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Why Is Student Debt So High In New Hampshire?
(And What Can We Do About It?)
September 2013
Commissioned by Granite State Management & Resources
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Prepared by:
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Table of Contents
EXECUTIVE SUMMARY ........................................................................................................................................... 3
I. I#TRODUCTIO# .............................................................................................................................................. 5
II. STUDE#T LOA# DEBT I# #EW HAMPSHIRE .......................................................................................... 6
III. WHY IS STUDE#T DEBT SO MUCH HIGHER I# #EW HAMPSHIRE?.............................................. 14
IV. RISI#G COSTS A#D RELIA#CE O# TUITIO# REVE#UE DRIVE DEBT LEVELS HIGHER ........ 28
V. SPE#DI#G LEVELS A#D #O#-TUITIO# REVE#UES DETERMI#E COLLEGE PRICES ............. 35
VI. FACTORS I#FLUE#CI#G THE RAPID RISE I# TUITIO# LEVELS ................................................... 51
VII. WHAT CA# #EW HAMPSHIRE POLICYMAKERS DO? ....................................................................... 55
VIII. LOWERI#G TUITIO# PRICES WILL LOWER THE DEBT OF GRADUATES ................................... 61
IX. CO#CLUSIO#S ............................................................................................................................................... 63
REFERE#CES ............................................................................................................................................................ 65
APPE#DIX A .............................................................................................................................................................. 67
APPE#DIX B ............................................................................................................................................................... 68
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Executive Summary
Rapid increases in the cost of higher education along with rising concerns about the
economic burden of higher student debt levels are challenging the belief that a college education
is necessarily a wise investment for many high school graduates and is having political
ramifications for the higher education industry, including the erosion of support for higher
education nationally and in New Hampshire. Tuition charges at New Hampshire’s public colleges
are the highest in the country and students graduate from public and private colleges in New
Hampshire with higher average levels of debt than do students anywhere in the nation. New
Hampshire and New England have traditionally thrived because of their ability to produce or
attract skilled individuals with high levels of educational attainment. Being the highest-cost
producer of individuals with high levels of educational attainment, however, adds to the many
demographic challenges facing New Hampshire and the region. Reducing the cost and debt
burden for individuals to obtain a college education is among the most important challenges
confronting the future of New Hampshire.
This report analyzes data from 1,300 public and private colleges across the country to
increase understanding of the causes of high levels of student debt among graduates of four-year
colleges nationally and in New Hampshire and documents factors that contribute to higher college
costs in New Hampshire and the New England region. Results of our analysis indicate that there
are several key factors contributing to especially high debt levels among New Hampshire residents
graduating from four-year colleges. High tuition levels are an important but not the only
determinant of levels of student debt. In New Hampshire, the lack of low-cost public colleges is a
significant contributor to high average debt levels of college graduates because it reduces the
effectiveness of one of the primary strategies used by students to lower costs and debt – attending
a low-cost, in-state, public college. But the percentage of New Hampshire high school graduates
who enroll in higher-cost private colleges and the large majority who enroll in colleges in regions
of the country with high college costs also contribute to higher debt levels among college
graduates from New Hampshire. Debt levels are also affected by a desire to increase access to
college among those with greater financial need and by differences in the financial aid policies of
colleges.
Much of the policy debate over higher education and student debt levels revolves around
the role of rising tuition levels. Results of this study indicate that for every one dollar increase in
tuition and fees, average student debt at graduation increases by 23 cents at private colleges and
by 55 cents at public colleges. Expenditure levels, and trends, and the percentage of a college’s
expenditures that are paid for by non-tuition revenues (such things as state aid for public colleges
and endowments at private colleges) primarily determine tuition levels at public and private
colleges. The selectivity of colleges is also associated with higher tuition charges at both public
and private colleges, all other factors (the percentage of expenditures paid for by non-tuition
revenue, student demographics, etc.) equal. In addition, the results of this analysis suggest that
high levels of competition for students and faculty among colleges in New England contribute to
high tuition levels in the region. Results suggest that competition among colleges in New
England raises tuition and fee charges relative to the U.S. average by about 14 percent at private
colleges and by 10 percent at public colleges and universities in the region.
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To assist policymakers in evaluating potential investments in higher education, this report
considers the impacts that changes in state support and other variables, including spending by
colleges, have on tuition levels at public colleges in New Hampshire and on the average level of
debt of their graduates.
Other Key Findings of the Report Include:
• High tuition and low levels of grant aid at New Hampshire’s public colleges contribute
significantly to high debt levels among college students from New Hampshire because
they eliminate or reduce the effectiveness of a primary path by which students limit
college costs and student debt - attending a low-cost, in-state, public college.
