United States General Accounting Office

GAO Report to the Honorable

Charles E. Schumer

House of Representatives

September 1998 HIGHER EDUCATION

Tuition Increases and

Colleges’ Efforts to

Contain Costs

GAO/HEHS-98-227

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-279220 

September 30, 1998

The Honorable Charles E. Schumer

House of Representatives

Dear Mr. Schumer:

The rising cost of tuition at the nation’s colleges and universities has been

a topic of considerable attention. Over the past two decades, tuition

increases have substantially outstripped rises in median family income and

the cost of living. In our study on tuition increases (including related fees)

at 4-year public colleges and universities from school year 1980-81 through

1994-95, we found that the two major factors associated with these

increases were the rise in schools’ expenditures and schools’ need to

increase tuition revenue to make up for smaller increases in state

appropriations.1

 A subsequent study by the National Commission on the

Cost of Higher Education covering fiscal years 1987 through 1996 had

similar findings and made a number of recommendations on the actions

that could be taken such as strengthening institutional cost control to keep

college affordable for anyone wishing to obtain a postsecondary

education.2

You asked us to provide information about various issues regarding

college tuition increases and what schools have done to keep down their

costs. More specifically, you asked that we address the following four

questions:

• To what extent have tuition increases varied by type and size of school?

• To what extent is there a statistical relationship between increases in

tuition and other factors such as cost increases at the schools?

• To what extent have tuition increases at 4-year schools affected tuition at

community colleges?

• What are some examples of strategies that schools have employed to

reduce their own costs?

1

Higher Education: Tuition Increasing Faster Than Household Income and Public Colleges’ Costs

(GAO/HEHS-96-154, Aug. 15, 1996).

2

National Commission on the Cost of Higher Education, Straight Talk About College Costs & Prices

(Phoenix, Ariz.: Oryx Press, 1998).

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Our information covers community colleges and 4-year public and private

colleges and universities.3

 The data we used are from the Department of

Education and cover the most recent 5-year period available.4

 The tuition

and related fee figures (which we refer to simply as “tuition”) we use

reflect schools’ full prices that have not been adjusted for discounts or

other forms of student financial aid. We conducted a statistical analysis

using multiple regression techniques to determine the factors associated

with variations in tuition increases.5

 In addition to analyzing the data, we

interviewed various school officials and experts knowledgeable about

college finance and policy issues, and we reviewed published research.

Appendix I describes our scope and methodology in further detail.

Results in Brief On a percentage basis, tuition has risen faster at both 4- and 2-year public

colleges and universities than at 4-year private schools—30 percent versus

17 percent in the past 5 years.6

 However, 4-year private schools, which had

much higher tuitions to begin with, had dollar increases that were

greater—$1,763 at 4-year private schools versus $670 at 4-year public

schools and $288 at community colleges. The relative size of a school,

whether public or private, appeared to have no relationship to the rate of

increase. Large schools tend to have higher tuitions than small schools,

and therefore, although the increase was greater in dollar terms at large

schools, the percentage increases were about the same.

At both 4-year public and private schools, our analysis showed that the

size of tuition increases was statistically related to a variety of other

financial variables such as schools’ revenues from grants, contracts, and

gifts; for public schools, changes in government appropriations for higher

education; and changes in schools’ costs of providing education including

noninstructional costs. For example, 4-year public schools that

experienced larger reductions in government appropriations tended to

have larger tuition increases. Likewise, schools that experienced greater

3

We excluded 2-year private schools from this analysis because they constitute a very small segment of

the total postsecondary education community.

4

For our analysis of variation by type and size of school, this period was school years 1990-91 to

1995-96; for our analysis of the relationship between tuition and other factors, which required

somewhat more detailed information than was available for 1995-96, the period began 1 year earlier, in

1989-90, and ended with 1994-95.

5

These methods did not identify the causes of tuition increases; they identify characteristics of schools

with larger or smaller tuition increases.

6

These percentages are based on adjusting all dollar amounts to 1995 dollars to account for inflation.

All dollar amounts shown in this report are adjusted to the last year of the 5-year period analyzed.

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losses in grant revenues or greater increases in operating costs also tended

to contribute to increase tuitions more than those schools that did not

have these experiences.

Tuition increases at community colleges have closely paralleled increases

at 4-year public schools in recent years. However, there is little evidence

that tuition increases at community colleges have been caused by

increases at 4-year schools, according to officials and researchers we

contacted and the literature we reviewed. Instead, the increases at both

4-year public schools and community colleges are similar either because

they are set legislatively or administratively on a statewide basis or

because the tuition-setting entities consider the same kinds of factors such

as the Consumer Price Index (CPI) or state funding levels when deciding on

tuition increases for both kinds of schools.

States, consortiums of schools, and individual colleges and universities

have all taken steps to cut schools’ operating costs in recent years. In our

review of published reports and discussions with education officials, a

variety of cost-cutting strategies surfaced, such as eliminating degree

programs or academic departments, increasing class sizes, streamlining

administrative operations, and privatizing operations like bookstores and

food service operations. While these actions serve to reduce schools’ own

costs, they may not necessarily result in lower tuition for students because

schools’ costs may be only one of several factors considered when

tuition-setting decisions are made.

Background During the 5-year period from school years 1990-91 through 1995-96, the

average tuition for a full-time resident undergraduate student rose

43.8 percent, compared with an increase of 15.4 percent in CPI and

13.8 percent in median household income in current dollars (dollars that

are not adjusted for inflation). (See fig. 1.) This difference continued a

pattern that has been apparent for a much longer period. From school year

1980-81 through 1994-95, for example, the average tuition for a resident

undergraduate to attend school increased by about 234 percent. During

approximately the same period, the cost of living rose 74 percent and

median household income rose 82 percent.

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Figure 1: Cumulative Percentage Increases in Tuition, Median Household Income, and Consumer Prices, School Years

1990-91 Through 1995-96

1991 1992 1993 1994 1995 1996

0

10

20

30

40

50

Tuition and Fees

Median

Household

Income

Consumer Prices

Percentage

Note: This comparison was made using data that are in dollars not adjusted for inflation.

Sources: Tuition and fee data are from the Department of Education; median household income

data are from the U.S. Census Bureau; and consumer price data are from the Bureau of Labor

Statistics.

The topic of college affordability has become an issue of growing concern

not only for students and their parents but also for both the state and

federal governments. Congressional committees have held a number of

hearings on this issue and, in 1997, the Congress established the National

Commission on the Cost of Higher Education to conduct a comprehensive

review of college costs and prices. In its final report, issued in

January 1998, the Commission stated that its members were convinced

that if colleges and universities did not take steps to reduce their costs,

federal and state policy makers would intervene and take up the task for

them.

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B-279220 

Tuition Increases

Varied by Type and

Size of School

During the most recent 5-year period (school years 1990-91 through

1995-96), the rise in tuition was highest in percentage terms at public

schools and highest in dollar terms at private schools. Tuition at public

2-year and 4-year schools rose 30 and 31 percent, respectively, compared

with 17 percent at private 4-year schools. Private 4-year school tuition,

which is generally much higher, had greater dollar increases—$1,763

compared with $670 and $288 for public 4-year and 2-year schools,

respectively (see table 1).

Table 1: Comparison of Average

Undergraduate In-State Tuition and

Fee Increases by Type of School,

School Years 1990-91 and 1995-96

Average tuitiona

Average tuition

increase

Type of school 1990-91 1995-96 Amounta Percent

4-year private $10,480 $12,243 $1,763 17%

4-year public 2,178 2,848 670 31

2-year public 951 1,239 288 30

aDollar amounts are in constant 1995-96 dollars.

A school’s size did not appear to have a substantial effect on the

percentage increase in tuition. To determine the degree to which tuition

increases were related to a school’s size, we divided each type of school

into quartiles according to fall 1995-96 enrollment levels. We did this for

each type of school—public 2-year and 4-year and private 4-year. For each

type of school, comparisons across the four quartiles showed that the

percentage increases in tuition were about the same.

Although tuition rose at about the same percentage increase across the

different sizes of schools, size did have some bearing on the dollar amount

of the increases. For all kinds of schools, tuition tends to be somewhat

higher at schools with higher enrollments. Even though the percentage

increase was generally about the same, larger schools saw higher dollar

increases (see table 2).

