The Tuition Freeze: A Double-Edged Sword in Higher Education Affordability

The landscape of higher education is continuously shaped by the persistent challenge of rising costs. For students, parents, and even institutional leaders, the financial burden associated with obtaining a degree is a significant concern. While the desire to make education more accessible is not new, the current economic climate, marked by increasing financial instability for many, is compelling colleges and universities to re-evaluate their tuition structures. The idea of maintaining or "freezing" tuition rates for a period has emerged as a prominent strategy, promising a semblance of financial predictability. However, a closer examination reveals that this seemingly straightforward policy is a complex mechanism with far-reaching and often unintended consequences.

Defining the Tuition Freeze

At its core, a tuition freeze is a policy that prevents the cost of tuition - the money paid for instruction at colleges and universities - from increasing for a defined period. This period can vary, ranging from a single semester to multiple academic years. Brad Frank, chief marketing officer at Collegis Education, highlights different interpretations of this policy. One variation involves keeping the total cost of attendance for students constant. Another approach is to charge students the same rate throughout their entire educational journey at an institution. Some institutions even offer a freeze contingent on students paying for subsequent years upfront. It is crucial to note that "tuition is only a portion of the cost of attendance," as explained by J. Michael Locke, a higher education consultant and Collegis Education board member. This distinction is vital when considering the overall financial implications for students.

The concept of a tuition freeze is not entirely novel. We see examples where governments have introduced multi-year freezes on university tuitions, aiming to enhance higher education accessibility. For students, the primary appeal lies in the financial predictability it offers. Instead of confronting potentially substantial tuition hikes each academic year, students gain a clearer understanding of their financial obligations. However, it is essential to recognize what a tuition freeze typically encompasses. Often, it applies exclusively to the tuition rate itself, meaning other associated costs, such as fees, accommodation, or general living expenses, may still escalate. For instance, a college might implement a 'Tuition Freeze Program' that safeguards eligible students from increases in full-time tuition rates but explicitly excludes other fees.

The Rationale Behind Tuition Freezes

The increasing popularity of tuition freezes can be attributed to a bipartisan desire to address the escalating cost of higher education and improve its accessibility. Since the 1960s, college tuition and related expenses have seen astronomical rises, leading education equity and access organizations, advocates, and research institutions to decry the high cost and the burden it places on students. In response, states and university systems have adopted various policies to alleviate financial pressure on students, with tuition freezes being a prominent method.

A tuition freeze is distinct from offering free tuition; it allows institutions to continue generating revenue from students. Nevertheless, a freeze implemented by one institution or a group of schools can inadvertently place financial strain on neighboring institutions that maintain higher tuition rates. The primary motivation behind these policies is to make higher education more attainable, particularly for working- and middle-class students. By stabilizing tuition costs, governments and institutions aim to reduce the financial barrier to entry, thereby encouraging a broader demographic of students to pursue higher education.

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The Multifaceted Impact of Tuition Freezes

While the intention behind tuition freezes is to enhance affordability, their practical implementation and effects are far more intricate. A new report from the Postsecondary Education and Economics Research Center, for example, argues that these freezes may inadvertently harm the very students they aim to assist. The report's authors suggest that tuition freezes can compel colleges and universities to reduce institutional aid or defer necessary tuition increases, ultimately leading to a disproportionate impact on low-income students.

Institutional Financial Strain:

Private nonprofit schools, in particular, may find themselves under increased financial pressure if they do not adjust other expenditures. This is not only because tuition often constitutes a significant portion of their total revenue but also due to the high likelihood that these institutions offer substantial tuition discounts. Many colleges and universities are already grappling with financial difficulties, leading to measures such as discontinuing varsity sports or closing academic departments. In some instances, institutions have attempted to recoup losses by increasing other student-facing costs, such as higher fees, more expensive housing, and other less apparent expenses.

Unintended Consequences for Low-Income Students:

Despite the intention of lowering educational costs, the analysis presented in the Postsecondary Education and Economics Research Center report indicates that institutional responses to tuition freezes and caps can undermine these very effects. Colleges may cut back on institutional aid, thereby offsetting reductions in the sticker price of tuition and preventing a significant decrease in the net price for students. Because institutional aid is often not subject to the same regulations as tuition, it can be more readily adjusted to compensate for lost revenue.

The report highlights that between 1990 and 2019, 22 states administered a tuition freeze or cap at least once. However, these policies have also restricted revenue streams that colleges typically use to fund institutional aid for low-income students. Consequently, a college might compensate for this loss by reducing the institutional aid it offers to low-income students, sometimes at a rate twice as large as the avoided tuition increase. During periods of tuition caps and freezes, the growth in institutional aid at four-year colleges fell by an average of 11.3 percentage points. Students attending four-year colleges are more likely to receive institutional aid-and subsequently have that aid reduced-if they come from low-income households. On average, a higher percentage of Pell Grant recipients and students from the bottom income quartile receive institutional aid compared to students from the top income quartile and non-Pell students.