• The college enrollment patterns of New Hampshire high school graduates appear to be
changing, perhaps in an attempt to lower costs and debt, with more students enrolling in
public colleges, especially at in-state and at public colleges. However, the higher costs
and limited financial aid available at New Hampshire’s public colleges means these
changes are having a limited impact on the ability of New Hampshire’s high school
graduates to reduce college costs and the need for borrowing.
• The published cost of in-state tuition and fees at New Hampshire’s public colleges has
risen to a level that is now equal to more than 20 percent of median household income
in the state (and 30 percent when room and board and all costs are included), compared
to 16 percent nationally. Including tuition discounts, in-state tuition and fees equaled
16.6 percent of median household income in 2011, up from just 10.8 percent of median
income in 2000.
• Increasing state aid per full-time equivalent (FTE) student at New Hampshire’s public
colleges to the national average in 2010 would have required between $85 million and
$130 million in state appropriations. It would have reduced the percentage of
expenditures paid for by net tuition revenue at New Hampshire’s public colleges from
81 percent to 57 percent, or just over the national average for public colleges of 53
percent, and could have reduced enrollment-weighted tuition by 12 percent.
• Options that increased state support by $1,000 to $2,000 per FTE student, at a cost of
about $26 -$52 million, along with reductions in expenditures at the state’s public
colleges, could have achieved nearly the same level of tuition reductions at a much
lower cost and without reducing the ranking of New Hampshire’s public colleges on the
amount of spending per student.
• For every $100 dollar reduction in tuition charges at New Hampshire’s public colleges,
the average debt of graduates will be lowered by between $70 and $78.
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II. Introduction
“Public confidence in universities is eroding. Although studies
show that the economic value of an advanced education has
increased substantially in the last decade, there is nevertheless
a growing concern that tuition and related costs are rising too
quickly and that the teaching programs of the [colleges and
universities] should receive more attention.”
The quotation above could have come from any number of recent reports highlighting
concerns about higher education. Except that it didn’t, it came from a 1992 report of the
President’s Council of Advisors on Science and Technology. Every few years over the past
quarter century a new round of concern is expressed over the rising cost of a college education.
A headline on page one of the ew York Times in May 1987 announced, “Tuitions Hit New Peak,
Igniting a Bitter Debate."1
Similar headlines are being written today. What has changed over the past 25 years is the
share of the cost of college that is being borne by students (and their parents) in the form of
student and parent loan debt. Mounting student loan debt has reignited concerns about the rising
cost of college and added an increased sense of urgency to efforts to control costs.
Colleges are blamed for what is increasingly being called the “crisis in student debt,”
because both costs and debt levels have been rising rapidly. But the truth is that consumers of
educational services, students and parents, are responsible as well because of the choices they
make about what colleges to attend, what studies to pursue, and how promptly they graduate.
State and federal policymakers contribute to college cost and debt trends via their decisions about
financial support for colleges and the level and nature of the financial assistance they provide to
students. Nevertheless, it is colleges who are most responsible and who face the most scrutiny
over recent trends.
On the one hand policymakers and the public view colleges as a part of the solution to our
nation’s and New Hampshire’s economic problems, they understand that a highly educated
population is essential in an internationally competitive, knowledge-based economy if we are to
improve our standard of living. At the individual and family level there is an increasing conviction
that a college degree is necessary for success in today’s economy at the same time it is becoming
less and less available to many qualified people. But increases in the cost of higher education
along with rising concerns about the economic burden of higher student debt levels are
challenging the belief that a college education is necessarily a wise investment for many high
school graduates. Trends in the cost of college are beginning to have political ramifications for
the higher education industry and threaten to seriously erode support for public and private higher
education nationally and in New Hampshire. Colleges are feeling pressure to control their
expenditures and tuition charges or risk losing political and financial support of the public and of
government. Much more problematic over the long-term for the higher education industry is that
1 Fiske, Edward B., Tuitions Hit ew Peak, Igniting a Bitter Debate, NY Times, May 12, 1987.
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it is increasingly being viewed by some as part of the problem rather than the solution. There is
concern that ever increasing tuition levels are limiting access to higher education and contributing
to skyrocketing student debt burdens. Colleges in the United States have come under increasing
attack for graduating students with debt levels that are considered by many to be overly
burdensome, especially in New Hampshire where students graduate from colleges in the state with
the highest levels of debt of graduates anywhere in the nation.
The focus in both the media and the political arena has been on the role of rising college
tuitions as a key factor influencing student debt levels. Despite a strong interest and desire to
address the issues of college costs and student debt, there is a scarcity of analysis directly
addressing the institutional and individual determinants of the average debt levels of college
graduates.