Table 2: Tuition Increases, by Type

and Size of School, School Years

1990-91 and 1995-96

Amount of tuition increase Enrollment quartile (1 being the

largest) 4-year public 4-year private 2-year public

1 $718 $1,991 $359

2 675 1,691 345

3 651 1,594 314

4 522 1,293 252

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For example, private 4-year schools in the quartile with the largest

enrollments (quartile 1) had an average 1990-91 tuition of $11,327,

compared with $6,925 for schools in the quartile with the smallest

enrollments. Although tuition rose by about the same percentage in both

quartiles, tuition increased by $1,991 for the largest schools compared with

$1,293 for the smallest schools. Appendix II provides more detailed

information.

Tuition Increases and

Certain Financial

Factors Are Related

The size of a school’s tuition increase is associated with certain aspects of

the school’s financial situation, our analysis found. To determine what

factors might help account for variations in tuition increases, we

conducted a statistical analysis using multiple regression techniques.

Multiple regression is a method for determining the existence and strength

of associations between one variable—in this case, the amount of the

tuition increase—and various other factors. These methods did not

identify the causes of tuition increases; they identify variables related to

larger or smaller tuition increases. It is particularly difficult to identify

factors causing variation in tuition increases because schools’ decisions to

increase tuition and to increase expenditures are likely to be

interdependent. For example, one study pointed out that schools with

larger tuition increases may increase spending more because they have

more income and because they may need to increase instructional

expenditures more to maintain adequate enrollment.7

 In addition, the

study reported that it is likely that schools’ decisions to increase tuition

and increase institutional financial aid may be interdependent, and it also

suggested that larger increases in tuition could lead to larger increases in

institutional financial aid, both because a school had more income and

because it desired to maintain a diverse student body.

We examined a judgmentally selected set of 15 factors derived from

information the Department of Education obtains annually in surveys of

all postsecondary institutions eligible for federal education programs. This

information includes a variety of financial trends (such as increases in

instructional costs or school endowments) as well as other institutional

characteristics (such as the ratio of in-state tuition to average tuition

receipts per student). We focused this analysis on tuition (and required

fees) for in-state full-year, full-time undergraduate students at 4-year

public and private schools over the period covering school years 1989-90

and 1994-95 (the latest years for which information was available). We

7

M.S. McPherson and M.O. Schapiro, Keeping College Affordable: Government and Educational

Opportunity (Washington, D.C.: Brookings Institution, 1991).

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adjusted tuition and all financial variables for inflation using the Bureau of

Labor Statistics’ CPI. For the list of all 15 variables and details concerning

our analyses and results, see appendix III.

In general, the size of tuition increases at both 4-year public and private

schools was most strongly related to the amount of change in school

revenue from sources other than tuition and schools’ costs of providing

education, including noninstructional costs. Changes in the market value

of schools’ endowments were not related to tuition changes. Because the

results differed to some degree between public and private institutions, we

discuss each individually.

Increases at 4-Year Public

Colleges and Universities

For 4-year public schools, the 15 factors collectively accounted for about

85 percent of the variation in tuition increases. Seven important factors,

which together accounted for about half of the variation, were as follows:8

• Change in government appropriations. On average, 4-year public schools

saw declines in governmental appropriations (federal, state, and local)

during the period—about $6,200 per full-time-equivalent (FTE) student in

1994-95, compared with about $7,100 in 1989-90.9

 Schools that saw the

greatest declines in appropriations per FTE student typically had larger

increases in tuition. These appropriations included unrestricted funding as

well as appropriations for restricted purposes, such as particular building

projects. These did not include, however, federal appropriations to fund

grants to individual students.

• Change in instruction expenditures. Schools that had the largest increases

in instructional costs per FTE student tended to have larger tuition

increases after adjusting for the other factors we examined. Schools varied

considerably in the extent to which their instruction costs changed. Some

schools had increases while others had decreases. As a result, instruction

costs per student changed little over the period. They were about $5,300 in

both 1989-90 and 1994-95.

8

See appendix III for a more detailed discussion of results for all factors analyzed. We identified

variables as “important” here if the decline in the portion of variation accounted for (R squared) by

omitting the variable from the model was greater than the decline observed from omitting other

variables, one at a time. However, when the independent variables are highly correlated, it is difficult

to distinguish their independent contribution to the portion of variation accounted for (R squared).

Some of the independent variables we examined were highly correlated. For example, the change in

revenue from grants, contracts, and other sources had a correlation of 0.76 with the change in research

expenditures in the sample of public 4-year schools.

9

The amounts are per FTE student at schools included in our regression analysis, weighted by each

school’s estimated FTE student count.

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• Change in revenue from grants, contracts, and other sources. These

“other” revenues, which totaled about $3,700 per full-time-equivalent

student in 1994-95, include such nontuition items as grants and contract

revenue from government and private sources. Schools that had larger

increases in these revenues typically had smaller increases in tuition after

taking into account the other factors analyzed. The average amount of

these revenues increased from about $3,400 to about $3,700 from 1989-90

to 1994-95.

• Change in the amount by which revenues exceeded or fell short of

expenditures. This is the amount by which a school’s revenue exceeded or

fell short of expenditures for current operations, which excludes revenue

and expenditures for such things as noninstitutional grants to students,

independent operations, auxiliary enterprises, and hospitals.10 On average,

public schools saw little or no change in this factor. On average, they had

revenues exceeding expenses (a surplus) of about $160 per student in both

years. Schools that had larger decreases in the annual current fund

surplus, or increases in their deficit, tended to have larger tuition increases

after taking into account the other factors analyzed.

• Change in other student-related expenditures. These expenditures were

for the portion of “overhead” expenditures proportionally allocated as

student-related expenses (instruction and student services) versus

research and public service. Such “overhead” expenses included

expenditures for libraries, museums, galleries, academic computing

support, academic administration, general administrative services, legal

and fiscal operations, public relations, operation and maintenance of

grounds and facilities, funds for debt retirement, and improvements or

additions to facilities. On average, institutions spent about $3,000 per FTE

student in this category in 1989-90 and about $2,800 in 1994-95. Schools

that had the largest decreases in this category typically had smaller

increases in tuition.

• Change in nonstudent-related expenditures. These other expenditures

include schools’ spending on public service and overhead expenditures

proportionally allocated to research and public service rather than student

services and instruction.11 These expenditures averaged about $2,100 in

1989-90 and about $2,400 in 1994-95. Schools with larger increases in this

10The Department of Education’s Integrated Postsecondary Education Data System (IPEDS) surveys,

from which we obtained these data, allow schools to account separately for current funds activity

(educational and general revenue expenditures and transfers) and for activity in other funds such as

endowment funds, funds for retirement of plant debt, and funds for renewals and replacements of

facilities.

11Schools’ spending on public service is for noninstructional services beneficial to groups external to

the institution such as seminars and projects provided to sectors of the local community and schools’

cooperative extension services funded by the Department of Agriculture.

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category were more apt to have larger tuition increases after controlling

for other factors (that is, after taking into account the relationship

between tuition increases and the other variables we studied).

• Change in research expenditures. One of the missions of many 4-year

colleges and universities is research. Schools report to the Department of

Education amounts of their expenditures on research commissioned by an

external agency or budgeted within a school. Research expenditures

increased from about $2,000 to about $2,100 per student from 1989-90 to

1994-95. After controlling other factors, including changes in all current

revenue, schools with larger increases in research expenditures were

more apt to have larger increases in tuition.

Increases at 4-Year Private

Colleges and Universities

Our analysis for 4-year private schools included the same 15 factors used

in analyzing public schools.12 Together, these factors accounted for about

70 percent of the variation in tuition changes at private 4-year schools.

Most of the factors that helped account for the variation were the same as

those for 4-year public schools. For private 4-year schools, the seven

factors that accounted for most of the variation were

• Change in revenue from grants, contracts, and other sources. Schools that

had large decreases in these revenues typically had larger increases in

tuition. These revenues averaged about $7,000 per FTE student in 1994-95,

up from about $6,300 in 1989-90.

• Change in the amount by which revenues exceeded or fell short of

expenditures. Although private 4-year schools on average saw little, if any

change in these amounts, schools that had a large increase tended to have

larger tuition increases. Conversely, schools that had smaller increases

tended to have smaller tuition increases. On average, schools with smaller

increases had a $200 decrease per FTE student in 1989-90 and a $300

decrease per FTE student in 1994-95.

• Change in other student-related expenditures. These expenditures

averaged $5,700 per student in 1994-95, up from about $5,600 in 1989-90.

Schools that had the greatest increases (or the smallest decreases) in this

category typically had larger increases in tuition.

• Change in instruction expenditures. Unlike public schools, where

instruction costs changed little over the period, private 4-year schools

showed an increase in instructional costs during the 5-year period after

adjusting for inflation. On average, the private 4-year schools we studied

spent $7,000 per student in 1994-95, up from $6,200 in 1989-90. We found

that schools with larger increases in instructional costs (and those that

12See appendix III for a more detailed discussion of results for the 15 factors analyzed.