Colleges that are heavily reliant on tuition for their revenue are more prone to cutting institutional aid in response to tuition regulation policies than more well-resourced institutions that can absorb such losses more easily. For example, four-year institutions without graduate programs adjusted their institutional aid more significantly than high-research institutions. Similarly, four-year colleges that depend more heavily on tuition dollars for revenue cut more of their institutional aid and increased their tuition more rapidly once tuition regulations were lifted. These findings underscore the need for policymakers to consider regulating net tuition to prevent policies from unintentionally harming low-income students.

Impact on Enrollment and Institutional Viability:

While a tuition freeze can be a compelling strategy for attracting and retaining students, it also presents significant financial challenges for institutions. Universities and colleges incur ongoing operational costs, including faculty salaries, facility maintenance, and research expenditures, all of which can escalate over time. Institutions that rely heavily on tuition revenue may find themselves in a precarious position if they cannot adequately cover these rising costs.

The Wisconsin Policy Forum report indicates that since 2014, a year into a tuition freeze, the University of Wisconsin system has experienced a reduction in its faculty ranks. This desire to avoid budgetary constraints and recruitment limitations may explain why some universities have opted to end tuition freezes or have never agreed to them in the first place. For instance, Minnesota State University increased tuition by 3.4 percent across the board this year, as state appropriations, budget cuts, and other measures were insufficient to cover a deficit for the system, where tuition and fees constitute nearly 40 percent of annual revenues. The University of Michigan, Ann Arbor, also raised tuition, but committed to meeting 100 percent of the financial need for in-state students.

Shifting Power Dynamics and Future Strategies:

Economists predict a significant decline in the college student population in the coming years. As Brad Frank observes, "The power is going to shift to the consumer because of shrinking demand." This impending demographic shift necessitates that institutions clearly articulate their unique value propositions to attract students. Consumers make purchasing decisions based not only on price but also on the perceived value and benefits they receive.

Institutions have a substantial opportunity to innovate in their tuition pricing models, especially as more courses transition to fully online and hybrid formats. Some institutions have already successfully leveraged technology to develop more affordable online versions of their traditional residential programs. Investing in technology solutions can also lead to cost reductions across the institution by driving labor efficiencies, as J. Michael Locke points out.

The pandemic has further amplified concerns about college tuition. Higher education is in a state of evolution, and institutions must adapt to remain competitive and relevant. The effectiveness of tuition discounting, for example, in helping low-income students or merely in enabling colleges to meet enrollment targets post-pandemic, remains to be seen. Enrollment projections indicated a steep decline in undergraduates during the 2020-21 academic year, forcing institutions to compete fiercely for a smaller pool of applicants.

Beyond the Sticker Price: Net Tuition and Affordability

It is important to recognize that the "sticker price" of tuition does not always reflect the actual amount students pay. Many students benefit from institutional, federal, and private grants and scholarships, which significantly reduce their net cost of attendance. This reality complicates the narrative around tuition freezes, as their benefits may disproportionately accrue to students who pay the full sticker price or close to it.

Research from the University of Wisconsin system illustrates this complexity. While a tuition freeze was in place for eight years, the net price of attending has actually increased for many low-income students. Only at specific campuses within the system have costs decreased for students from lower-income families. Conversely, at private colleges, sticker-price increases have sometimes correlated with lower net prices for the least wealthy students. For low-income students attending institutions where tuition increased minimally, the net price has remained relatively flat. However, for those at colleges with higher sticker price increases, the net price has fallen considerably. This suggests that institutions with higher sticker prices may have a greater capacity to use tuition revenue to fund financial aid programs, enabling them to better target assistance to those most in need.

The Long-Term Sustainability of Tuition Freezes

The University of Chicago's decision to hike tuition in 2021-22 after a year-long freeze exemplifies the challenges of maintaining stagnant tuition rates indefinitely. For institutions operating under a long-term tuition freeze, budgetary flexibility can be severely limited if state funding does not compensate for the reduced tuition revenue. The argument that "the tuition freeze is simple to do. It’s simple to explain to the public" often overlooks the intricate financial realities that institutions face.

The notion of a perpetual tuition freeze can, in essence, evolve into a policy akin to "free college," albeit implemented more gradually. In Wisconsin, for example, a bill (SB 343) was proposed to provide a roadmap for families regarding future tuition adjustments once the freeze is eventually lifted. This approach aims to offer predictability, even as the underlying costs of higher education continue to rise. The experience in Wisconsin suggests that while headline-grabbing double-digit tuition increases may be avoided, the long-term sustainability of a prolonged freeze without corresponding increases in state appropriations or other revenue streams is questionable.

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