This report examines reasons for colleges in New Hampshire graduating students with the
highest reported levels of student debt in the nation. We examine the role that rising tuition,
student demographics, enrollment decisions, and intuitional characteristics play in student debt
levels. Because of increasing concerns over rising tuition and the role that it plays in the debt
levels of students, we analyze data from public and private colleges across the country to
determine factors that are associated with higher and lower tuition charges as well as larger or
smaller increases in tuition over the past decade. Finally, this report explores the role that higher
education policy and support at the state-level could have on college debt and affordability in New
Hampshire.
III. Student Loan Debt in #ew Hampshire
According to the Project on Student Debt, colleges and universities in New Hampshire
graduated students with the highest levels of student loan debt of any state in the nation. For
graduates of colleges in each state, Table 1 shows the average debt of students who graduate with
debt, the percentage of students graduating with some level of student debt, and the per capita
debt of graduates (the average debt of graduates with debt times the percentage of graduates with
debt). Table 1 shows that graduates of colleges and universities in New Hampshire have not only
the highest average debt among those students who graduate with student loan debt, but also the
highest percentage of students graduating with any student loan debt. As a result, graduates from
four-year colleges in New Hampshire also have the highest per capita debt of any state in the
nation.2
2 In some ways per capita debt is a better overall measure of the debt trends of graduates because it indicates the
overall debt burden borne by a graduating class rather than just the average debt of graduates who borrowed to pay
for college. As an example, if the average debt of graduates in successive years remained the same, one might
conclude that debt among graduates had not increased. However, if the percentage of graduates who graduated with
debt increased, the overall level of debt (per capita debt) of the graduating class would have increased over the prior
year.
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Table 1
Average and per Capita Debt of Graduates by State
State Avg. Debt Rank % With Debt Per Capita Debt Rank
#ew Hampshire $32,440 1 75% $24,330 1
Pennsylvania $29,959 2 70% $20,971 4
Minnesota $29,793 3 71% $21,153 3
Rhode Island $29,097 4 69% $20,077 6
Connecticut $28,783 5 64% $18,421 9
Iowa $28,753 6 72% $20,702 5
Ohio $28,683 7 68% $19,504 7
Vermont $28,273 8 63% $17,812 11
New Jersey $27,610 9 64% $17,670 12
Indiana $27,500 10 63% $17,325 15
Michigan $27,451 11 62% $17,020 16
North Dakota $27,425 12 83% $22,763 2
Massachusetts $27,181 13 65% $17,668 13
Illinois $26,470 14 64% $16,941 17
Wisconsin $26,238 15 67% $17,579 14
West Virginia $26,227 16 64% $16,785 18
Maine $26,046 17 71% $18,493 8
New York $25,851 18 60% $15,511 22
South Carolina $25,662 19 54% $13,857 27
Oregon $25,497 20 63% $16,063 19
Alabama $25,192 21 54% $13,604 28
Virginia $24,717 22 59% $14,583 26
Nebraska $24,287 23 63% $15,301 23
South Dakota $24,232 24 76% $18,416 10
Idaho $24,134 25 66% $15,928 20
Montana $24,113 26 65% $15,673 21
Maryland $24,002 27 55% $13,201 30
Mississippi $23,537 28 54% $12,710 33
Wyoming $23,341 29 47% $10,970 41
Kansas $23,321 30 64% $14,925 25
Missouri $23,229 31 65% $15,099 24
Florida $23,054 32 51% $11,758 37
Arkansas $23,048 33 56% $12,907 32
Louisiana $22,455 34 46% $10,329 42
Georgia $22,443 35 58% $13,017 31
Kentucky $22,287 36 60% $13,372 29
Colorado $22,283 37 54% $12,033 36
Washington $22,244 38 56% $12,457 34
Texas $22,140 39 56% $12,398 35
Oklahoma $20,897 40 53% $11,075 39
North Carolina $20,800 41 54% $11,232 38
Tennessee $20,703 42 53% $10,973 40
Nevada $19,954 43 44% $8,780 45
Arizona $19,950 44 49% $9,776 43
California $18,879 45 51% $9,628 44
Hawaii $17,447 46 38% $6,630 47
Utah $17,227 47 45% $7,752 46
Source: The Institute for College Access and Success.
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Recent Trends in Student Loan Debt
Nationally, the volume of student loan debt per full-time equivalent (FTE) student has
increased by over 50 percent (in constant 2011 dollars) over the past 10 years.
During that time, real, inflation adjusted tuition and fees increased by 26 percent
nationally at private four-year colleges and universities, and by 72 percent at public colleges. The
real, mean income of families declined over the same time period.3 Figure 2 shows how the
composition of undergraduate student debt per FTE student has changed over the past decade.
The largest increase has been in unsubsidized federal student loans.4 Because the interest on
these loans is not paid for by the federal government while a student is attending college full-time,
the effective cost to students of unsubsidized loans is higher than is the cost of subsidized loans.
Thus to the extent that average student debt levels today include a higher percentage of
unsubsidized loans than they did 10 years ago, the trends in average student debt, as disturbing as
they are, actually understate the current impact of student debt on college graduates.