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B-279220 

had smaller decreases) per FTE student tended to have larger tuition

increases.

• Change in the ratio of undergraduate tuition to average tuition received

per FTE student. Some schools increased in-state undergraduate tuition

charges more than other tuition charges, such as tuition for graduate or

professional schools. The schools that did so saw larger increases in

undergraduate tuition. On average, in-state undergraduate tuition was

close to the average amount of tuition that schools reported receiving per

FTE student in both 1989-90 and 1994-95.

• Change in research expenditures. Schools with larger increases in

research expenditures were more likely to have larger increases in tuition

after controlling for other factors. This does not mean that tuition

increases with additional research, because much research is paid for by

other revenue.13 We were not able to identify how much of each school’s

“other” revenue was for research. Without that information, we could not

determine whether research activity (including associated costs and

revenue) was related to changes in tuition. Our analysis indicated only that

research costs were related to tuition increases after controlling for other

factors, including revenue and other costs. The average amount of

research expenditures per student increased from about $1,300 to about

$1,500 from 1989-90 to 1994-95.

• Change in other nonstudent-related expenditures. On average, these other

expenditures increased from about $2,900 to about $4,100 per student over

the 5-year period. Schools that saw larger increases in these expenditures

saw larger tuition increases.

Effect of 4-Year

School Tuition

Increases on

Community College

Tuition Prices

Although community college tuition increases have generally paralleled

those of 4-year public schools, in our review of the literature and

discussions with officials in the higher education community we found

little evidence of any direct causative relationship between the two, at

least on any widespread basis. That is, there is little evidence that

indicates that community colleges, in general, raised tuition just because

4-year schools did.

In some states, however, there is some commonality in the tuition-setting

policies and practices of both 4-year and 2-year public schools, and this

can occur in a variety of ways. The following examples illustrate:

13Without controlling for other factors, changes in research were not correlated with changes in tuition

to a statistically significant extent.

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• In Alaska, the Alaska Board of Regents sets tuition for the state’s 4-year

and 2-year public schools and it applies the same policy to both types of

schools. The Board’s policy is to adjust schools’ tuition annually on the

basis of the average of the prior 3 years’ Higher Education Price Index

(HEPI).14 The Board can also suspend this policy and adjust tuition by other

amounts.

• In Nevada, the Nevada Board of Regents sets the tuition rates for both

4-year and 2-year public schools on the basis of recommendations by a

committee composed of elected student government representatives,

college presidents, and university system administration staff. In its

deliberations, the committee is to consider a common set of factors for

both kinds of schools. These factors include charges at peer institutions,

changes in HEPI, and the cost of education.

• In Washington State, the legislature sets tuition for both 4-year and 2-year

public schools, and it increased tuition for both kinds of schools by

4 percent for each of the 2 years in the 1997-99 biennium budget.

Thus, the tuition increases for public 2-year schools in states such as these

are linked in one way or another to the tuition increases of 4-year schools.

However, even in these states it cannot be concluded that 2-year school

tuition increases were caused by tuition increases at 4-year schools.

Examples of School

Efforts to Reduce

Costs and Improve

Efficiency and

Effectiveness

Many schools are taking a wide variety of actions to reduce or contain

their own costs or improve the efficiency and effectiveness of their

operations. In our 1996 study on the cost of college, we reported on

examples of approaches taken by states and schools to ease the college

cost burden to students.15 For example, we found some initiatives that

focus directly on charges students incur, such as limiting the amount of

tuition increases, and other initiatives such as prepaid tuition plans that

provide alternative ways of helping students or their parents pay for

college.

To identify additional examples of schools’ cost containment initiatives,

we conducted a search of publications in the field, and we contacted

researchers and representatives of schools and major higher education

associations such as the American Council on Education. In some cases,

14HEPI is an index specifically designed to measure changes in the prices of goods and services

commonly purchased by higher education institutions. Items that HEPI measures include faculty and

administrators’ salaries, fringe benefits, communication and data processing services, supplies and

materials, library acquisitions, and utilities.

15GAO/HEHS-96-154, Aug. 15, 1996.

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the actions we identified were being driven by state-level initiatives. In

other cases, schools had initiated efforts either on their own or in

conjunction with other schools.

Schools have initiated cost-cutting initiatives for a variety of reasons, such

as to compenstate for cuts in state funding, to reallocate resources from

one department or area of activity to another, or simply just to improve the

economy and efficiency of their operations. While these kinds of activities

help schools reduce their own costs, they do not necessarily result in

lower costs to students because, in some states, schools’ costs are only

one of several factors considered when tuition-setting decisions are made.

Responses to State-Level

Initiatives

In some states, such as Ohio, Oregon, Virginia, and Wisconsin, the

governor, legislature, or board of regents initiated efforts to contain costs

or improve efficiency and quality in state-funded colleges and universities.

For example, in 1994, Virginia’s Governor and General Assembly asked the

state’s public colleges and universities to submit restructuring plans to

improve quality and reduce costs. In subsequent years, the schools

responded by taking or planning a wide variety of actions such as reducing

the number of credits needed to graduate from most bachelor’s degree

programs to 120 credits, closing or merging a number of degree programs,

increasing faculty productivity by teaching more students with fewer

instructors, and privatizing various services such as food service and

bookstores. In 1996, these actions had a value of $63.3 million in cost

savings, and once all plans are fully implemented, the schools estimate

financial benefits to be about $110 million annually. An official of the

Virginia Council of Higher Education said this amounts to about 5 to 6

percent of the state’s total educational and general appropriations for its

postsecondary education system, which is almost $2 billion.

Actions Initiated by

Schools

Some schools have hired consulting firms to help them identify cost

savings opportunities or otherwise become efficient. For example, in our

discussions with representatives of five of the largest accounting firms, we

found that four of them have departments or persons who specialize in

helping schools develop strategies to contain costs or improve efficiency.

These firms help schools develop strategic plans and institutional goals

and evaluate opportunities for enhancing efficiencies. They also assist

schools in redesigning and reengineering their business processes and

information systems. According to one firm, it has worked with over two

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dozen colleges and universities, medical schools, and state education

agencies.

Since 1994, the National Association of College and University Business

Officers (NACUBO), together with Barnes and Noble Bookstores, Inc., have

sponsored a program that recognizes schools that have improved quality

and reduced costs. The Higher Education Award program is fashioned

after the Malcolm Baldrige National Quality Management program for

businesses. It grants awards of $2,500 to $10,000 to schools submitting the

best proposals for improving quality or reducing costs. For example,

Loyola College in Maryland was one of six winners of the 1997 Higher

Education Award. Its physical plant department improved operational

efficiency and reduced expenses by forming self-directed work teams to

assist with management functions. The end result was a decrease in

overtime and an increase in the housekeeping staff’s duties by 50 percent

and more than $625,000 in annual savings.

A recent study by RAND, a private nonprofit research institution, found

that some schools have joined together to undertake cost-savings

initiatives. For example, 17 independent nonprofit colleges and

universities in Virginia—the Council of Independent Colleges in

Virginia—joined together to purchase a contract with a long-distance

network carrier. As a group, the schools expect to save $4.65 million over

the 3-year period of the contract.16

Department of Education

Initiatives

According to a Department of Education official, the Department does not

have any programs that deal specifically with cost containment or

efficiency improvement activities at postsecondary institutions. However,

it operates a grant program, the Fund for the Improvement of

Postsecondary Education (FIPSE), that offers schools funding for projects

that will help them improve and become more efficient.17 The University of

Delaware, for example, is using a FIPSE grant to establish a longitudinal

database on instructional costs and productivity to compare these factors

among many institutions. Such information will eventually help schools

identify departments, programs, or other areas where cost-savings

opportunities are available.

16Tessa Kaganoff, Collaboration, Technology, and Outsourcing Initiatives in Higher Education: A

Literature Review (Chicago: The Foundation for Independent Higher Education, 1998).

17Created by the Higher Education Amendments of 1972, FIPSE provides grants intended to support

innovative educational reform projects that can serve as national models for the improvement of

postsecondary education. From fiscal year 1994 to 1998, $83.9 million in FIPSE grant funds were used

for over 1,100 new and continuing projects.

