Cap on College Tuition Rates (Emily Slavkin and Zachary Manheimer)

Context

Reference to a current Michigan bill or law that relates in some way to your proposal:

This is a link to the most recent highlight sheet regarding state appropriations for higher education.

This is a link to the most recent detailed decision document.

Why this proposal will make a difference in the lives of students of all ages across Michigan, or a significant subgroup (by age, background, economic status, and/or region, etc.) of students in Michigan:

With our proposal to make the increase in college tuition match the rate of nominal income increases in Michigan, many lives of students and families could change for the better by giving more young people the opportunity to afford and attend college. Right now, the amount that state colleges in Michigan can raise tuition is capped at double the rate of inflation. While in 2015 per capita income rose 4.1% and the past year's tuition rate cap was set at an increase of 4.2%, these numbers have not been as close over time. Linking tuition rate increases to nominal per capita income would save families a great deal of money over time. Additionally, if tuition is capped at the rate of nominal income increases, students who may not have had the opportunity to go to college with the previous tuition cap, would know from a young age if their parents could now afford to help send them to college. In grade school this would motivate them to work harder and be better students in hopes of getting into one of the top Michigan state schools.

How and where did you learn about the issues underlying your proposal?

Initially we thought about this idea as two out of state students paying an upwards of $60,000 per year to attend the University of Michigan, and considered the national problem of college affordability. While we understand that the focus of the Caucus and the class is to discuss issues in the state of Michigan, we think our proposal can help students who are residents of Michigan, as well as out-of-state students. After interviewing Ian Marshall, whose mother and grandfather attended Michigan state schools, for our media artifact, it became clear to us that the cost of college has risen at an obscenely high rate over time.

How has your service activity influenced your thinking about this proposal?

For our service hours, we both worked at the Ann Arbor Hands-On Museum, a children's museum in downtown Ann Arbor. While there, we interacted with many children. Many seemed quite gifted and it made us think about their futures. Will they be able to afford college? Or will college costs continue on the current trajectory and prevent them from pursuing their interests at a university in Michigan?

By working with children, it made us consider future generations of students that will be looking to go to college. In order for college to be affordable for them, the rate of tuition increase at Michigan schools will have to be slowed.

Link to your media artifact(s) giving background on the issue:

Click here to listen to our podcast!

Consultations

Talk directly with at least 3 real live people who have special knowledge about this topic or the impact your proposal would have, and summarize their comments. These may include people appearing in your media artifact (video, podcast, etc.).

CONSULTATION 1: Senator Tonya Schuitmaker (R-Lawton), chair of Senate Appropriations Subcommittee on Higher Education in Michigan

As the chair of Higher Education in Michigan, Sen. Schuitmaker was a great resource to give us insight into how tuition increase rates are currently set, and to give us ample feedback on our ideas.

Sen. Schuitmaker explained that as of now, the cap at which tuition rates can rise is set at two times the rate of inflation, which this past year was 2.1%, making for a cap of 4.2%.

She also pointed out a fact that we had not considered - part of the increase in financial burden for families over time has been caused by a decrease in state funding for universities. We learned that in 1979, state appropriations accounted for 70% of university revenues, and tuition 30%; in 2016, state appropriations were 23% to tuition's 77%. This has been the case for a couple of reasons, predominantly Medicaid. Previously, one in twelve people in Michigan were on Medicaid, and now one in four are. This has required state funds and is out of the state's control, and comes from the same budget as education.

We also asked Sen. Schuitmaker if she thought that schools felt required to raise tuition by the full amount allowed by the cap, just for the sake of guaranteeing revenues that might not be available in the next year (for example, if schools would use the full 4.2% cap just in case the cap were changed to a very low rate next year, to ensure that they had enough money for the two years). She made the point that schools are governed by an independent board of regents, and they are supposed to have the students' best interest in mind. Additionally, if they raise tuition too much, students will go to other schools. Overall, Sen. Schuitmaker was incredibly helpful in providing another perspective on our proposal.

CONSULTATION 2: United States Congressman Ted Deutch (FL-22)

To try and gain some perspective on how other states set tuition caps for their public universities, we spoke with Congressman Deutch. While he mentioned that the rate at which Florida colleges have raised tuition has been quite high at times (up to 15% from 2007-2013), he also spoke to the fact that Pell Grants, a major source of federal financial aid, have not risen at nearly the same rate.