3 Mean income declined across the income spectrum. Dividing families in quintiles according to income during the
time period shows that mean family income declined by just 3.2 percent for the top 20 percent of the income scale but
by 14 percent for the bottom quintile, and 6.8 percent for middle income families. 4 The College Board, Advocacy and Policy Center, “Trends in Student Aid 2012.”
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Another way in which reported trends in student debt understate the magnitude of the
problem is in the reporting of borrowing by parents. Parent “PLUS Loans” are federal loans made
to parents for the purpose of paying their children’s college expenses. They represent a smaller
portion of the overall volume of loans used for funding undergraduate education but they are the
second fastest growing category of debt. These loans are not included in the calculations of the
average debt of college graduates and thus their increasing use means that most reports of average
student debt understate the level and true impact of recent trends in borrowing to pay for college.
The increase in the volume of loans to parents to fund undergraduate education has also
contributed to the rising pressure to address college costs, as parents are a constituency likely to
have a stronger voice among lawmakers and others concerned with trends in college costs.
Student Loan Debt Has Risen Faster in #ew Hampshire
Comparing aggregated levels of student debt over time for individual states can be
problematic because not all colleges consistently report annual data on the debt of their graduating
students. Nationally this is not a significant problem unless the characteristics of non-reporting
institutions change greatly from year to year, an unlikely occurrence. For a small state like New
Hampshire, however, a few colleges not reporting or a change in the mix of reporting institutions
can significantly affect calculations of the average debt level of graduates. This is apparent in
some historical data for private institutions in New Hampshire, where debt levels rise and fall in
some consecutive years because of changes in the number of colleges reporting or changes in
which colleges chose to report debt levels of their graduates. New Hampshire’s four-year public
colleges have a consistent reporting of student debt over the last decade and are included in the
graphs below, along with a more limited time series of student debt for New Hampshire’s private
colleges.
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Figure 3 shows debt levels at New Hampshire’s four-year public and private institutions
and in comparison to national averages. The average debt of graduates of New Hampshire’s
private institutions is almost $4,000 higher than is the debt of graduates of private colleges
nationally. The average debt of graduates at New Hampshire’s public colleges is over $9,000
higher than is the average debt of graduates of public colleges nationally. Perhaps more troubling
is the fact that the average debt of graduates from New Hampshire’s public colleges is higher than
is the average debt of graduates from private colleges nationally, and it is as high as the debt of
graduates from private colleges in New Hampshire. The debt of students graduating from New
Hampshire’s private colleges is lowered significantly, however, by the low levels of debt of
graduates of Dartmouth College where the average debt of graduates was reported to be just
$16,615 in 2011.
The real, inflation adjusted average debt of graduates increased 10 percent more at New
Hampshire’s public colleges than did average debt of graduates at public colleges nationally
between 2001 and 2011. The real debt of graduates of New Hampshire’s private colleges
increased 4 percent more than did debt at private colleges nationally (subject to the reporting mix
caveats noted above).
The Difference Between the Debt of Graduates of #ew Hampshire Colleges and the Debt of
Graduates from #ew Hampshire
Colleges and universities are surveyed annually about the debt of their graduates.
Organizations such as The Institute for College Access and Success, which includes The Project
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on Student Debt, and Peterson’s5, obtain information about the debt of graduates submitted by
colleges. In their annual report on student debt, The Project on Student Debt aggregates the
information from individual colleges to the state level and ranks states according to the average
level of student debt among students who graduate from colleges in each state. For states where a
large majority of college graduates are also residents of the state, the average level of debt among
graduates of the colleges in the state is a reasonable proxy for the level of debt of state residents
who graduate from college. Arguably a majority of readers of reports on student debt levels by
state interpret the state rankings of the average debt of graduates as a measure of the debt of
college graduates who are from a state rather than as a measure of the debt of graduates from
colleges in a state.
For a state like New Hampshire, where one-half of all high school graduates who enroll in
four-year colleges choose to enroll in a college outside of New Hampshire, these state rankings of
student debt are less likely to accurately reflect the average debt of New Hampshire residents who
graduate from colleges and universities from around the region and throughout nation. Figure 4
shows the percentage of high-school graduates in each state who enrolled in four-year colleges
and who also enrolled in a college within their state of residence.6
5 Peterson's undergraduate financial aid database. 6 The figure for NH reported here differs from the one used later in this report for purposes of calculating the student
debt of college graduates from NH. The figure used for purposes of debt calculation includes only students who
enrolled within 12 months of their high school graduation and it excludes specialty institutions that do not report
student debt levels.