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For fiscal year 1998, the FIPSE grant competition specifically addresses cost

control at postsecondary institutions. For the purposes of the competition,

FIPSE defines cost control as reducing the total amount that is actually

spent by a school to bring a given number of students up to the level of

postsecondary knowledge and skill that was achieved by comparable

groups in previous years or as lowering the annual rate of increase of such

costs significantly below its previous level. The Department awarded FIPSE

grants to nine institutions that proposed projects to demonstrate

innovative ways to reduce costs. Brief descriptions of these projects are

contained in appendix V.

For more specific examples of schools’ cost containment and efficiency

improvement efforts, see appendix IV.

Agency Comments The Department of Education provided comments on a draft of this report.

The comments are included as appendix V. The Department said that the

report demonstrates that public school tuition and fees have increased

primarily in response to reductions in state funding for higher education

and that the report provides helpful examples of how states and schools

are reducing costs. The Department also provided technical suggestions

that we incorporated as appropriate.

Copies of this report are being sent to the Chairman and Ranking Minority

Member of the Committee on Education and the Workforce of the House

of Representatives; Chairman and Ranking Minority Member of the

Committee on Labor and Human Resources of the U.S. Senate; the

Secretary of Education; other appropriate congressional committees and

Members; and others who are interested.

If you have any questions about this report, please call me or Joseph J.

Eglin, Jr., Assistant Director, at (202) 512-7014. Major contributors to this

Page 14 GAO/HEHS-98-227 Cost of College Update
B-279220 

report include Charles M. Novak, Benjamin P. Pfeiffer, Charles H. Shervey,

and Dianne L. Whitman-Miner.

Sincerely yours,

Carlotta C. Joyner

Director, Education and

 Employment Issues

Page 15 GAO/HEHS-98-227 Cost of College Update
Contents

Letter 1

Appendix I 

Scope and

Methodology

18

Appendix II 

Variations in Tuition

Increases by Kind and

Size of School

22

Appendix III 

Regression Analyses

23

Results for 4-Year Public Colleges and Universities 27

Results for 4-Year Private Colleges and Universities 30

Appendix IV 

Examples of School

Cost Containment

Efforts

34

Statewide Initiatives 34

Multiple School Collaborative Efforts 35

Individual School Efforts 36

Appendix V 

Comments From the

Department of

Education

40

Tables Table 1: Comparison of Average Undergraduate In-State Tuition

and Fee Increases by Type of School, School Years 1990-91 and

1995-96

5

Table 2: Tuition Increases, by Type and Size of School, School

Years 1990-91 and 1995-96

5

Table II.1: Variations in Tuition Increases at 4-Year Public

Schools, School Years 1990-91 and 1995-96, by School Size

22

Table II.2: Variations in Tuition Increases at 4-Year Private

Schools, School Years 1990-91 and 1995-96, by School Size

22

Page 16 GAO/HEHS-98-227 Cost of College Update
Contents

Table II.3: Variations in Tuition Increases at 2-Year Public

Schools, School Years 1990-91 and 1995-96, by School Size

22

Table III.1: Variables Examined in Relation to Changes in Tuition 23

Table III.2: Statistics Concerning Selected Variables and Variation

in Tuition Changes, From 1989-90 to 1994-95

25

Table III.3: Factors Associated With Changes in Tuition at Public

4-Year Schools, From 1989-90 to 1995-96

28

Table III.4: Factors Associated With Changes in Tuition at Private

4-Year Schools, From 1989-90 to 1995-96

31

Figure Figure 1: Cumulative Percentage Increases in Tuition, Median

Household Income, and Consumer Prices, School Years 1990-91

Through 1995-96

4

Abbreviations

CPI Consumer Price Index

FIPSE Fund for the Improvement of Postsecondary Education

FTE full-time-equivalent

HEPI Higher Education Price Index

IPEDS Integrated Postsecondary Education Data System

MHEC Midwestern Higher Education Commission

NACUBO National Association of College and University Business

Officers

TWU Texas Woman’s University

Page 17 GAO/HEHS-98-227 Cost of College Update
Appendix I 

Scope and Methodology

For this study, we used annual tuition and school financial and enrollment

data collected by the Department of Education from 4-year private and

public colleges and universities and community colleges. We did not

include 2-year private schools in this study because they constitute a very

small segment of the total number of schools providing postsecondary

education. We also excluded proprietary (for-profit trade) schools

because, unlike the schools included in our study, they operate on a

for-profit basis. For our various analyses, we used annual tuition and

related fees for full-time in-state undergraduate students. We did not

include data on other costs that students may incur while attending

college such as for room and board, books and supplies, and commuting.

To determine the extent to which tuition increases from school years

1990-91 through 1995-96 varied by type of school, we used average

undergraduate in-state tuition and fee data published by the Department of

Education in the 1997 Digest of Education Statistics. To determine the

extent to which the tuition increases varied by school size, we obtained

and analyzed annual school-by-school tuition and enrollment data

collected by the Department of Education through its Integrated

Postsecondary Education Data System (IPEDS) for school years 1990-91

through 1995-96.

To determine the extent to which there is a statistical relationship

between increases in tuition and other factors, such as school revenues

and expenditures, we conducted linear regression analyses using IPEDS

data for school years 1989-90 and 1994-95. We developed two regression

models: one for public 4-year schools and one for private 4-year schools.

We limited the scope of these analyses to 4-year public and private schools

in the 50 states and the District of Columbia where more than half of the

students enrolled in the fall term were undergraduates and where more

than half of all students enrolled in the fall term were full-time students.

To be included, schools had to report tuition revenue, instruction

expenses, fall enrollment, and the typical tuition and required fee charge

for in-state full-time full-year undergraduates. We excluded schools for

which their tuition charge was less than 50 percent or more than

150 percent of reported tuition revenue per estimated full-time-equivalent

(FTE) student. Our analysis included a total of 383 public 4-year schools

and 761 private 4-year schools.

Our dependent variable in each model was the dollar change in in-state,

full-time, full-year undergraduate tuition and required fees that each

school reported to the Department in its IPEDS survey. We converted

Page 18 GAO/HEHS-98-227 Cost of College Update
Appendix I 

Scope and Methodology

1989-90 tuition figures to constant 1994-95 dollars using the Department of

Labor’s Consumer Price Index (CPI) for all urban consumers for that

school year. This index indicated an 18.4-percent increase in prices over

the period compared with a 19.5-percent increase in the Higher Education

Price Index (HEPI), which tracks changes in the costs of items purchased

by postsecondary schools.

Most of our independent variables were the dollar amounts of change in

selected revenue and expense items per FTE student. Here again, we

adjusted 1989-90 dollar figures for inflation using the CPI. We estimated the

number of FTE students at each school by multiplying the number of

part-time fall-term students by one-third and adding the number of

full-time fall-term students. We recognize that the calculation of FTE

students is a contentious subject and may differ considerably by type of

school. However, we believe the calculation method we selected is

appropriate for the purposes of our analyses.

Our independent variables included two categories of revenue from Part A

of the IPEDS finance survey: governmental appropriations and revenue from

grants, contracts, and other sources. We excluded the amount of

(1) student scholarships, fellowships, and grants other than those from

institutional funding sources and (2) revenue from hospital, independent,

and auxiliary operations.

We placed expenditure items reported in Part B of the IPEDS finance survey

into the following categories:

• instruction expenditures;

• student services expenditures;

• other student-related expenditures (a pro rata share of other expenditures

excluding research, public service, hospital, independent and auxiliary

operations and amounts of student scholarships, fellowships, and grants

other than those from institutional funding sources);

• research expenditures;

• scholarships, fellowships, and grants to students from institutional funding

sources (versus federal, state, local, or private sources); and

• other nonstudent-related expenditures including public service, pro-rata

portion of academic support, institutional support, operation and

maintenance of the physical plant, and transfers to other funds for

purposes such as debt service and additions to the physical facilities. (We

excluded hospital, independent and auxiliary operations and amounts of

student scholarships, fellowships, and grants.)

Page 19 GAO/HEHS-98-227 Cost of College Update
Appendix I 

Scope and Methodology

Our analysis also included independent variables for the inflation-adjusted

dollar change per student in (1) the market value of each school’s

endowment and (2) the amounts of tuition used for purposes not reported

in Part A of the IPEDS survey. Our analysis excluded measures of quality of

education and other services offered by schools.

As agreed with your office, the scope of this regression analysis does not

identify the causes of changes in tuition. It is particularly difficult to

identify factors causing variation in tuition increases because decisions to

increase tuition and to increase expenditures are likely to be

interdependent. In addition, it is likely that decisions to increase tuition

and increase institutional (compared with federal) financial aid may be

interdependent.

