Higher education bill draws a bead on tuition costs

The rapid rise in college costs has caught the attention of Congress, which is taking steps to at least give the public reason to hope for a break on tuition bills.

New legislation, expected to clear the House and Senate after press time on July 31, includes provisions designed to put pressure on colleges, universities, and states to rein in the escalating price of a college education.

The best potential for doing so, some experts say, lies in the searchable college data that the US Department of Education will post online to bring transparency to tuition rates and the "net price" students pay after receiving aid.

One set of lists would spotlight the 5 percent of institutions with the largest percentage tuition increase over the past three years – in categories such as public, private, four-year, and two-year. They would have to report to the Ed Department the reasons for the tuition hikes.

"There are lists that no college or university wants to be on. They don't want to be on the Princeton Review's Top 10 party school list … and they're not going to [want to] be on the list … saying [they] have raised their tuition faster than others," says Terry Hartle, a senior vice president at the American Council on Education, a higher education advocacy and research group in Washington. But it's difficult to predict the level of impact such scrutiny will have, given the variety of factors that affect college pricing, he adds.

The Education Department will also be required to list the 5 percent most expensive and the 10 percent least expensive schools in each category.

Online calculator coming

Within a year of the bill's passage, students and parents should be able to use online calculators to estimate what any given college would cost based on their income level and family situation. Since most students receive financial aid, it's important for families to see this net price, experts say, rather than simply compare based on the full-charge "sticker price."

There's little agreement about how effective these new requirements of the Higher Education Opportunity Act will be, but many experts say they can't hurt.

"Anything that brings public attention to rising college costs is good, and public pressure probably helps to moderate tuition increases in the long run," says Ross Hodel, codirector of the Center for the Study of Education Policy at Illinois State University. But for higher education to work efficiently, he says, "it takes all parties – the states, the feds, and the parent or student ... [each doing] their share."

States' education spending targeted

To push states to do their part, the law requires that their higher education funding each year be at least as much as their previous five-year average (excluding capital and research and development). Such "maintenance of effort" provisions are common in K-12, but this sets a new precedent in higher education, Mr. Hartle says.

As the federal government increases student aid, "states should not see that as an opportunity to take their own funding out at the bottom," says Rachel Racusen, spokeswoman for the House Education and Labor Committee. Last fall, Congress provided about $20 billion in federal aid for students over the next five years.

The state-funding requirement has drawn resistance from some in Congress and groups such as the National Governors Association and State Higher Education Executive Officers (SHEEO). "We don't think it is an appropriate role for the federal government to be sanctioning states on educational policy," says SHEEO president Paul Lingenfelter.

On average, state and local funding for higher ed was fairly generous in 2006 and 2007, outpacing enrollment growth and inflation, SHEEO reports. But since the 1990s, tuition paid by students and their families has made up a bigger share of public education dollars.

Several experts say the maintenance of effort rule is unlikely to have much influence on state decisionmakers, who stand to lose only some yet-to-be-funded federal matching grants to help low-income students earn college degrees.

"It's by no means enough to tip the scales against the pressures the states are under that are causing them to cut funding for higher ed," says Jane Wellman of the Delta Project on Postsecondary Education Costs, Productivity, and Accountability, a nonprofit in Washington.

The law's transparency measures are helpful, Ms. Wellman says, but "the deeper problem is the cost structures.... [The focus should be on] whether the institutions are in fact spending more money."

States' biggest chunk of discretionary spending is the higher education budget, so when revenues drop lawmakers tend to cut funding to public colleges and raise tuition rates.

When the price students pay shoots up, the public often blames universities for overspending, but many do a good job of managing costs, Wellman says. For instance, the sticker price at four-year public research universities went up nearly 46 percent between 1999 and 2005, but the amount they spent to educate each student rose by just 0.2 percent, the Delta Project reported in May.