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Estimating the Student Loan Debt of #ew Hampshire Residents
There is no publicly available data on the student loan debt of recent college graduates by
their state of residence. To estimate the level of debt of New Hampshire residents who graduate
from four-year colleges we used data on the postsecondary school enrollment choices of New
Hampshire residents collected by the national Center for Education Statistics “Integrated
Postsecondary Educations Data System” (IPEDS). We matched the college enrollment patterns
of New Hampshire’s high school graduates to the average debt data of graduates for
corresponding institutions to develop a “debt profile” of New Hampshire residents graduating
from four-year colleges anywhere in the country.7 This methodology assumes that the debt of
New Hampshire residents who graduate from a college will reflect the average debt levels of all
graduates from that college, a reasonable assumption but not one which can be empirically
verified.
Using this method, the average debt of New Hampshire residents graduating from four-
year colleges during the 2010-2011 academic year is estimated to be about $2,000 (6%) less than
the average debt of graduates from New Hampshire colleges reported for New Hampshire by the
Project on Student Debt. This would still rank New Hampshire highest on the average level of
student debt but by a much narrower margin. It is unlikely, however, to alleviate concerns among
policymakers, parents, and students about the level of debt among New Hampshire’s college
graduates.
We used the same methodology to estimate debt levels of New Hampshire residents in the
2000-01 academic year. For that academic year, we estimate average debt levels for New
Hampshire residents to be about $1,600 or 8.5 percent lower than the average debt levels reported
by the Project on Student Debt for graduates of four-year colleges in New Hampshire. Figure 5
shows the average debt levels of graduates from New Hampshire colleges in 2001 and 2011 as
reported by the Project on Student Debt along with our estimates of the average debt of New
Hampshire residence who graduated from four-year institutions in each of those years. Although
we estimate the debt of graduates from New Hampshire to be lower than the debt of students who
graduate from New Hampshire colleges, the growth rate of student debt has been higher for
students from New Hampshire than it has been for students graduating from New Hampshire
colleges (38% to 34% between 2001 and 2011). In subsequent sections of this report we consider
how enrollment trends have affected the debt of New Hampshire residents graduating from four-
year colleges between 2001 and 2011.
7 For institutions that did not report debt of graduates we estimated the debt of graduates based on the average amount
borrowed by freshman students from those colleges. For 12 percent of the colleges in which NH high school
graduates enrolled we had to estimate the average debt of graduates. There is a .98 correlation between the amount
borrowed by freshman and average debt levels of graduates across all colleges nationally that reported both freshman
borrowing and average debt of graduates. We compared average debt levels of NH graduates for colleges where
average debt was reported with average debt levels of graduates from colleges where we used this procedure to
estimate the debt of graduates and found less than $500 difference in the average debt of the two groups. Unless there
is some fundamental difference between the institutions that reported graduate debt and those who did not, this result
provides a high level of confidence that the methodology used for estimating unreported graduate debt does not alter
or bias our results.
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Implications
Average student loan debt at graduation is lower for New Hampshire residents than is the
average debt of graduates from colleges located in New Hampshire. Along with the fact that a
high percentage of high school graduates from New Hampshire enroll in colleges outside of the
Granite State, this may indicate that high college costs, and thus higher debt levels, are a factor in
deciding where New Hampshire high school graduates choose to pursue four-year college degrees.
It is possible that some of New Hampshire’s high out-of-state migration of high school graduates
is a function of their seeking more affordable postsecondary school options. Evidence of that
possibility is considered in later sections of this report.
Unfortunately, whether the average debt of college graduates is reported based on the
states where colleges are located or by the state of residence of college graduates, by either
measure debt levels are higher for New Hampshire colleges (or among New Hampshire residents
graduating from colleges) than they are in other states. If high debt was only a function of
colleges in New Hampshire graduating students with high debt levels we might expect our
measure of the student debt of graduates from New Hampshire to be even lower, and closer to the
national average because one-half of New Hampshire students enrolling in colleges enroll in a
college in a state where the average debt of graduates is lower than it is in New Hampshire. But
our findings suggest that there are other factors that influence the high debt levels of college
graduates who are from New Hampshire. These factors include the choices made by high school
graduates in the state, the characteristics of New Hampshire college students and their families,
the characteristics of colleges in New Hampshire and the New England region, the financial aid
practices of colleges, and the higher education policies of government. In the sections that follow,
we consider the key factors that contribute to student debt levels at New Hampshire colleges and
among New Hampshire residents.
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IV. Why is Student Debt So Much Higher in #ew Hampshire?
It is clear that graduates from New Hampshire colleges, on average, have significantly
higher debt burdens than do graduates from colleges in most other states. But with only one-half
of New Hampshire high school graduates enrolling in a New Hampshire institution, why do debt
levels of New Hampshire residents graduating from college still appear to be significantly higher
than the national average, albeit somewhat less than the average debt of students who graduate
from New Hampshire colleges? In this section we examine characteristics of New Hampshire
high school graduates and their college choices that can help explain why the student loan debt of
New Hampshire residents is not significantly different from the high levels of debt among
graduates of New Hampshire’s colleges and universities.