The Department uses separate IPEDS survey forms to collect fall enrollment

data, finance data, and tuition data. In many cases, schools reported some

but not all data for separate campuses or affiliates. As a result, in many

cases schools used one identification number for finance data and used

several identification numbers to report enrollment data. In some cases,

schools reported data separately in one of the study years and in aggregate

in other years. Where possible, we aggregated an institution’s data,

calculating estimated FTE weighted average tuition rates for the whole

institution where tuition and enrollment data were available for subunits.

Where this was not the case, we used tuition for the school entity for

which financial data were reported. In many cases, data for some of the

variables were missing for schools in either the 1989-90 or 1994-95 survey.

We used imputed data from the Department where these were available. In

many cases, data were missing and schools were excluded from our

analysis.

To determine the extent that tuition increases at 4-year schools affect the

costs of attending community colleges, we conducted a literature search

and contacted representatives of major higher education associations,

such as the American Association of Community Colleges, and individuals

who have conducted research in the subject area.

To identify examples of schools’ efforts to reduce their own costs, we

conducted a literature search and contacted representatives of example

schools and major higher education associations, such as the American

Council on Education, and individuals who have conducted research in

higher education finance issues. We also contacted officials from the

Page 20 GAO/HEHS-98-227 Cost of College Update
Appendix I 

Scope and Methodology

Department of Education and representatives of accounting and

consulting firms that advise schools on cost containment strategies.

We conducted our work in accordance with generally accepted

government auditing standards between October 1997 and July 1998. We

did not verify the accuracy of data in the Department’s IPEDS data sets. The

Department uses several procedures for ensuring that the data are

accurate, including a wide range of edit checks to ensure that numbers

reported in different places in the survey forms are consistent and that

numbers are within a range of tolerance compared with the schools’ report

for the prior years. Nonetheless, the Department does not conduct tests to

ensure that schools’ reported tuition receipts are consistent with the

numbers of students enrolled and the tuition charges the schools report. In

several cases, we found that schools’ reported in-state tuition charges

were less than 50 percent or more than 150 percent of receipts per

estimated FTE student. Concerned that the data reported by these schools

may not be consistent, we excluded them from our analysis.

Page 21 GAO/HEHS-98-227 Cost of College Update
Appendix II 

Variations in Tuition Increases by Kind and

Size of School

Table II.1: Variations in Tuition

Increases at 4-Year Public Schools,

School Years 1990-91 and 1995-96, by

School Size

Average tuition of

schools in quartile Tuition increase Enrollment

quartile

Fall 1995

enrollment 1990-91 1995-96 Amount Percent

1 14,157 to 51,445 $2,227 $2,945 $718 32%

2 7,095 to 14,108 2,079 2,755 675 33

3 3,259 to 7,061 1,963 2,615 651 33

4 287 to 3,256 2,278 2,800 522 23

Table II.2: Variations in Tuition

Increases at 4-Year Private Schools,

School Years 1990-91 and 1995-96, by

School Size

Average tuition of

schools in quartile Tuition increase Enrollment

quartile

Fall 1995

enrollment 1990-91 1995-96 Amount Percent

1 2,500 to 35,835 $11,327 $13,318 $1,991 18%

2 1,352 to 2,492 9,707 11,398 1,691 17

3 666 to 1,343 8,893 10,487 1,594 18

4 3 to 664 6,925 8,218 1,293 19

Table II.3: Variations in Tuition

Increases at 2-Year Public Schools,

School Years 1990-91 and 1995-96, by

School Size

Average tuition of

schools in quartile Tuition increase Enrollment

quartile

Fall 1995

enrollment 1990-91 1995-96 Amount Percent

1 6,583 to 47,060 $1,300 $1,659 $359 28%

2 3,268 to 6,562 1,401 1,745 345 25

3 1,891 to 3,261 1,240 1,554 314 25

4 124 to 1,890 1,197 1,449 252 21

Page 22 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

To better distinguish the characteristics of schools that experienced larger

increases in tuition from 1989-90 to 1994-95, we undertook a series of

regression analyses. As shown in table III.1, we examined 15 variables in

relation to changes in tuition.

Table III.1: Variables Examined in

Relation to Changes in Tuition Variable Description

Revenue

Change in government appropriations These included federal, state, and local

appropriations to schools, excluding

appropriations for grants to students such

as Pell grants. This variable is expressed

as the change in the 1994-95 constant

dollar amount of these appropriations from

1989-90 to 1994-95 (the amount for

1994-95 less the amount for 1989-90).

Change in revenue from grants, contracts,

and other sources

This is educational and general revenue

excluding appropriations and tuition

revenue. It includes grants, contracts, and

gifts. It excludes funding received for

noninstitutional student grants,

scholarships, and fellowships and revenue

for hospitals, auxiliary, and independent

operations. This is the change in the

1994-95 constant dollar amount of these

revenues from 1989-90 to 1994-95.

Expenditures

Change in instruction expenditures This includes expenditures for both credit

and noncredit instructional activities

expressed as the change in the 1994-95

constant dollar amount of these

expenditures from 1989-90 to 1994-95.

The Department’s survey form for

collecting this information instructs schools

to include research expenditures not

budgeted by the school.

Change in student services expenditures This includes career guidance, counseling,

financial aid administration, and student

health services. This is expressed as

change in the 1994-95 constant dollar

amount of these expenditures from

1989-90 to 1994-95.

Change in institutional scholarships,

fellowships, and grants

This is the change in the 1994-95 constant

dollar amount of these expenditures from

1989-90 to 1994-95.

(continued)

Page 23 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Variable Description

Change in other student-related

expenditures

This includes a prorated portion of

academic and institutional support,

physical plant maintenance, and transfers

to other funds. The variable is the change

in the 1994-95 constant dollar amount of

these expenditures from 1989-90 to

1994-95.

Change in research expenditures The variable is the change in the 1994-95

constant dollar amount of these

expenditures from 1989-90 to 1994-95.

These figures include only research

budgeted by the school. Other research

expenditures are included with instruction

expenditures.

Change in other nonstudent-related

expenditures

This includes public service and a

prorated portion of academic and

institutional support, physical plant

maintenance, and transfers to other funds.

The variable is expressed as the change in

the 1994-95 constant dollar amount of

these expenditures from 1989-90 to

1994-95.

Other items

Change in the ratio of in-state

undergraduate tuition to average tuition

received per FTE studenta

This is expressed as the percentage point

change in in-state undergraduate tuition as

a percentage of average tuition revenue

received per estimated FTE student.

Change in the amount of tuition used for

noncurrent fund purposes

This is the change in the 1994-95 constant

dollar amount of these expenditures or

uses from 1989-90 to 1994-95. These are

uses not noted among current funds

expenditures. These may include uses in

renewal, replacement, or addition to the

school’s physical plant or retirement of

debt.

Ratio of in-state undergraduate tuition to

average tuition received per FTE studenta

This is expressed as in-state full-time,

full-year undergraduate tuition as a

percentage of the average amount of

tuition and required fee revenue received

per estimated FTE student in 1989-90.

Change in market value of the endowment

fund

This is the change in the 1994-95 constant

dollar amount of the fund balance from

1989-90 to 1994-95.

Level of in-state undergraduate tuition in

1989-90

This is the in-state full-time, full-year

undergraduate tuition rate in constant

1994-95 dollars.

(continued)

Page 24 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Variable Description

Change in the amount by which revenues

exceeded or fell short of expenditures

(surplus or deficit in current account)

This variable is the change from 1989-90

to 1994-95 in the 1994-95 constant dollar

amount by which general and educational

revenue exceeded or fell short of general

and educational expenditures. This

excluded funds for noninstitutional

scholarships, fellowships, and grants to

students, independent operations, auxiliary

enterprises, and hospitals.

Change in surplus (deficit) from

independent operations, auxiliary

enterprises, and hospitals

This variable is the change over the

1989-90 to 1994-95 period in the 1994-95

constant dollar amount by which revenue

from independent operations, auxiliary

enterprises, and hospitals exceeded or fell

short of expenditures for the same.

aPrivate school tuition is generally the same for in-state and out-of-state students. This variable

may be affected by the mix of in-state and out-of-state students; the mix of undergraduate,

graduate, and first professional students; and the mix of part-time and full-time students. While we

recognize these mixes may differ considerably among schools, we did not attempt to analyze

them.

As shown in table III.2, we computed several statistics for 4-year public

and private schools indicating relationships between variables and

changes in tuition. We indicate the portion of variation accounted for with

and without adjustments for other variables.

