Do Price Controls Help Students?

Critics say recent attempts to charge more for high-demand community college courses hurt low-income students. But they're hurt more, Nate Johnson says, if the only classes open to them are at costlier private colleges.

April 13, 2012

It is easy to criticize Santa Monica Community College’s recent decision to charge more for high-demand classes. Community colleges are, by design, supposed to make sure that everyone has at least one public higher education option within reach financially and geographically.

American higher education is a divided system, in which the “haves” fret over their odds of getting into Swarthmore, while the “have-nots” balance minimum-wage jobs with classes at a nearby public college.  In that light, tuition increases for high-demand courses look like an assault on the last bastion of equity, creating two tiers within the community colleges themselves.  Students who can pay more -- or take on more debt -- will have better options. Those who can’t, won’t.

In fact, though, this is what has already happened. At four-year colleges, differential pricing is becoming the norm. But for low-income students, the more important trend has been the rapid growth of open-access private institutions. From  2001-2 to 2009-10, the proportion of Pell grant recipients attending for-profit colleges rose from 15 to 25 percent, while declining from 35 percent to 32 percent at community colleges. Given the much higher prices at for profit institutions, this has meant a huge -- but hidden -- tuition increase for low-income students.

Nursing programs in Florida provide a good case study. It’s backed up by data, but also by the experience of an acquaintance whose child goes to school with mine.

Joe is exactly who we imagine when talking about adults retraining for new careers. A former commercial pilot who took a severance package when his airline downsized in the recession, he decided to enter a field with much better employment prospects: nursing.

He considered the R.N. programs at each of Tallahassee’s three public colleges -- Florida State, Florida A&M, and Tallahassee Community College (TCC).  As a bachelor’s degree graduate already, Joe could easily have qualified to enter any of them after completing a couple of science prerequisites.  

But they all had waiting lists. It would have taken a year and a half before Joe could have started at TCC.

So Joe did what more and more students -- especially adults returning to college -- are doing. He turned to a private career college, Keiser University (which recently shifted from for-profit to nonprofit status), which said he could start in three months.

The shorter wait, he figured, would make up for the cost, which Joe pegged at about three times that of TCC.

Joe was not alone.  Between 2005 and 2011, the number of registered nurses graduating from for-profit colleges in Florida rose from 114 to 1,034 — an increase of 800 percent.  Average published tuition and fees at these institutions was over $15,000 a year in 2010-11.

Nursing programs at Florida community colleges also grew, but only by 36 percent, from 3,761 graduates to 5,124. Average tuition and fees at community colleges — which are closely regulated by the state -- run less than $3,000, a fifth of what the for-profits charge.

When demand is modest, bargain basement prices keep costs low for community college students, most of whom fall squarely into the low-income category. But for high-demand programs, the net effect on prices can be deceiving.

Average tuition and fees at community colleges in Florida went up about $800 from 2005 to 2011. But at the same time, an increasing number of nursing students like Joe were enrolling at more costly private colleges. As a result, the average tuition and fees for all nursing students — public and private together -- actually rose by about $3,700. The biggest source of that increase was the shift of unmet demand to the more expensive private sector.

What if community colleges had raised tuition by another $2,000 for nursing programs? There would have been an outcry, but would students necessarily have been worse off?  Would community colleges have been able to increase capacity more quickly to compete with the private sector? It’s hard to say, but that is the type of big picture question we should be asking.

The story of nursing programs in Florida is higher education’s version of the shortages in the Soviet Union in the early '90s, when food in state-run shops was cheap — if you could get it. People either waited in long lines, or paid higher prices in private markets. While nursing has especially high costs and high demand, for-profit colleges have also found a profitable in areas such as business and general education, where they can charge more than public institutions while keeping costs as low as possible.

The explosive growth in for-profit colleges around the country shows that there is more demand for postsecondary education out there than open-access public institutions have been able to meet. Some of that demand was ginned up by dubious recruiting practices, but some is certainly real. According to its founder, John Sperling, the nation’s largest for-profit, the University of Phoenix, can trace its origins to the unmet needs of working adult students in the 1970s.

There may be alternatives to Santa Monica’s path, or at least ways to soften the blow. More financial aid could help defray the costs of high-demand courses for low-income students. States could also consider incentive funding for institutions that successfully serve challenging student populations.  But before reflexively jumping to price controls, we should consider how those might affect the same students we are trying to protect.

And Joe? After one term, he started doubting whether nursing was the right choice. So he dropped out, though he says he might have stuck it out longer if the price weren’t so steep.

In the long run, he’d like to enter one of the few graduate programs in the country that train anesthesiology assistants. In the meantime, he found a job — running an employment retraining program at TCC.


Nate Johnson is the principal in Postsecondary Analytics, a policy consulting firm.


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