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The Challenge of College Affordability: University of Alaska is a bargain in shaping the future

UAA Men’s Basketball fans at Wells Fargo Sports Center.

UAA Men’s Basketball fans at Wells Fargo Sports Center.

© 2007 Clark James Mishler/AlaskaStock.com

The opinions expressed herein are those of the author alone and not of the University of Alaska.

 

A journey of a thousand miles must begin with a single step.

—Chinese proverb

 

The canvas is epic. Over the last decade, student debt in America has skyrocketed to more than $1 trillion (per the Consumer Finance Protection Bureau) which will lead to a total lifetime wealth loss of $4 trillion for indebted households without accounting for the impact of defaults. The average student debt is approximately $26,600 (the average University of Alaska student debt is approximately $24,000). Roughly $864 billion is outstanding in federal student loan debt while the remaining $150 billion is in private student loan debt. According to the Chronicle of Higher Education, of the approximately 20 million Americans who attend college each year, almost 60 percent borrow annually to help cover costs; and there are around 37 million student loan borrowers with outstanding student loans today.

The cost of a college education is increasing two to three times the overall rate of inflation per the US Bureau of Labor Statistics. The average cost of a baccalaureate degree at a public university went up 46 percent in real dollars from 2000 to 2010. In 2012, the national average for state appropriation per student was $5,906, and the share of revenues that comes from tuition at public institutions was 47 percent. The Center for the Study of Education Policy estimates that in 2012-13 the average tuition and fees at four-year public universities was $8,655, and that states spent $71.9 billion on higher education. Of the US population, 27.6 percent have a college or advanced degree.

 

Lifetime Earning Power

That begs the question: Is a college education worth it? The answer is an unequivocal “yes.”

Apart from the quest for knowledge, a force for enormous social good, and producing more informed citizens, the reason is more mundane or pedestrian: according to the US Bureau of Labor Statistics, college graduates earn 74 percent more over their lifetimes than high school graduates, and two-thirds of all new jobs now require some type of postsecondary degree. Another compelling statistic is provided by a recent Brookings Institution study that estimated the investment return on a four-year college degree at 15.2 percent a year, which is double the average stock market return. So, the challenge is that as a college degree becomes more important for a student, the cost, unfortunately, has shifted inordinately to students themselves, a majority of whom pay for their higher education with loans.

Much like the complexities of controlling health care costs, controlling higher education costs is complex. Questions of quality, performance, and relevance have to be addressed in addition to cost and access. Oftentimes local community colleges offer the best educational value. From there students can transfer to a local university to finish their baccalaureate degree, thereby cutting the cost of a degree almost in half with no room-and-board expenses if they live at home.

 

Addressing the Rising Cost

To address this rising cost in higher education, many universities across the nation are freezing tuition or approving the smallest tuition increases in years: The University of Michigan 1.1 percent increase; Ball State University 2 percent; Indiana University 1.75 percent; University of Vermont 2.9 percent; University of South Carolina 3.5 percent; Washington State University 2 percent; University of Washington and Central Washington University a freeze; North Carolina’s sixteen public universities including UNC Chapel Hill a freeze; Purdue University a freeze; South Dakota’s six public universities a freeze; public universities in Massachusetts a freeze.

So, the question that naturally arises for Alaska is where does the University of Alaska (UA) stand?

At UA, three dominant themes are guiding discussions on tuition: student achievement, revenues, and student access and affordability. Affordability is a basic component of any tuition discussion. UA has a notable low cost in terms of tuition. The tuition increase for 2013-14 across UA was 2 percent, the lowest in a decade. Keeping a high quality UA education affordable is an important component of students’ success. Besides keeping tuition low though productivity gains, UA makes available financial aid and scholarships. Examples of what students receive include federal work-study programs ($5.1 million); need-based financial aid ($31 million); tuition waivers; UA-funded UA Scholars program; and the UA College Savings Program (a tax-advantaged way families can invest and save their own money for their children’s future).

The State of Alaska offers the Alaska Performance Scholarship and the Alaska Education Grant. Then there are several federal government programs such as Pell grants, the American Opportunity Tax credit, and others to complement state and local aid—the federal government distributes $150 billion in annual student aid nationwide.

At the University of Alaska, the average student full-time equivalent in FY11 was billed an estimated $5,900 in tuition and fees for the year, offset by an average $2,300 in non-loan aid and $3,920 in loans for the year; the total average tuition and fees (net of non-loan aid) charged to an “average” student full-time equivalent in FY11 was $3,600. This is remarkable, indeed, against the canvas of what universities in the rest of the nation charged their students.

UA’s baccalaureate tuition is low in comparison to the fifteen members of the Western Interstate Commission on Higher Education (WICHE):

 

In comparison to WICHE members, the UA two-year program ranks on the high side because we are being compared to state community colleges that are significantly subsidized by local governments; such support does not exist to the same extent in Alaska. Note that UA has both the university and the community college missions—unique in the nation.

In the end, the circular journey brings us right back to where we started about Alaska college affordability. Forget comparing us with the roar of New York, the rattle of Wall Street, the hum of Chicago, even the tranquil prosperity of California. Goethe’s Mephistopheles observes cynically in the second part of Faust that, “In the end we are all dependent on monsters of our own creation.” UA has been working very hard and has been forward-looking in the area of college affordability for Alaskans.

After all, at the end of the day, universities are in the business of ideas. With the great migration of human population to cities (84 percent of the US population lives in cities, accounting for 90 percent of Gross Domestic Product), it is ontologically imperative to provide quality university education at an affordable cost to prepare students to be competitive. We are wedded to the notion that when a student succeeds, we all benefit from it. A university education remains the escalator up to a better life.

Dr. Ashok K. Roy is the Vice President for Finance & Administration/Chief Financial Officer for the University System of Alaska and Associate Professor of Business Administration at the University of Alaska Fairbanks. Dr. Roy has significant experience, at senior management levels, at three other large universities, local government, and in the private sector. Dr. Roy holds six university degrees and five professional certifications and has authored seventy-three publications in academic and trade journals.

This first appeared in the October 2013 print edition of Alaska Business Monthly magazine.

Oct 4, 2013 09:06 am
 Posted by  Just Checking

Do these rates for University of Alaska reflect the tuition increases the Board of Regents proposed for the 2014-2015 academic year?

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