Following our conversation with Congressman Deutch, we went out and did more research on what the state of Florida has done regarding tuition at its state colleges. Governor Rick Scott promised to not raise the cost of tuition at Florida schools, and in the 2013-2014 academic year tuition increased by only 1.4%, equivalent to the rate of inflation.

Additionally, after speaking with Congressman Deutch we looked more into the Pell Grant. We found that since 1975-1976, the average Pell Grant has risen by .26%, adjusted for inflation (or 3.8% nominally). This is substantially less than the rate at which state colleges in Michigan have raised tuition (between 7.5% and 10% over time).

CONSULTATION 3: Derek Sova, Chief of Staff for Senator Tonya Schuitmaker (R-Lawton)

Chief of Staff Sova provided us with a great deal of information regarding the funding of higher education in Michigan. We asked if the shift from universities being funded primarily from state appropriations to being funded by tuitions came more from the state providing less, or from schools charging students more. He explained to us that what it costs colleges to provide an education per student has barely increased over time (2.3% over the past 14 years). Colleges have had to take more from students as the state has made higher education less of a priority in the budget.

He told us that the state cut funding to all universities in 2011 by 15%; now, funding is back at around 2011 levels. He sees that tuitions will likely continue to rise at least at a minimal to moderate rate, and told us that Purdue has not raised tuition in about three years, though that is more than an exception than the norm.

Chief of Staff Sova also went into some interesting details about how higher education is funded. He explained that it comes from the general budget, which is very flexible. Unfortunately, this means that as circumstances arise, like the Flint Water Crisis, money comes out of this budget and takes from higher education. This is often unpredictable.

He also provided some interesting details about the current cap on tuition increases. The current system of two times inflation was put into place in 2012. In general, schools have not gone over the cap, but in 2015 both Oakland University and Eastern Michigan University charged significantly more than the cap. While this sacrificed about $1 million in state appropriations, it raised about $9 million in tuition. This goes to show that if schools feel like they are being squeezed in a significant way, they will just forgo their state appropriations and raise tuition substantially. He stressed the importance of not making the schools feel like they are being squeezed too much.

As a whole, Chief of Staff Sova offered very valuable details on funding in Michigan, and helped us consider the feasibility of our ideas.

Prospectus:

Describe the specific issue or problem, being sure to provide sufficient context so that someone less familiar with the issue has a sense of the bigger picture, but know that your focus here is on a more detailed spelling out of the specific problem or issue that you’ve identified. (250 words minimum)

Throughout the country, a pressing issue is the rising cost of a college education. Currently, students that cannot afford to attend college with their family’s funds are taking out loans, but as college costs rise, the amount of money loaned increases, and become mores and more difficult to pay back.

In the state of Michigan, students are encountering the same problem. While state schools such as the University of Michigan and Michigan State University aim to offer affordable education to “in-staters” while the price for “out-of-staters” is significantly higher, the cost to get a degree is still increasing at a steep rate. In 1970, the price of in-state tuition at the University of Michigan was only $480, and now in 2017 the price of in-state tuition is slightly under $16,000. Looking at the numbers that is an 8% increase (compounded yearly) of in-state college tuition. At Michigan State University, 15 credits in 1980 was $420, and now it is $14,114, a yearly increase of about 10%. At Central Michigan University, tuition has risen by approximately 7.5% each year since 1970.

In a vacuum, this may not seem like that large of an issue. However, it must be noted that incomes in the state of Michigan have not risen at quite as fast of a pace. In 1970, per capita income in Michigan was $4,178; in 2015, it was $42,427 - making for a yearly rate of about 5%. This means that each year, tuition costs rise faster than incomes by 3% - compounded over 45 years, this has had a major impact. In 1970, a year of University of Michigan tuition was 11% of per capita income; now, it is approximately 36%. 61% of Michigan residents at Michigan schools are graduating with a per capita debt burden of $17,784, 15% more than the national average.