Key Findings:
• Most New Hampshire high school graduates who enroll in four-year colleges enroll
in schools in states with, on average, the highest college costs in the country.
• A higher percentage of New Hampshire residents attend higher-cost private colleges
and universities.
• On average, college students from ew Hampshire come from families with above
average incomes.
• A traditional avenue for lowering college costs and debt levels (attending public
colleges and especially in-state public colleges) has not been an effective means of
lowering costs and limiting student debt for New Hampshire residents.
Most #ew Hampshire Residents Attend Colleges in States With the Highest College Costs
Figure 6 shows the geographic pattern of enrollment in four-year colleges for high school
graduates from New Hampshire. The chart indicates that almost 80 percent of New Hampshire
high school graduates enroll in colleges in New England and another 12 percent enroll in colleges
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in New York, New Jersey, or Pennsylvania (the Mid-Atlantic region as defined by the U.S.
Bureau of the Census). The chart also shows an increase in the percentage of enrollment by New
Hampshire high school graduates in colleges in New Hampshire between 2001 and 2011.
The importance of the geographic patterns of enrollment to average student loan debt of
New Hampshire residents is apparent from Figures 7 and 8. As Figure 7 shows, New Hampshire
high school graduates largely enroll in four-year colleges in states with colleges that graduate
students with high levels of debt. Figure 8 shows the enrollment-weighted average cost of
attendance public and private colleges by state. On average, New Hampshire is not the highest
cost state in the nation to attend college, although its public colleges do have the highest tuition
and fees. Alone, Figure 8 suggests that more factors than just college costs must be affecting
student debt levels. Despite having the 7th highest enrollment-weighted average cost of
attendance among its public and private colleges, the average debt of graduates from New
Hampshire colleges is the highest in the nation. Along with the graphics on student debt levels by
state, and the geographic debt the patterns of enrollment by New Hampshire high school
graduates, Figure 7 and 8 show that large percentages of, New Hampshire’s high school graduates
enroll in colleges with the highest costs and the highest debt levels in the country, even though
New Hampshire doesn’t have colleges with the highest average costs in the country.
16
Grouping states into nine regions (Census Divisions) identified by the U.S. Census
Bureau (Figure 9) shows that when 90 percent of New Hampshire high school graduates choose to
enroll in colleges in New England and the Middle Atlantic States, they are also enrolling in
colleges in the regions with the highest college costs in the country.
17
With nearly all New Hampshire students enrolling in colleges in the highest college cost
and highest debt regions of the country, we would expect debt levels of New Hampshire residents
to be much higher than the national average. As Figure 10 shows, as the average cost of
attendance at colleges in a state increases, so also does the average level of student debt of
graduates.
#ew Hampshire Students are More Likely to Enroll in Higher Cost Private Colleges and
Universities
Not only do graduates from New Hampshire high schools enroll primarily in colleges in
regions with the highest costs in the country, they are also much more likely to enroll in private
colleges than are high school graduates from other states (Figure 11). With their higher cost of
attendance, private schools also tend to graduate students with higher levels of debt, although at
elite private colleges that is not the case.8
Figure 11 includes students who enroll at all levels of postsecondary schools. Among
New Hampshire high school graduates who enroll in four-year colleges there has been an increase
in enrollment in public institutions over the decade between the 2000-01 and 2010-2011 academic
years. The implications of the changing enrollment patterns of New Hampshire high school
graduates are discussed later in this report.
8 Elite private colleges are more likely to enroll students from families with higher incomes and with less need for
borrowing and they are much more likely to provide grants and scholarships that lessen the need for borrowing among
students of more limited means. Dartmouth College is a notable example in NH. Tuition and total cost of attendance
are much higher than they are at NH’s public colleges but average debt levels of graduates are one-half as large at
Dartmouth as they are at NH’s public colleges.
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College Students From #ew Hampshire are More Likely to be in the “Middle Income Trap”
New Hampshire colleges have the highest percentage of student aid applicants from
families earning $60,000 or more of colleges in any state in the nation.9 Data from the U.S.
Census Bureau’s American Community Survey suggest that New Hampshire residents enrolled in
some level of postsecondary education (two or four-year) have among the highest average family
incomes in the country. However, as Figure 12 shows, the relatively high average family income
of college students from New Hampshire is as much a function having a smaller percentage of
lower income families as it is a function of having a very high percentage of high income families.
Figure 12 compares the distribution of family income of postsecondary students age 18-24 in New
Hampshire, New England, and the nation as a whole. The chart shows that compared to New
England as a whole, college students from New Hampshire are less likely to belong to families
with the highest incomes (Massachusetts and Connecticut each have higher percentages of
students from families earning in excess of $125,000). New Hampshire students are much more
likely to belong to families in the middle of the income distribution, and much less likely to come
from families at the lower end of the income distribution.