Table III.2: Statistics Concerning

Selected Variables and Variation in

Tuition Changes, From 1989-90 to

1994-95

Statistic (letter designates column in

tables III.3 and III.4) Description

A. Portion of variation accounted for after

controlling for the other factors

The figures in this column indicate the

extent to which the portion of variation

accounted for (multiple R squared, the

multiple coefficient of determination)

declines with the deletion of each variable

one at a time. In table III.3, for example, all

the variables together accounted for 86

percent of the variation in tuition increases.

When the analysis is repeated with all the

variables listed except the first (changes in

governmental appropriations), the portion

accounted for declines by 64 percentage

points to 25 percent.

(continued)

Page 25 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Statistic (letter designates column in

tables III.3 and III.4) Description

B. Portion of variation accounted for without

including factors listed lower

These figures indicate the cumulative

portion of variation in tuition accounted for

with the inclusion of each successive

variable moving down the list. For

example, the first two variables—change in

governmental appropriations and change

in instruction expenditures—accounted for

8.52 percent of variation in tuition

increases. Adding a third variable to the

analysis (change in nonappropriation

revenue) increased the portion of variation

explained to 10.97 percent.

C. Portion of variation accounted for by the

addition of each variable to the model

including factors listed in rows above

These figures show an increase in the

portion of variation explained with the

addition of each variable as you move

down the table. Since adding the third

variable, change in revenues from grants,

contracts, and other sources, to the

preceding two variables increased the

portion of variation accounted for from 8.52

to 10.97 percent, the change associated

with the addition of this variable was 2.4

percent.

D. Portion of variation accounted for by each

variable separately (without controlling for

other factors)

These figures show the portion of variation

in tuition accounted for by each variable

without controlling for any other variables.

This is the correlation coefficient (column

E) squared.

E. Correlation coefficient with change in

tuition

These are the Pearson correlation

coefficients of each variable with the

dependent variable—change in tuition

from 1989-90 to 1994-95. If increases in a

variable were consistently associated with

increases in tuition, the correlation would

approach 1.0. If decreases in the variable

were consistently associated with

increases in tuition, the correlation would

approach –1.0. If there were no statistical

relationship between the two variables

(without controlling for other factors), the

correlation coefficient would approach 0.

(continued)

Page 26 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Statistic (letter designates column in

tables III.3 and III.4) Description

F. Regression coefficient These are the regression coefficients,

which indicate the model’s estimate of how

many dollars more tuition would increase

with each dollar (or other unit of measure)

change in each independent variable after

controlling for all the other variables. For

example, if instruction expenditures

increased by one dollar more, the model

predicts that tuition increases by about 76

cents more. Similarly, if governmental

appropriations declined by one more

dollar, tuition would increase by about 75

cents more (after adjusting for other

variables).

G. Probability of the T statistic These figures are the probability of the T

statistic. They indicate, for each variable in

the model, the probability that the

statistical relationship between the variable

and the variation in average tuition

increases not accounted for by all the

other variables was due to random factors.

Results for 4-Year

Public Colleges and

Universities

Together the 15 variables we examined accounted for about 85 percent of

the variation in tuition increases among 4-year public colleges and

universities. (Multiple R squared was 85.69 percent and adjusted multiple

R squared was 85.11 percent.) The first seven variables shown in table III.3

were particularly important:18

1. change in government appropriations (federal, state, and local);

2. change in instruction expenditures;

3. change in revenue from grants, contracts, and other sources;

4. change in the amount by which revenues exceed or fell short of

expenditures;

5. change in other student-related expenditures;

6. change in other nonstudent-related expenditures; and

18We identified variables as “important” here if the decline in the portion of variation accounted for (R

squared) by omitting the variable from the model was greater than the decline observed from omitting

other variables, one at a time. This technique is affected by strong correlations between the variables.

An omitted variable may appear to be less important if it is strongly correlated with another

independent variable.

Page 27 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

7. change in research expenditures.

Schools that experienced larger increases in these expenditure items,

larger decreases in these revenue items, or larger increases in surpluses or

decreases in deficits were more likely than other schools to have larger

increases in tuition. Deleting any one of these variables from the statistical

analysis resulted in a decline in the portion of variation accounted for of

more than 30 percentage points. (In other words, after adjusting for all the

other factors in the model, each of these variables accounted for more

than 30 percent of the variation in tuition increases.)

In contrast to other financial variables, such as the change in the value of

the school’s endowments, changes in amounts of institutional grants,

scholarships, and fellowships, and amounts of tuition used for noncurrent

fund purposes accounted for little, if any, of the variation in tuition

increases.

Table III.3: Factors Associated With Changes in Tuition at Public 4-Year Schools, From 1989-90 to 1995-96

Ab B

C D

E

F

G

Portion of variation accounted for

Regression equation

with all listed variablesa

Variable

after

controlling

for the other

factors

without

including

factors listed

lowerc

by the addition

of each

variable to the

model,

including

factors listed

in rows above

by each

variable

separately

(without

controlling

for other

factors)

Correlation

coefficient with

change in tuition

Regression

coefficient Probability

Change in

government

appropriations d,e 64.01% 2.07% 2.07% 2.07% –0.144 –0.75 < 0.0001

Change in

instruction

expenditurese 52.60 8.52 6.45 1.57 0.125 0.76 < 0.0001

Change in revenue

from grants,

contracts, and other

sourcesf 52.50 10.97 2.44 0.15 –0.039 –0.79 < 0.0001

Change in the

amount by which

revenues exceeded

or fell short of

expenditures 46.52 12.53 1.56 0.11 –0.034 0.77 < 0.0001

Change in other

student-related

expenditures 41.17 18.90 7.93 0.49 0.070 0.76 < 0.0001

(continued)

Page 28 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Ab B

C D

E

F

G

Portion of variation accounted for

Regression equation

with all listed variablesa

Variable

after

controlling

for the other

factors

without

including

factors listed

lowerc

by the addition

of each

variable to the

model,

including

factors listed

in rows above

by each

variable

separately

(without

controlling

for other

factors)

Correlation

coefficient with

change in tuition

Regression

coefficient Probability

Change in other

nonstudent-related

expendituresf 31.79 32.67 13.77 0.43 0.065 0.76 < 0.0001

Change in research

expendituresf 30.53 46.70 14.03 0.24 0.049 0.80 < 0.0001

Change in the ratio

of in-state

undergraduate

tuition to average

tuition received per

FTE student 26.59 66.06 19.36 4.02 0.200 23.34 < 0.0001

Change in student

services

expenditures 12.06 75.44 9.38 3.15 0.178 0.78 < 0.0001

Change in amount

of tuition used for

noncurrent fund

purposes 5.84 80.26 4.82 1.77 –0.133 0.67 < 0.0001

Ratio of in-state

undergraduate

tuition to average

tuition received per

FTE student 4.73 85.61 5.35 1.52 –0.123 6.66 < 0.0001

Change in surplus

or deficit from

independent

operations, auxiliary

enterprises, and

hospitals 0.08 85.69 0.08 0.83 0.091 –0.03 0.1484

Level of in-state

undergraduate

tuition in 1989-90 0.00 85.69 0.00 2.28 0.151 0.00 0.7526

Change in

institutional

scholarships,

fellowships, and

grants 0.00 85.69 0.00 6.16 0.248 0.00 0.9267

Change in market

value of the

endowment fund 0.00 85.69 0.00 0.10 0.031 0.00 0.9984

(Table notes on next page)

Page 29 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Note: The dependent variable in each regression analysis was the change in full-time, in-state,

undergraduate tuition from school year 1989-90 to 1994-95. This analysis does not identify the

causes of changes in tuition. It is particularly difficult to identify factors causing variation in tuition

increases because decisions to increase tuition, increase expenditures, and increase institutional

financial aid are likely to be interdependent. Further analysis using techniques that could shed

light on the nature of these interdependencies was beyond the scope of our work.

aThe constant in the regression equation is –515.

bSee table III.2 for an explanation of the statistics in each column.

cAnalysis of changes in R squared by adding variables one at a time in reverse order (starting

with change in institutional scholarships, fellowships, and grants and working up one variable at a

time) further demonstrated the importance of changes in government appropriations. Only two

other variables added more than 5 percentage points to R squared: adding institutional

scholarships, fellowships, and grants to the analysis increased R squared by 6 percentage

points, and adding change in government appropriations increased R squared by 64 percentage

points.

dThis and each of the other financial variables were expressed as a dollar change per estimated

fall FTE student in constant 1994-95 dollars, except as noted.

eThe utility of assessing the importance of a variable by deleting it from the model (as shown in

column A) or adding it to a model (columns B and C) is limited where independent variables are

correlated with one another. Change in government appropriations and change in instruction

expenditures were correlated (r = 0.5658). Removing both these variables from the model

decreased R squared by 66 percentage points to 20 percent.

f

Change in revenue from grants, contracts, and other sources was correlated with change in

research expenditures (r = 0.7594) and change in research expenditures was correlated with

change in other nonstudent-related expenditures (r = 0.2962). The correlation between revenue

from grants, contracts, and other sources and change in other nonstudent-related expenditures

was similar (r = 0.3791). Removing these three variables from the model decreased R squared by

54 percentage points to 32 percent.