Since 2012, there has been a cap imposed on the rate that state colleges can raise tuition each year. This is set to two times the rate of inflation. However, this number seems slightly arbitrary, as it is not at all tied to incomes in the state of Michigan - it is important to consider what residents are making when charging them for college.

Exacerbating the problem of tuition increases is the fact that state appropriations, which made up 70% of college funding in 1979, now make up a mere 23%. The remainder of the funding is done by students in the form of tuition. A large reason why this is the case is due to uncontrollable causes, such as Medicaid: in 1979, one in every twelve people in Michigan was on Medicaid, and now one in every four people is.

Unfortunately, sources of financial aid are not keeping up with tuition increases. Pell Grants, a major source of federal financial aid, are tied to inflation, even though Michigan tuitions are capped at double that rate.

If rising education costs continue to outpace income growth, young adults will no longer be able to afford to attend college. It is important that students can go to college, as they can learn more and become better-rounded people. While working harder to earn a scholarship (need-based or merit) might be a good alternative, a majority of people intelligent enough to go to college will not earn these scholarships. A fix to the rising costs of college would greatly benefit young citizens of Michigan, as they will graduate with less debt and be able to start their careers in a better position.

Potential Solutions:

Describe three reasonable, feasible potential solutions or approaches that would help address this problem.

SOLUTION 1: Set a cap on the rate at which public colleges can raise tuition each year that is equal to the previous year’s change in nominal per capita income in Michigan. The average increase in tuition has greatly outpaced incomes, and this proposal would keep the cost of a college education from becoming unaffordable for even more people.

SOLUTION 2: Expand the definition of “need” for “need-based scholarships” for students in the state of Michigan going to college in Michigan. While families’ incomes vary, college is still a hefty expense. Families with a higher level of income tend to not fall under the “need-based” category for college scholarships since they do not have any trouble paying for basic necessities and other luxuries, such as housing, food, and clothes. Even though they can pay for these items, paying for college is still a major expense for most families. Giving more need-based scholarships would keep college from becoming unaffordable as tuition costs continue to rise.

SOLUTION 3: Promote community colleges to high school students as a viable form of post-secondary education. Community colleges are a more affordable option for students coming from families that have enough income to not qualify for need-based financial aid, but would struggle to pay for a more expensive state school. Part of this solution is to increase awareness among high school students and show them that they can still receive a quality education at a community college. The other part is to further improve community colleges, so that there is not as large of a discrepancy between them and the pricier state schools like University of Michigan or Michigan State.

Reaction or advice from a Topic Coordinator:

You must solicit a critique from a topic coordinator, and explain the impact that advice has had on the final draft of this proposal.

We went to speak with TC Zachary Greenspan during his office hours on Wednesday, March 29. While there, we asked him about which of our potential solutions he felt was strongest, and what would make for a high-quality final proposal. He mentioned that he thought our first solution would likely be our strongest, and showed us that the current cap on college tuition increases in the state of Michigan is 4.2%. Additionally, we asked him for some advice regarding consultations. He suggested we reach out to University of Michigan Regent Andrea Fischer Newman, who voted "no" on U-M's recent tuition increase of 3.9%. In light of this, we reached out to all three regents who voted "no"; unfortunately, none returned our emails or calls.

In addition to the feedback given to us at this meeting, we took into account the feedback that was given to us by topic coordinators as responses to our media artifact, prospectus, and three potential solutions. We took the advice to look at more than just the University of Michigan's tuition increases, and expanded our search to more colleges across the state. We also looked into some information about community colleges and found that there were serious issues with community college graduation rates. Overall, Zach Greenspan was incredibly helpful with our proposal, and provided a great deal of information to help us throughout the process.

Research process:

Describe your research process — indicate who you talked to (including but not limited to consultants), what you read, what your thinking was, how it changed over time, and how your consultants changed your thinking. This description of your research process definitely could include “dead ends,” or ideas you had that didn’t ultimately bear fruit.  In short, we want to know what you did and how it led to your legislation, and we also want you to give us a window into your thought process.