The family income distribution of college students from New Hampshire suggests that
they are somewhat less likely to find New England’s higher college costs “affordable” compared
to students from states like Connecticut and Massachusetts. At the same time, a smaller
9 Based on PolEcon’s analysis of IPEDS data on application for financial assistance by income category for all
colleges and aggregated at the state level. Thus this is a measure of the income of students enrolled at NH colleges
rather than a measure of income levels of NH residents enrolled in four-year colleges.
19
percentage of New Hampshire’s students have incomes low enough to receive grant awards
substantial enough to significantly reduce student debt loads. It is foolish to think of New
Hampshire’s broad middle class as anything other than an asset to the state, but in the case of
college costs, and considering the college enrollment patterns of New Hampshire high school
graduates, New Hampshire’s broad middle class may contribute to the high levels of debt of its
residents.
The largest and most widely available grant program for students with financial need is the
federal Pell Grant program. The maximum Pell Grant award is now $5,500 per academic year for
students with the lowest family incomes and greatest financial need. At many public colleges this
would largely cover annual tuition and fee payments for a student from a lower income household.
Figure 13 shows the percentage of postsecondary students receiving Pell Grants by broad income
category. The chart implies that for students from New Hampshire, who are less likely to come
from families that qualify to receive Pell Grants and more likely to receive smaller awards when
they do, and whose enrollment patterns generally include higher cost colleges, the impact of Pell
Grants on the need for borrowing for college is likely to be smaller than it is for students from
most other states. Students enrolled in colleges in New Hampshire receive the third lowest
average dollar amount of Pell Grants among students enrolled in colleges of any state (behind
only Alaska and Nevada).
20
Students From #ew Hampshire Receive Somewhat Higher Levels of #eed-Based
Educational Assistance But #ot High Enough to Offset the Higher Cost of Colleges They
Attend
With the highest percentage of its high school graduates enrolling in private postsecondary
institutions of any state in the nation, we would expect that New Hampshire’s postsecondary
students to have higher levels of need-based grants, despite having higher family incomes. In fact,
New Hampshire residents aged 18-22 enrolled in postsecondary schools who receive educational
grants do receive an above average amount of grants based on our analysis of data from the U.S.
Census Bureau’s “Current Population Survey” (CPS).10 The CPS data do not distinguish between
different levels of postsecondary education (two-year, four-year, etc.) but still provide a
reasonable assessment of the relative amount of grants received by New Hampshire residents
compared to residents of other states.
Just over 37 percent of students enrolled in postsecondary schools and who are New
Hampshire residents indicate that they received some need-based grants. That is about the
national average and ranks New Hampshire residents 30th among all states on the percentage of
students receiving educational assistance. As Figure 14 shows, students from New Hampshire
and enrolled anywhere in the country do receive an above average amount of educational
assistance. However, because New Hampshire students also attend higher-cost colleges in much
10 We used data from three years (2010 – 2012) of the March Supplement of the Current Population Survey. Our
measure of need-based grant is constructed by selecting individuals age 18-22 who are currently enrolled and who
indicated whether or not they had received any educational assistance as well as the amount they received.
21
higher percentages, the higher average grant awards may not offset the higher cost of college for
these students and the result is a higher level of student debt among students from New
Hampshire.
In theory, the higher average family incomes of college students from New Hampshire
should result in lower levels of student debt, as the families of New Hampshire students have
more resources available to pay for college. In part, this is offset by the enrollment choices of
22
students who enroll in higher cost public and private colleges in much greater percentages than the
national average. Private colleges generally have a higher cost of attendance but they also have
higher grant awards. For private colleges in New Hampshire, the average need-based grant was
the highest among private colleges in any state (over $24,000), covering 54 percent of the average
costs of attendance, third highest among private colleges in any state. However, this average is
greatly affected by the large need-based awards provided by Dartmouth College. For the 2010-11
academic year, the median value of need-based grants awarded to students at public colleges
nationally was $7,123 and $12,113 at private colleges and universities.11 The average need-based
grant at New Hampshire’s public colleges was $4,925; public colleges in only five states have
lower average need-based grant awards to students with financial need. As importantly, because
the cost of attendance at New Hampshire’s public colleges is so high, the percentage of the total
cost of attendance for in-state students that the average need-based grant covers is the lowest in
the nation among public colleges in the 50 states (Figure 15).
Lower Savings Rates May Be Contributing to Debt Levels and Concerns About Costs
There is no detailed, publicly available data on the resources (savings) of families that
could be used to reduce the need for borrowing by college students nationally and in New
Hampshire. Information on the college savings plans (so called 529 plans) of different states is
generally limited to audit statements and information on the performance of investment portfolios
that provide little insight into the broader college savings trends of families. Nationally, the
Federal Reserve Board conducts its “Survey of Consumer Finances” (SCF) every three years.