Results for 4-Year

Private Colleges and

Universities

Our analysis accounted for less of the variation in tuition increases at

private 4-year colleges and universities than it did at 4-year public

institutions. The 15 variables we examined accounted for about 70 percent

of the variation in tuition increases from 1989-90 to 1994-95. The R squared

was 0.7199 and the adjusted R squared was 0.7142. Most of the seven most

highly related variables accounting for variation among 4-year public

institutions also figured prominently in our 4-year private college analysis.

In addition, changes in the ratio of in-state undergraduate tuition to

average tuition received per FTE student were helpful in accounting for

variation in tuition changes. These highly associated variables were19

1. change in revenue from grants, contracts, and other sources;

19We identified variables as “important” here if the decline in the portion of variation accounted for (R

squared) by omitting the variable from the model was greater than the decline observed from omitting

other variables, one at a time. This technique is affected by strong correlations between the variables.

An omitted variable may appear to be less important if it is strongly correlated with another

independent variable.

Page 30 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

2. change in the amount by which revenues exceeded or fell short of

expenditures;

3. change in other student-related expenditures;

4. changes in the ratio of undergraduate tuition to average tuition received

per FTE student;

5. change in instruction expenditures;

6. change in research expenditures; and

7. change in other nonstudent-related expenditures.

Other variables helped account for less than 10 percent of additional

variation in changes in tuition after controlling for all the other variables.

Table III.4: Factors Associated With Changes in Tuition at Private 4-Year Schools, From 1989-90 to 1995-96

Ab

B

C

D

E

F

G

Portion of variation accounted for

Regression equation

with all listed variablesa

Variable

after

controlling

for the

other

factors

without

including

factors

listed lowerc

by the

addition of

each

variable to

the model,

including

factors

listed in

rows above

by each

variable

separately

(without

controlling

for other

factors)

Correlation

coefficient

with

change in

tuition

Regression

coefficient Probability

Change in revenue from grants,

contracts, and other sources d,e 27.81% 0.27% 0.27% 0.27% 0.052 –0.62 < 0.0001

Change in the amount by which

revenues exceeded or fell short of

expenditures 27.02 1.07 0.80 0.61 –0.078 0.61 < 0.0001

Change in other student-related

expenditures 26.12 1.84 0.77 1.84 0.136 0.61 < 0.0001

Change in instruction expenditures 16.91 4.14 2.30 3.03 0.174 0.55 < 0.0001

Change in the ratio of undergraduate

tuition to average tuition received per

FTE student 13.51 12.76 8.62 2.22 –0.234 42.83 < 0.0001

Change in research expenditurese 12.02 15.89 3.13 0.28 0.053 0.65 < 0.0001

Change in nonstudent-related

expenditures e 9.79 52.92 37.03 13.33 0.365 0.59 < 0.0001

Change in government appropriations 7.22 57.55 4.63 0.00 –0.005 –0.78 < 0.0001

(continued)

Page 31 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Ab

B

C

D

E

F

G

Portion of variation accounted for

Regression equation

with all listed variablesa

Variable

after

controlling

for the

other

factors

without

including

factors

listed lowerc

by the

addition of

each

variable to

the model,

including

factors

listed in

rows above

by each

variable

separately

(without

controlling

for other

factors)

Correlation

coefficient

with

change in

tuition

Regression

coefficient Probability

Change in student services

expenditures 6.96 64.95 7.40 1.50 0.123 0.65 < 0.0001

Ratio of undergraduate tuition to

average tuition received per FTE student 2.28 67.81 2.86 2.22 –0.149 15.28 < 0.0001

Level of undergraduate tuition in

1989-90f 1.01 69.75 1.94 27.90 0.528 0.04 < 0.0001

Change in institutional scholarships,

fellowships, and grantsf 0.63 70.39 0.64 25.48 0.505 0.17 < 0.0001

Change in amount of tuition used for

noncurrent fund purposes 0.33 70.72 0.33 0.10 –0.031 0.15 0.0038

Change in surplus or deficit from

independent operations, auxilary

enterprises, and hospitals 0.04 70.76 0.04 0.24 0.049 –0.02 0.2897

Change in market value of the

endowment fund 0.00 70.77 0.004 0.29 0.054 0.00 0.7561

(Table notes on next page)

Page 32 GAO/HEHS-98-227 Cost of College Update
Appendix III 

Regression Analyses

Note: The dependent variable was the change in full-time, full-year in-state, undergraduate tuition

from school year 1989-90 to 1994-95. This analysis does not identify the causes of changes in

tuition. It is particularly difficult to identify factors causing variation in tuition increases because

decisions to increase tuition, increase expenditures, and increase institutional financial aid are

likely to be interdependent. Further analysis using techniques that could shed light on the nature

of these interdependencies was beyond the scope of our work.

aThe constant in the regression equation is –1,230.

bSee table III.2 for an explanation of the statistics in each column.

cAnalysis of changes in R squared by adding variables one at a time in reverse order (starting

with change in the market value of the endowment fund and working up one variable at a time)

indicated greater importance for changes in institutional scholarships, fellowships, and grants.

This variable added 25 percentage points to R squared in an analysis including the three

variables listed below it in the table. Only two other variables increased R squared by more than

5 percentage points. These were the level of undergraduate tuition in 1989-90 and the change in

revenue from grants, contracts, and other sources (adding 9 and 28 percentage points to R

squared, respectively).

dThis and each of the other variables were expressed as changes in constant 1994-95 dollars per

estimated FTE student between school years 1989-90 and 1994-95, the amount for 1994-95 less

the amount for 1989-90, except as noted.

eThe utility of assessing the importance of a variable by deleting it from the model (as shown in

column A) or adding it to a model (columns B and C) is limited where independent variables are

correlated with one another. Change in revenue from grants, contracts, and other sources was

correlated with change in research expenditures (r = 0.5455) and change in research

expenditures was correlated with change in other nonstudent-related expenditures (r = 0.3858).

The correlation between change in revenue from grants, contracts, and other sources and

change in other nonstudent-related expenditures was in the same range (r = 0.4146). Removing

these three variables from the model decreased R squared by 36 percentage points to

43 percent.

f

Changes in other nonstudent-related expenditures were correlated with changes in amounts of

institutional scholarships, fellowships, and grants (r = 0.6242). The level of undergraduate tuition

in 1989-90 was also correlated with changes in other nonstudent-related expenditures (r =

0.4126). Change in institutional scholarships, fellowships, and grants and the level of

undergraduate tuition in 1989-90 had correlation in the same range (r = 0.5453). Removing these

three variables from the model decreased R squared by 49 percentage points to 23 percent.

Page 33 GAO/HEHS-98-227 Cost of College Update
Appendix IV 

Examples of School Cost Containment

Efforts

Statewide Initiatives

Oregon Public

Postsecondary Schools

In 1989, Oregon voters passed a ballot measure that reduced property

taxes and shifted hundreds of millions of state tax dollars from state

agencies, including higher education, to local school districts and prisons.

To make up for the lost state tax revenues, the state’s public

postsecondary colleges and universities reduced the number of programs,

closed a college, cut services, and laid off hundreds of nontenured faculty

and staff. The schools were also required to develop scenarios for

administrative cuts of up to 30 percent.

The University of Oregon, for example, implemented various measures to

cut 15 percent, or $7.7 million, in the first round of cuts from its

administrative budget. Subsequent savings efforts included the

implementation of a new on-line financial information system. These

actions have eliminated nearly all the paperwork and manual processing

that was necessary before. Previously, it cost about $25 to manually issue

a check, and now the cost is about $6. At slightly over 100,000 transactions

per year, the estimated annual cost savings are between $150,000 and

$190,000. In addition, the university expanded its procurement card

program wherein departments are allowed to make purchases with a

credit card instead of purchase orders. Through the combined expansion

of procurement cards and reduced cost or elimination of checks for

purchases made on the cards, annual savings are estimated to be about

$18,000. This new system reportedly not only saves money and time but is

also more convenient; products are delivered faster, and the schools’

vendor base is larger because some businesses that do not accept

purchase orders accept cards.