We started our research by looking through historical University of Michigan catalogs to find out how tuition has grown over the past 40 years. We then interviewed Ian Marshall for our media artifact, which really opened up our eyes to all the issues surrounding the increases in college tuition. After that we researched other schools' historical tuitions, to see if what was occurring at U-M was also the case at other schools in Michigan. When we found that it was, we started looking at all the options that could be put on the table to make college more affordable. Originally our thought was to propose that tuition increases should be capped at the rate of inflation. After doing a great deal of research and talking to people in the state government, we changed our proposal to cap tuition increases at the rate of income increases, as we believe this to be a more fair measure. During our research process we spoke to Michigan State Senator Tonya Schuitmaker, Derek Sova, Senator Schuitmaker's Chief of Staff, Congressman Ted Deutch from FL-22, Topic Coordinator Zach Greenspan, and faculty member Rachel Kuck. We learned a great deal about how the state of Michigan funds colleges, and how it has changed over time. From speaking to everyone and taking their opinion and critiques into account we finalized our proposal.

Author contributions:

Please delineate--in detail--who made what contributions to the process and to the finished proposal? Who took on which responsibilities in researching ideas, drafting language, etc.?

We split up the work very evenly on our proposal, and worked on all of it together. Zach had the initial idea for our proposal, and after that, we both looked into the changes in tuition over time, and the current problem of college affordability. For our media artifact, we both met up with Ian to interview him about University of Michigan tuition. After the interview Emily edited it and put it together so it could be posted on the Caucus page. For the prospectus, we wrote it at the same time while with each other, so we could go through each paragraph and make sure it all made sense. We brainstormed the three potential solutions while together, and wrote up descriptions for them. When it came to meeting with a topic coordinator, both of us went to Zach Greenspan's office hours. For consultations, Zach reached out to Senator Schuitmaker and spoke to her on speaker phone while Emily listened in. Emily then contacted Congressman Deutch and Zach listened in on the phone call. For the final consultation with Chief of Staff Sova, Emily listened while Zach asked the questions. Lastly, when it came to editing the final proposal, both of us read it over ourselves and consulted each other with any edits we had. Throughout this entire process we always worked on the proposal when we were together to make sure we were both on the same page. Working on it in the same room made it easier to ask each other questions and further develop our thoughts as opposed to working on this in separate locations and having to call one another each time we had a new suggestion, idea, or question. 

 

===FORMAL PROPOSAL===

The sections below should comprise your final proposal language, submitted for consideration by your peers and potential inclusion in the MSC Platform.

Preambulatory clauses

These set up the PROBLEM, but not the solution.

WHEREAS tuition in the state of Michigan has risen at a compounded rate of 7.5%-10% each year over the past 45 years, while income in the state has risen at a compounded rate of 5%; and

WHEREAS the cost to colleges of providing an education to a resident student has risen only 2.3% over the past 14 years; and

WHEREAS in 1979, state appropriations accounted for 70% of college funding and student tuitions were 30%, and in 2016 state appropriations were only 23% and colleges were 77% student-funded; and

WHEREAS the average Pell Grant amount is tied to inflation, while the Michigan tuition increase cap is set at two times the rate of inflation; and

WHEREAS the cost of a University of Michigan tuition was 11% of per capita income in 1970 and is now 36% of per capita income; and

WHEREAS the per capita debt burden of college graduates in Michigan is 15% higher than the national average.

These describe in detail, the solution you are proposing (not the problem itself; those should go in the "Whereas" clauses above).

THEREFORE BE IT RESOLVED....

1. The cap on college tuition increases will be set at the rate of change of nominal incomes in the state. Historically, tuition prices have outpaced nominal incomes, which has led to college costing a great deal more over time, when compared to per capita GDP in Michigan. This will prevent tuitions from outpacing incomes any more and keep college from becoming more unaffordable for Michigan residents.

2. The state continues to appropriate funds to state colleges in an amount that is of constant or greater proportion than the 23% of total college funding that it provides now. This will keep some of the burden of paying for college off of Michigan's middle class, and allow students to graduate with less debt.

Counter-arguments:

What are three reasonable arguments against this proposal?

1. Counter: Last year, two times the rate of inflation was very close to the rate of the rise in nominal per capita GDP. As a result, there might not be a need for a new system.

