Response to Students for NBP

April 29, 2011 | Blog

I applaud Jon Alfuth of the Students for the New Badger Partnership for attempting to do something the UW-Madison Administration has not bothered to do — share some models of affordability under the NBP.

Jon asked me for my critique, so here are some big picture questions to ponder while I try and secure the numbers required for an alternative model (don’t hold your breath, this requires figures beyond what Jon seems to have here and I don’t see a UW source willing to provide them):

(1) Why assume that tuition will increase at the same rate for resident and non-resident students? That seems very unlikely– typically rates for nonresidents increase at twice the rate for residents (Don Hossler, 2005, “Students and Families as Revenue, p. 116).

(2) Why assume the % of non-residents remains the same? Assuming the differential in tuition grows, this will likely tip the proportion of residents downwards, since the BOT will begin to find nonresidents even more attractive. Doubt this? Job descriptions for enrollment managers at public research universities have included a preference for candidates with successful strategies to attract out-of-state students (Hossler, p. 117).

(3) A discount rate is the average institutional grant divided by average tuition and fees– for example, a 15% discount rate would mean that for every $1,000 increase in tuition and fees UW-Madison would award a $150 institutional grant. What is the assumed discount rate for in-state and out-of-state students? At private institutions it’s around 40 percent. At publics it is on average 14%. First, what is it right now at UW-Madison? We need to know. We must know to do this modeling appropriately. If we intend to raise tuition and compete with privare institutions, the discount rate will have to climb– and thus much of that additional projected revenue won’t be realized as gains at all. (Don’t believe me? AASCU writes, “part of the reason why institutions are able to keep their discount rates low is due to the fact that they are able to keep their tuition rates relatively low, making the overall cost of attendance relatively low.”)

(4) Discounting cannibalizes revenue. What are your calculations as to the likelihood that under a new model UW will be able to afford to devote 30+ % of new tuition revenue to aid?

(5) What is the assumed discount rate for in-state versus out-of-state students? National data indicate that non-residents are 1.7 times more likely to get a discount and that discount costs a lot. “For example, a one-percent increase to the non-resident tuition discount rate would cost an institution $100.13, while an equivalent percentage increase for resident students would only cost $35.80.” Is the UW-Madison community comfortable with giving more of our institutional aid as a discount to non-Wisconsin folks?

(6) What is the assumed discount rate for low-income versus high-income students? Biddy has made a big deal about how much she has grown need-based aid under MIU, but the fact remains that UW-Madison spends much more on merit-based aid than on need-based aid. Nationally, institutions have increased the proportion of institutional aid devoted to merit-based aid faster over time. Moreover, national data indicate that while low-income students are more likely to get a discount, theirs is typically smaller than those given to high-income students. In a recent study of public universities, “students whose families earn between $70,000 and $100,000 receive an average discount of 15.1 percent, while the lowest income students only receive a 14.7 percent discount rate.”

(7) Why assume the BOT and Chancellor of today keep their promises (well actually we don’t even know who the BOT is) for tomorrow, the day after and the day after? What grounds do you have to disagree with all of the scholarly proponents of this approach to financing, who clearly state that the link between aid and tuition should be legislated, not left up to faith?

(8) We already use differential tuition to finance aid. Can you explain why continuing to do that during the near future wouldn’t be as effective as NBP?

Big picture: Jon and I shouldn’t have to do this modeling ourselves. If UW Madison wants to argue for tuition flexibility it should have produce these kinds of figures a long time ago and made them publicly available.

More to come…

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