Ohio Public Postsecondary

Schools

In 1992, the Ohio Board of Regents initiated an effort to contain costs at

public postsecondary schools. From fiscal year 1993 through 1997, the

average annual savings was $55 million, totaling $270 million during the

5-year period. According to the Board of Regents’ 1997 annual progress

report on cost containment,

• nearly all campuses reported significant savings through the adoption of

cost- and time-saving changes in the purchasing procedures, including the

adoption of electronic ordering systems and participation in cooperative

purchasing agreements with other institutions;

Page 34 GAO/HEHS-98-227 Cost of College Update
Appendix IV 

Examples of School Cost Containment

Efforts

• several campuses are using technology to eliminate or reduce the

paperwork for processing financial aid;

• nearly half of the campuses have reported reducing or containing the cost

of providing health care benefits to their employees;

• many campuses have achieved significant savings through administrative

restructuring and downsizing and by outsourcing many services previously

done in-house; and

• many creative projects have been undertaken to significantly reduce the

cost of providing energy for the lighting, heating, and cooling of campus

facilities.

University of Wisconsin

System

The University of Wisconsin System and its 13 4-year schools and 13 2-year

schools have taken a wide variety of efficiency-related measures. In

addition to eliminating or consolidating a number of administrative

functions and academic programs, the system and its schools have taken

many other cost reduction or efficiency improvement actions. These

include

• the implementation of injury prevention programs, safety awareness

training, and better claims management, resulting in savings of

$1.1 million;

• the establishment of preferred rate agreements with hotels and hotel

chains, generating approximately $180,000 in annual savings; and

• the installation of more efficient and effective lighting at the Madison

campus, bringing an annual savings of $475,000.

Multiple School

Collaborative Efforts

Five Colleges, Inc. Five Colleges, Inc., a consortium of five Massachusetts schools (Amherst

College, Hampshire College, Mount Holyoke College, Smith College, and

the University of Massachusetts at Amherst), was formed to share

resources, services, and programs. The schools pooled faculty to create

two consortium departments (astronomy and dance), to confer minor

degrees and certificates, and to make joint faculty appointments. The

consortium also offers open club membership, open theater productions,

open library access, meal exchange, and cross-registration, all at no

additional cost to students. The schools also have common contracts for

Page 35 GAO/HEHS-98-227 Cost of College Update
Appendix IV 

Examples of School Cost Containment

Efforts

key services and a joint purchasing agreement that saves more than

$1 million a year. They also share a risk-management expert, saving

$300,000 a year, and a recycling coordinator, saving another $35,000 a

year.

Midwestern Higher

Education Commission

(MHEC)

MHEC, a regional consortium established in 1991, is made up of public and

private nonprofit colleges and universities in Illinois, Indiana, Kansas,

Michigan, Minnesota, Missouri, Nebraska, Ohio, and Wisconsin. The

consortium has multiple programs under way to help MHEC member

schools, such as

• Academic scheduling and management software, which was created in

response to the needs of commission schools and offered to them at

discounts saving the schools $800,000 in the lower purchase price.

• Virtual Private Network, which provides low-cost voice, video, and data

transmission services at some of the lowest telecommunication rates in

the country. This effort was especially helpful to smaller institutions that

cannot leverage lower telecommunication rates on their own.

• Interactive Video Program, which provides over 100 members with

discounted prices on interactive video equipment at a total savings of

more than $7 million.

Individual School

Efforts

Emporia State University Emporia State University in Emporia, Kansas, has achieved cost savings

and other efficiencies from actions taken, such as the following.

• Implemented an energy conservation program by installing building

automation equipment. The retrofit networked about 70 percent of the

campus with new controls and will produce an anticipated savings of

about $571,500 per year.

• Purchased furniture that was constructed by Kansas Correctional

Industries for the school’s lounges, residence halls, most of the school’s

residence hall lounges, married student apartments, and several

departments. Estimated saving was over $112,000 compared with furniture

from the private sector. The school also purchased paint and custodial

Page 36 GAO/HEHS-98-227 Cost of College Update
Appendix IV 

Examples of School Cost Containment

Efforts

supplies from the Correctional Industries for about half the price of buying

them in the public sector.

• Negotiated a new lower-cost contract for deregulated natural gas, saving

about $150,000 a year (depending upon winter weather conditions).

• Purchased 11,000 gallons of No. 2 fuel oil from federal surplus property for

10 cents a gallon versus the going price of 80 cents, saving about

88 percent, or $7,700. The school also purchased six new rooftop

air-conditioning units from federal surplus property for $6,000 compared

with the retail cost of $36,000.

• Negotiated with the telephone company for new phone service to the

residence halls at a savings of $650,000, plus an additional annual $110,000

saved from 1985 to 1991 by eliminating the positions of switchboard

operators used with the old telephone system.

• Saved $190,000 a year by training and qualifying employees as

commercially licensed pest control applicators, thus eliminating the need

to hire outside exterminators.

San Diego State University San Diego State University in San Diego, California, has achieved savings

through various measures. For example,

• the school’s Department of Electrical and Computer Engineering obtained

donated software packages valued at over $12 million,

• the school negotiated its local telephone contract at an estimated annual

savings of $33,000 compared with its previous services and

• the school hired an auditing firm to audit the phone bills received from

vendors, resulting in $51,600 in savings from erroneous charges and

$34,300 in refunds.

Tennessee Technological

University

Tennessee Technological University in Cookeville, Tennessee, issued a

nonexclusive office supply contract with a local vendor, which saved

about $320,000 in 6 months. The vendor will also make an annual

contribution to the university’s scholarship fund, based on a percentage of

sales during the course of the contract. In addition, by procuring carpets

through promotional sales or from a carpet mill’s special goods section,

the school saved as much as 75 percent of the retail cost.

Texas Woman’s University Texas Woman’s University (TWU), with campuses in Dallas, Denton, and

Houston, Texas, implemented a reorganization in 1989, reducing the

number of deans from 11 to 8 and the number of academic departments

Page 37 GAO/HEHS-98-227 Cost of College Update
Appendix IV 

Examples of School Cost Containment

Efforts

from 28 to 21. These changes also achieved modest savings in

administrative costs and promoted cooperation, coordination, and

interdisciplinary collaboration. In the ensuing 5 years, TWU also phased out

or eliminated approximately one-third of its degree programs.

Thomas Edison State

College

Thomas Edison State College in Trenton, New Jersey, reviews its

collegewide operations periodically to determine opportunities for finding

better and less costly ways to conduct its operations. Examples of

cost-savings efforts it has undertaken include

• filling only staff positions determined to be the most critical in terms of

efficiency or revenue enhancement, which saved the school nearly

$725,000;

• using part-time temporary hourly staff (rather than full-time employees) to

supplement full-time staff during periods of peak need and operation,

saving the college about $240,000;

• restructuring and consolidating several departments, which enabled the

school to achieve approximately $128,000 in personnel savings and

additional savings of $108,000 by closing its Newark office facility; and

• restructuring its reprographic and data processing contracts, saving the

school $135,000, and investing in automated postal zip coding equipment,

saving it $18,000 in postal costs.

Washington State

University

According to documentation provided by a school budget office official,

Washington State University in Pullman, Washington, through a wide

variety of cost-savings measures, reduced its costs per student from

$11,273 in school year 1986-87 to $10,998 in 1995-96 and its spending per

degree granted from $48,294 in 1986-87 to $46,066 in 1995-96 (all figures

adjusted for inflation). Some of the measures the school has taken to

achieve these savings include

• reallocating funding from areas of declining enrollment to areas of

expanding enrollment;

• increasing faculty productivity (over the past 4 years, FTE students have

increased 12 percent while FTE faculty increased only 5.99 percent);

• operating a highly efficient composting program that diverts cafeteria food

scraps, heating plant coal ash, and agricultural school animal waste and

bedding materials to beneficial use at an annual savings of $200,000 in

avoided disposal fees; and

Page 38 GAO/HEHS-98-227 Cost of College Update
Appendix IV 

Examples of School Cost Containment

Efforts

• acquiring, at no cost, used motor vehicles, including tractors, backhoes,

farm trucks, and pickups as well as electronic repair parts and computer

components from the U.S. Department of Agriculture and the Boeing

Company as federal excess property.

Page 39 GAO/HEHS-98-227 Cost of College Update
Appendix V 

Comments From the Department of

Education

Page 40 GAO/HEHS-98-227 Cost of College Update
Appendix V 

Comments From the Department of

Education

Page 41 GAO/HEHS-98-227 Cost of College Update
Appendix V 

Comments From the Department of

Education

(104910) Page 42 GAO/HEHS-98-227 Cost of College Update
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