What do taxpayers get out of higher payments to public universities so that tuition can be kept low?
When the price of college to the student is kept low, more students who lack commitment and readiness for college-level work enroll. These then drop out at a high rate.
The taxpayer expects colleges to turn out graduates with wisdom and the skills that the labor market demands. The higher the subsidy from taxpayers, the lower the cost to the student and the less the price signal conveys to the student. A student can start college and enjoy campus life for several years, then drop out without much personal financial consequence. Taxpayers’ investments fail in these cases.
Montana’s low tuition and high dropout rate illustrate this pattern. Our public-college tuition ($6,409) is third-lowest of the 50 states. We also have one of the lowest graduation rates: 21 percent in public four-year colleges, compared to the national average of 33 percent. Only five states have a lower graduation rate than Montana.
A scatter-plot graph of tuition versus graduation rates in the 50 states reveals a strong correlation — low tuition is associated with low graduation rates, high with high.
I sometimes ask students I meet at church or at the athletic club two questions: a) How much was tuition for your most recent semester? And b) How much of that did you pay with your own money from savings or current earnings? They frequently answer: They don’t remember tuition’s cost, and they didn’t pay any of it. (Sallie Mae, the Student Loan Marketing Association, says students pay 11 percent of the cost of college, a different measure than the cost of tuition.)
When Montana students were told by our higher-education administrators this spring that tuition increases might be necessary after nearly a decade of low and frozen tuition, they objected that it would be a hardship. Yet, at Montana State University, 62 percent of survey respondents approved of recreation-fee increases to “improve playing fields, climbing walls and provide more support to student clubs.” The Bozeman Daily Chronicle wrote, “MSU’s recreation fee proposal includes a study that found recreation facilities are more influential than academic programs in attracting students to enroll and keeping them in college.”
The clear expectation is that taxpayers should fork over escalating amounts to keep tuition low — so more students can enroll in college where they prioritize recreation facilities over academic programs.
And taxpayers have indeed been paying more. The state’s Legislative Fiscal Division reported that annual per-student funding has risen 40 percent in five years, from $5,200 to $7,300.
Subsidizing tuition burdens taxpayers. But it also has downsides for students. It encourages students who have no business attending college to heed the siren call; they delay their entry into the workforce and often incur debt. (The perks of college — an exciting peer culture, time to ski, climb and kayak, sporting events — are arguably worth it to them.) Meanwhile, those students who are prepared for college get a degraded product because standards are lowered to accommodate the ill-prepared, and fewer dollars are available to pay top-flight faculty.
In summary, low tuition spurs a high dropout rate. Taxpayers’ sacrifices enable large enrollments but yield reduced economic returns. This problem is especially acute in Montana.