition may seem to improve retention and graduation rates at first glance, the data doesn’t bear these results over time.

In these cases, Keaveney found, “While first-to-second year retention rates remained much higher at the University of Kansas than the national average, the introduction of guaranteed tuition in 2008 doesn’t seem to have had a measurable impact. After an initial increase peaking in 2009, the Western Oregon University retention rates have declined steadily.” In another case, Keaveney wrote, “Universities also assert that by putting a four-year limit on tuition guarantees, students will be incentivized to complete their degrees during that period. However, despite a slight trend upward, four-year completion rates at Illinois public universities don’t appear to have been greatly affected by the introduction of tuition guarantees.”

Since 2006, University of Colorado Boulder has offered guaranteed tuition for out-of-state students. Though the Board of Regents considered implementing guaranteed tuition for in-state students in 2011, this proposal was not enacted for in-state tuition during this time. A review of data comparing in-state and out-of-state students at CU Boulder shows no measurable difference in four and six year graduation rates between those students with guaranteed tuition and those without it.

Additionally, several universities who offered tuition guarantees abandoned them because much of the revenue that a state-funded university incurs is beyond its control – making the lack of a variable tuition rate untenable given the need to control costs. Keaveney gives two examples: “At the very least, schools that freely choose to start tuition guarantee programs may also choose to end them in case of financial hardship. Some schools that turned to tuition savings programs because of the touted benefits realized that they are not always the most prudent option. The University System of Georgia discontinued its guaranteed tuition program in 2009 after just three years, citing decreased budget flexibility and necessitated budget reductions as factors in the decision. Similarly, Central Michigan University ended its program in 2008 because of diminished state funding.”

In the case of the University of North Carolina, a guaranteed tuition cap was lifted in 2010 after the recession forced schools to collect additional revenue in light of diminished state support. The additional tuition increase on top of the existing 6.5% cap? A staggering 23%.

In the most dramatic example, the the Illinois University System has been in a budget crisis after their state-mandated guaranteed tuition law prevented them from covering costs. Keaveney writes, “Illinois’s 12 public universities have struggled to maintain operations while waiting out the crisis; however, because of the guaranteed tuition law, administrators are not legally allowed to raise rates on current students to cover short-term operational needs.” Consequently, Chicago State University ended their current semester early due to fiscal insolvency.

Based on the experiences of these and other schools, guaranteed tuition policies have yet to yield any promising results. A 2014 study of college affordability policies by the National Association of Student Financial Aid Administrators concluded, “we are not aware of any rigorous studies of this approach to tuition pricing in affecting persistence and graduation.” While guaranteed tuition has been tried, no clear evidence of successful outcomes are readily apparent.

Just as Moody’s listed ASU’s guaranteed tuition program as one reason for recently downgrading ASU’s credit rating, the investors service recently downgraded three universities in Illinois due in part to their guaranteed tuition policies. It should come as no surprise to any university that creditors look unfavorably on a fixed tuition income with variable state support and escalating operational costs.

Whether guaranteed tuition at Adams State will be successful remains to be seen, but the lessons learned from many other universities suggest otherwise.