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Tennessee Tuition Modeling Analysis

Summary

The Tennessee Higher Education Commission (THEC) coordinates all of the state’s public universities, community colleges, and colleges of applied technology. It is also charged with setting binding tuition guidelines for Tennessee’s public higher education institutions. THEC sought NCHEMS’ assistance in reviewing and revising the methodology it uses to set those guidelines, which take the form of annual limits on in-state undergraduate tuition increases.

NCHEMS examined data on institutional revenue, enrollment, student financial aid, and financial health metrics in the context of tuition prices. This analysis aimed to identify areas where current policies may not adequately support THEC’s goals of making education more affordable for students, ensuring financial sustainability for institutions, and responsibly managing state resources. These analyses were done while ensuring institutions are supported in fulfilling their educational missions effectively. We then identified how tuition policy can contribute to those goals and made recommendations for changes.

Topics Challenges Approach Impacts Resources

Topics

• Tuition-Setting Policy – Reviewing and revising the methodology for setting annual tuition increase limits.
• Affordability – Assessing how tuition policies impact students’ ability to afford higher education.
• Institutional Finance – Analyzing the financial health of public higher education institutions.
• Higher Education Governance – Supporting the Tennessee Higher Education Commission’s role in coordinating public institutions and setting statewide policies.

Challenges

THEC’s authority to set tuition policy is relatively narrow; it only applies to published tuition rates for in-state undergraduate tuition and mandatory fees. Student affordability has many other components, including additional costs of attendance (housing, food, books, etc.), nonmandatory fees, federal and state financial aid programs, and institutional scholarships. Institutional revenue also has many additional components, including state appropriations, out-of-state tuition, graduate tuition, mandatory fees, and discounting practices. All of this means that THEC’s policy is, on its own, an important but relatively weak lever for advancing state goals. Our first challenge in this project was clearly explaining the nuances of these components, their relationships, and the differences between Tennessee institutions. The next challenge was identifying how the commission can best leverage its limited tuition policy authority to further state goals.

Approach

We began by approaching this project conceptually. We first identified the role of tuition policy in the context of Tennessee’s statewide goals and priorities for higher education. Raising or lowering tuition can impact institutional finances, student affordability, and demands on state resources, but the relationships are complex and interact with many other factors. In-state undergraduate tuition and mandatory fees are the only rates governed by THEC’s tuition policy. Still, they necessarily interact with out-of-state and graduate tuition, institutional scholarships, state appropriations, and state financial aid in ways that determine student affordability and institutional financial strength. We started this project by clarifying these interactions, as well as THEC’s goals and values, and the ways it would like to advance them through its tuition policy.

Next, we analyzed data on several different topics:

  1. Student affordability, including published tuition and costs of attendance as well as actual student charges, scholarships, and financial aid, disaggregated by several student characteristics, including family income. We also looked at differences between in-state and out-of-state tuition, and between undergraduate and graduate tuition.
  2. Enrollment disaggregated by a number of student characteristics.
  3. Institutional Revenue from state, student, and scholarship/financial aid sources, as well as total revenue and expenses. We disaggregated tuition and fee revenue by student level and residency.
  4. Institutional financial health, as measured by the ratios that comprise the Composite Financial Index.

We analyzed data for each institution and also compared Tennessee colleges and universities to broad comparison groups of institutions across the nation for context.

Our conceptual frameworks and data analysis led us to recommendations for THEC. Our recommendations addressed the specific question of how we suggest THEC adjust its process for setting limits on tuition increases. They also addressed broader questions of how the Commission can better align tuition policy with the state’s outcomes-based funding formula and state financial aid programs to advance state goals more effectively. Finally, we made recommendations for topics on which THEC should consider requesting additional information from the institutions; this information will deepen the commission’s understanding of the complex dynamics between pricing, enrollment, financial aid, and revenue, and how those dynamics work differently at each of the institutions.

Impacts

THEC plans to implement some or all of NCHEMS’ recommendations.

Resources

  • Tennessee Tuition Policy: Analysis and Options – Final Report