Hildreth Institute in Boston.com

Mass. Board of Higher Ed recommends doubling state-funded financial aid

The aid would be made possible thanks to the passing of Question 1, or the “millionaire’s tax."

Originally posted in Boston.com

There is a lot to like about Governor Maura Healey’s $59 million budget proposal to lock-in tuition rates for four years for Massachusetts students attending state universities. It provides predictability in budgeting for students, and colleges are being reimbursed by taxpayers, so they do not lose money.

Healey, speaking to The Boston Globe editorial board, suggested that having cost certainty will help more students stay in school. “It’s going to allow students and families some certainty, transparency. They’ll be able to plan,” she said.

But in considering the idea, lawmakers must avoid confusing predictability with affordability. They have an obligation to students to make sure that any plan addresses both aspects. It’s not clear that Healey’s plan does.

The $59 million would be divided among the three public higher education segments. The University of Massachusetts would agree to freeze tuition for the incoming fall 2023 class at the same rate for all four years of college. Other state universities, which make the bulk of their money in fees, would freeze both tuition and fees at the same rate for all four years for the incoming class. At community colleges, where students often attend part-time and pay per credit, tuition and fees would freeze for one year.

The tuition lock would provide predictability in budgeting for students. It would also be a marketing tool to help public colleges recruit students with the promise of flat fees. It might even incentivize students to graduate in four years, because tuition would rise after the four-year lock.

State Senator Jo Comerford, who cochairs the Joint Committee on Higher Education, praised Healey for “removing a lot of the opacity of the cost.” “There’s nothing hidden, there’s nothing unexpected,” she said.

But the plan is more complicated than it appears. While the Healey administration envisions a multiyear lock, that is not guaranteed. Because of the nature of state budgeting, this year’s budget would lock in rates for next year’s class only. The Legislature would have to decide each year whether to approve additional funding for another year’s tuition lock, and each school’s board of trustees would have to agree.

A bigger question is what rates would be locked in, who sets the rates, and, perhaps most importantly, whether having a fixed rate would in the long run reduce the price of college. Healey budget officials say appropriating $59 million a year for four years will be enough to lock in a tuition and fee rate that increases by 2.5 percent a year for the next four years. So the class entering in 2024 would pay 2.5 percent more than the class entering in 2023, with their rate locked in for all four years, and the class entering in 2025 would pay 2.5 percent more than that.

It’s hard to say whether the total amount of money paid for higher education would increase or decrease at that level, because tuition increases vary widely by year and by campus. The tuition and fee increases this year were 3 percent at UMass and ranged from zero to 4 percent at other state universities, depending on the campus. State officials say 2.5 percent was chosen because it reflects modest annual growth, recognizing that campus costs increase with inflation.

Further complicating matters is that while the Legislature decides how much money to appropriate, each campus sets its own tuition and fees. If lawmakers are committed to affordability and agree that a 2.5 percent annual increase is the right amount, they could write into the law that campuses will only be reimbursed for a tuition lock if they raise tuition and fees by no more than 2.5 percent.

But the current language of the budget bill says explicitly that “tuition and fees will continue to be set by each respective board.” If a campus board decides that due to inflation or other costs it needs to raise tuition and fees by 5 percent for an incoming class, there is nothing to stop the board from taking that vote and lobbying the Legislature to increase appropriation before the campus agrees to a tuition lock. It is unclear what would happen in that case.

Both UMass President Marty Meehan and Vincent Pedone, executive director of the State Universities of Massachusetts Council of Presidents, made clear that the campuses are only committed to locking in tuition costs for as long as the Legislature fully funds the added expense.

“If you give us a certain amount of money up front, we’ll guarantee a price lock for incoming students,” Meehan said.

Neither official appears willing to defer to the Legislature to cap the size of inflationary tuition and fee increases.

Pedone said it is up to each campus’s board to set tuition and fees, and there are costs that need to be paid, like collective bargaining agreements, employee benefits, maintenance and capital spending, and student support services.

Illinois imposed the nation’s first state-level guaranteed tuition law in 2004, requiring universities to lock in freshman tuition rates for four years. Other states like Oklahoma and Texas gave students the option to have a guaranteed tuition plan, but at an additional cost. Some private colleges have imposed tuition locks at particular times, such as after the 2008 Great Recession.

Academic studies of guaranteed tuition programs were done in 2015-2016 by Jennifer Delaney and Tyler Kearney of the University of Illinois. The researchers concluded that guaranteed tuition there actually led to higher tuition rates, since campuses tended to overestimate the effect of inflation over the four years of the lock so they made tuition higher up front. Ultimately, students ended up paying more with guaranteed tuition than if the campuses had imposed annual increases.

Another potential pitfall is campuses may seek to raise more money through fees that are not covered by the freeze, like course fees, student activity fees, or health service fees. The schools could also hike tuition and fees for out-of-state students.

Bahar Akman Imboden, managing director of the Hildreth Institute, a Boston-based higher education research institute, said the trade-off of providing predictability to students is that colleges become limited in their ability to respond to financial hits, like enrollment declines or unanticipated expenses. That can lead to policies like hiking fees on future students or trying to enroll more out-of-state students.

“It will provide predictability to students,” Imboden said. “But the impact of these on tuition and fees themselves is quite complex.”