RefutationWhile over the past few years the increase in nominal per capita GDP has been similar to the amount that schools have raised tuition, this is not always the case. For example, in the three years 2009-2011, per capita GDP changes in Michigan were -4.7%, +3.0%, and +6.1%, while University of Michigan tuition changes were +5.7%, +1.6%, and +6.8%. This is a reasonably substantial difference, and there are many other years where incomes did not rise at nearly the same rate as tuitions, which has led to such a large increase in tuition costs relative to incomes over the past 40 years, as previously mentioned.

2. Counter: Some schools may need the tuition increases. For example, Eastern Michigan and Oakland University were very far over the cap in 2015 (7.8% and 8.48%, respectively, compared to a cap of 3.2%). Schools will not have enough money to keep the school running at the standard that students are used to. Additionally, why would a school not sacrifice a small amount of state funding in order to get significantly more in tuition dollars from students?

Refutation: This might not be fair to say. Over the past 14 years, school spending per resident student has only increased 2.3%. If spending on students has not increased substantially, and a similar amount of state funds has come in over recent years, it does not seem logical that a school would need to be so far over the cap. That being said, there is definitely a difference between a school like the University of Michigan raising tuition 3% versus Oakland University raising tuition 3% - U-M's tuition has been historically higher, so a 3% increase in tuition is more substantial than the same increase for Oakland University. As for why schools should not raise tuition by a significant amount and forfeit their state funding, although it might get them more money, it would not make for a great relationship with the students paying to go to the schools. On top of this, students could just choose to go elsewhere if schools raise tuition by too much.

3. Counter: In order to keep schools running at an acceptable standard, more state funds may be required to go towards higher education. This could prove to be an issue as higher education already uses a significant amount of the state's general budget.

Refutation: While higher education is a significant portion of Michigan's general budget, it has gotten smaller over time. Additionally, spending on higher education is an investment in Michigan's future - allowing more students to go to college will lead to them having more income later, resulting in more future tax revenues for the state.

Costs and funding:

What will your proposal cost (in direct expenses, lost tax revenue, lost economic opportunity, and/or non-monetary costs)? How will you pay for your proposed legislation? Where will/could the funding for your proposal come from?  Who might object to dedicating resources to your proposal (competing interests)?  

Our proposal should not be overly expensive. When it comes to setting the new tuition increase cap, schools in Michigan might receive less money; however, this should not be a problem, as the cost of providing an education has not changed much over the past 14 years. As for ensuring that the state continues to provide a sufficient proportion of college funding, this would take from funding for other sources in the general Michigan budget. However, this is a reasonably flexible budget. In the circumstance where more money is needed, taxes might need to be altered slighty; however, paying for education is a high quality investment. The students that would be allowed to graduate due to the extra state funds can go on to make more money than they otherwise would have, providing a greater amount in tax revenue to the state in the long run.

References:

http://www.senate.michigan.gov/sfa/economics/US&MichiganPerCapitaPersonalIncome.PDF

http://www.umich.edu/~bhlumrec/research/guides/commence/tuition.html

http://ro.umich.edu/tuition/

http://www.floridacollegeaccess.org/2014/06/23/tuition-roundup-new-laws-aim-to-make-college-in-florida-more-affordable/

http://www.floridacollegeaccess.org/wp-content/uploads/2013/08/SUS-Tuition-2013-14-Table2.pdf

https://trends.collegeboard.org/student-aid/figures-tables/maximum-and-average-pell-grants-over-time

http://www.senate.michigan.gov/sfa/economics/US&MichiganPerCapitaPersonalIncome.PDF

http://www.umich.edu/~bhlumrec/research/guides/commence/tuition.html

http://ro.umich.edu/tuition/

http://www.ctlr.msu.edu/COStudentAccounts/history.aspx

https://admissions.msu.edu/cost-aid/tuition-fees/default.aspx

https://cmuhistory.cmich.edu/cgi-bin/cmuhistory?a=d&d=IsabellaCML19720918.1.3&e=-------en-10--1--txt-txIN--------

https://www.cmich.edu/ess/OSFA/Pages/Cost_of_Attendance.aspx

http://www.freep.com/story/news/local/michigan/2017/02/25/community-college-graduates-completion-rate/98314224/

http://www.freep.com/story/news/local/michigan/2015/07/07/oakland-university-hikes-tuition/29816277/

Source: Collegeboard.org

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Total votes: 38