Curbing Tuition Growth with Carrots, Not Sticks

We all know that higher education tuition growth rates are a huge problem. According to the College Affordability and Transparency Center, from the period of 2011-2012 to 2013-2014, the average percentage increase in tuition for every sector, every type and every duration far outpaced inflation rates.

Four-year public schools saw a tuition increase of 7.7%. Four-year private profit and nonprofit schools saw increases of 3.2% and 7.9%, respectively. Two-year public schools saw tuition increases of 10.8%. And, two-year private profit and nonprofit schools saw increases of 5.7% and 9.5%. The highest inflation rate in the last 10 years was 4.1% in 2007. In 2014, inflation was at .8% and is hovering around .1% in 2015.

We’ve researched the causes of these increases, and have heard everything from decreased state funding to bloated administrations to increased student enrollment. It all depends on who you’re talking to and may be a combination of all three. With Americans shouldering $1.2 trillion in student loan debt, and about eight million of them in default, many solutions have been offered. The most recent one is from Hilary Clinton, where she proposes major new spending by the federal government that would help undergraduates pay tuition at public colleges without needing loans.

Most of the solutions offered would “stick” it to someone through increased regulations and taxes. Tuition Heroes™ has a more free-market “carrot” approach. We believe in true competition and reward performance. Competition lowers prices and ensures continual improvement. Tuition Heroes tracks tuition for all US institutions and calculates a compound annual growth rate (CAGR) over a rolling four year period for each one. We then assign a rating for each school and designate those with a CAGR of 2.5% or less a Tuition Hero™. Each Tuition Hero can then get a digital badge to display on their websites and social media accounts.

It’s very similar to the Energy Star program for energy efficient appliances. If you don’t have an Energy Star badge on your appliance for consumers to see when they compare products, you’re at a disadvantage. The Tuition Hero “carrot” approach doesn’t force institutions to do anything, and it doesn’t “stick” it to anyone. It’s a standard that all institutions should strive to achieve. Peer pressure is a powerful thing, especially when there are dollars involved.

The cool thing is that the Tuition Hero Badge can be acquired by anyone associated with an institution. We would hope that school leaders would want to get the badge for themselves and proudly display their tuition control. But, anyone can get the badge. This includes alumni, businesses or government officials. Alumni may want to put the badge on their blogs or social media accounts. And even state governors may want to tout the Tuition Heroes in their state.

In 2015, 39% of the more than 3,700 two and four-year institutions tracked were granted the Tuition Hero designation. Of that, 28% were public schools and 71% were private schools. Only 12% were four-year public schools, and should be considered rock stars, compared to other schools in their segment.