The Influence of Tuition and Tuition Subsidies on the Long-Term Persistence and Attainment of Community College Students

The purpose of the research is to inform public policies regarding the pricing of tuition and tuition subsidies for community college students. State policy makers are currently exploring tuition “rationalization” approaches, which raise tuition prices and provide direct subsidies to low-income students. Earlier research shows that student price responsiveness—as measured by enrollment and persistence—varies by college sector and student income and racial characteristics. This research adds to knowledge about student price responsiveness and informs policy making by analyzing persistence and degree attainment among community college students. Specifically, we address the following research question, “What is the influence of tuition and tuition subsidies on the probability of persistence over one year and of degree attainment over five years? ” Using logit and probit regression models, we analyze the NCES’ Beginning Postsecondary Students (BPS 90:94) data, a longitudinal component of the National Postsecondary Student Aid Survey (NPSAS). One model predicts within-year persistence from fall 1989 to spring 1990, and a second predicts degree attainment from 1989 to 1994. The independent variables of interest include tuition, grant and loan aid, independent and dependent financial status, and other student characteristics, such as race, gender, age, and income. The results indicate that a $500 annual increase in tuition has a small influence (-3.0%) on within-year persistence, indicating that community college students are only moderately price sensitive. The longitudinal model indicates that the receipt of grants has little effect on short-term persistence, but significantly increases the probability of earning an associate’s degree in the long term. The receipt of loans has a positive effect on persistence, but a negative effect on attaining an associate’s degree. The small relatively small impact of tuition increases and the positive influence of grant aid provide support for tuition rationalization policies that include well targeted grant aid. In future analyses, additional specifications of the variables and statistical models will test these conclusions and interpretations. Tuition, Tuition Subsidies, and Persistence 2 INTRODUCTION Efficiency minded policy makers and researchers have for some time debated the merits of higher education “tuition rationalization,” a term which refers to the adoption of high tuition prices accompanied by high levels of financial aid for needy students. The approach is considered by some as a cost-effective and equitable way to increase access to higher education for low-income families by requiring those families with greater financial means to pay a greater share of college costs. Critics of tuition rationalization schemes charge that universally low tuition pricing levels are necessary to attract lowincome students to higher education. The costs associated with accumulating the information necessary to apply for and retain grant and loan aid are considered a significant barrier to enrollment. In addition, the political pressures on states to subsequently lower aid levels that were originally raised to offset increases in tuition can be considerable. (For recent scholarship on and reviews of the tuition rationalization issue, see Griswold & Marine, 1996; Hearn, Griswold, & Marine, 1996; Hossler, Lund, Ramin, Westfall, & Irish, 1997; St. John & Starkey, 1995.) The debate has been a particularly important one in the past decade, as tuition levels at both public and private colleges and universities have risen and federal funding has shifted from means-tested grant aid to subsidized loans that are made available to low and middle income families alike. Researchers have produced a large body of literature analyzing student price responsiveness and the effect of changing tuition and “net price” levels on aggregate enrollments (Heller, 1997; Heller, 1999; Leslie & Brinkman, 1988; Rouse, 1994). This research has generally found that students in community colleges are more sensitive to Tuition, Tuition Subsidies, and Persistence 3 tuition increases than students in the four-year sector. In addition, those students who are disproportionately served by community colleges, those from low-income households, also show greater sensitivity to changes in prices and aid awards, particularly grants (Jackson, 1990). Typically, the aggregated price-response studies do not attempt to estimate differences that may exist in the effects of tuition and aid on decisions to persist in college as choices made separately from initial enrollment decisions (St. John & Starkey, 1995). That work has been taken up by a smaller number of researchers, foremost among them St. John and his colleagues (Andrieu & St. John, 1993; Cofer & Somers, 1999; Hippensteel, St. John, & Starkey, 1996; St. John, Andrieu, Oescher, & Starkey, 1994; St. John & Starkey, 1994; St. John & Starkey, 1995). These researchers have examined the effects of tuition prices and different types of aid (grant, loans, work-study) on persistence using data on the enrollment or drop-out behaviors of individuals enrolled in different sectors and with different characteristics. Much of this research has been limited by the available data to studies of within-year persistence. Our study builds on this work by estimating within-year persistence as well as persistence to the attainment of a degree over a five-year period. As Adelman (1999) has so vividly illustrated, undergraduate enrollment today is characterized by attendance at multiple institutions and a complex pattern of stop-out and re-enrollment decisions. In addition, he has stressed, a great deal of variation exists in the amount of work students have completed by the time they complete their first year of college. A fair proportion of those who may be considered “persisters” in the second semester have actually Tuition, Tuition Subsidies, and Persistence 4 accumulated only a small number of academic credits. Therefore, our use of longitudinal data allows us to make a contribution in an area deserving of additional study. In addition, we limit our sample to students enrolled in public community colleges. With their open enrollment policies, community colleges provide access to higher education for economically disadvantaged students, who are more likely to have attended low quality secondary schools (Tinto, 1993). Enrollment in this sector is growing and is expected to continue at a greater rate than enrollments in the four-year sector. While community colleges enroll nearly 40% of all college students in the U.S., comparatively little research has been done on the experiences of community college students (Pascarella & Terenzini, 1998). Therefore, the effects of public financing on the educational outcomes of students in community colleges are of particular interest to evaluate equality of educational opportunity in the U.S. CONCEPTUAL FRAMEWORK Two distinct approaches to analyzing persistence in college exist in the research literature. The first takes a sociological perspective and the second takes an economic perspective. While the methods of this study are econometric, our interpretation of the findings are also influenced by the broader sociological perspective. A large number of studies evaluate the academic persistence or “dropout” behaviors of college students within the framework of Vincent Tinto’s (1975, 1993) sociological model of student attrition. Tinto’s model, which focused on a student’s academic and social integration into college life and the resulting degree of goal and institutional commitment a student achieves, has been significantly validated by numerous studies of full-time students Tuition, Tuition Subsidies, and Persistence 5 attending residential four-year colleges. Extensions of the model to commuter, part-time, and otherwise “nontraditional” students have been less successful. For this reason, Bean and Metzner (1985) developed a conceptual model building on Tinto’s work and placing greater emphasis on “environmental variables. ” These included finances, hours of employment, outside encouragement, family responsibilities, and opportunity to transfer, which were considered to play a greater role in the persistence decisions of students who are older, part-time, and/or employed. At the same time, Bean and Metzner deemphasized the influence of social integration on campus, arguing that social activities have much less bearing on the persistence of non-residential college students, many of whom have extensive social and family commitments outside the campus environment. Tinto (1975, pp. 97-98) had originally conceptualized environmental or “external” factors as having an indirect effect on persistence by influencing a person’s goal and institutional commitments. He observed that a “cost-benefit” analysis is consistent with his theory because a person’s academic and social integration in college is dependent on her perceptions of the benefits and costs of college attendance. Economists have explicitly relied on cost-benefit analyses to model influences on the choices of college students. Economic models generally treat institutional and student psychological factors as unobservable characteristics, which create a “random” disturbance and exert their influence through an unexplained “error” term of the model. Beyond the years of compulsory high school attendance, a person chooses among various schooling and labor force options, weighing the costs and benefits of each under the constraints of her own ability and family income. She then chooses the option offering the greatest “utility,” or Tuition, Tuition Subsidies, and Persistence 6 satisfaction. Her enrollment in college or entry into the labor market is understood to reveal her preference for the observed activity (Becker, 1976; Manski & Wise, 1983) As shown by Manski and Wise (1983, p. 33) this “random utility model”