Data from this detailed survey of almost 20,000 households nationwide contains information on
the savings and reasons for savings of households. We filtered the SCF data to include only
households with children and created a time series for a variable that asked whether or not
education expenses was a reason that a household was saving.
The results of our analysis show that the percentage of households with children saying
that education expenses was a reason for their saving has been declining. To a degree this may be
expected, as in recent years economic conditions have made saving more difficult for many
households, but the decline in the percentage of households saying that education expenses are a
reason for their saving has been ongoing for 15 years (Figure 16). As the figure also shows, the
decline has been most evident among households where the educational attainment of the head of
the household is a bachelor’s degree or higher. The children from these households are the most
likely to enroll in college after high school. Households headed by individuals with four-year
degrees or higher also tend to have higher income levels.
11 PolEcon analysis of IPEDS data from 1,284 public and private four-year colleges and universities.
23
Figure 17 compares the percentage of households saying that college expenses were a
reason for their saving for households by income categories. The chart shows how the percentage
of savers for education has changed among income categories between 1995 (the peak year for
saving according to the SCF survey) and 2010 (the most recent survey year available). Figure 17
shows a dramatic decline in the percentage of higher-income households saying that education
expenses are a reason for their saving.
24
Discussion
For New Hampshire high school graduates enrolling in four-year colleges the implications
of the enrollment patterns, student aid, and income trends above are clear. The most common
method by which students from families and students look to minimize college costs and the need
to borrow to pay for college - attending a public college in their home state - is far less effective
for New Hampshire residents than it is for residents of most other states. Moreover, because the
cost of attendance at both public and private colleges in the New England region is higher, on
average, than it is in other regions of the country, the options for limiting college costs for the 80
percent of New Hampshire students who enroll in colleges in New England are also more limited.
The total cost of attendance (in-state, on-campus) at New Hampshire’s public colleges is
higher than all but one state, while the average need-based grant at New Hampshire’s public
colleges covers the smallest portion of costs at public colleges of any state in the nation. About
40 percent of the New Hampshire high school graduates who enroll in four-year, non-specialty
colleges enroll in public colleges in New Hampshire and one result of these enrollment, cost, and
financial aid patterns is higher student debt levels for New Hampshire residents. A very small
percentage of New Hampshire high school graduates attend elite and very selective colleges like
Dartmouth where very large need-based grant awards are common and where debt levels are low,
even among students with financial need. For the approximately 40 percent of New Hampshire
high school graduates who enroll in four-year colleges and attend New Hampshire public colleges,
however, the high tuition costs and low grant awards translate into higher levels of borrowing,
even for students at higher levels of family income. In addition, although we do not have data
specific to New Hampshire households, national surveys suggest that fewer higher-income
households appear to be saving for college. A large percentage of New Hampshire’s high school
graduates also attend colleges where they will either pay out-of-state tuitions that are close to
those of private schools, but which provide smaller need-based grants than private colleges, or
they attend private colleges where need-based grants are higher than those awarded by public
colleges but where the generally higher income levels of New Hampshire residents mean that the
need-based grants they receive are not large enough to offset the higher cost of attendance at those
institutions.
These findings beg the question “what can New Hampshire students and parents do to
minimize costs and the need for student borrowing?” That question is often answered in terms of
saving for college, securing more financial aid in the form of scholarships and grants, or otherwise
obtaining the resources necessary to meet the rising cost of college in ways that do not require
borrowing money. The findings above suggest that enrollment options and choices that limit
college costs and the need for borrowing should play a more prominent role in those strategies. In
fact, that may be already occurring in New Hampshire as students and parents in New Hampshire
increasingly appear to be seeking lower cost four-year colleges. Nationally, a recent survey
conducted for Fidelity Investments found that 38 percent of families with college bound children
were opting for lower priced colleges as a strategy for coping with higher college costs and levels
of student debt.12 But our findings also indicate that there are fewer low-cost options for New
12 Fidelity Investments, “College Indicator Survey, 2012.”
25
Hampshire residents in the region and especially in New Hampshire.13 For students enrolling in
four-year colleges, attending a public college, especially an in-state public college, has been a
primary strategy for minimizing the cost of attendance. The combination of very high tuition and
fees and relatively lower need-based grants at New Hampshire’s public colleges, however, makes
this a less viable strategy for New Hampshire residents, while relatively high public college costs
throughout the region (especially for students paying non-resident tuition and fees) makes finding
a lower cost public option in a nearby state also problematic.
Changing Enrollment Patterns May Reflect Efforts to Reduce Costs and Limit Debt
Although we cannot be certain of the motivations for doing so, over the past decade it
appears that strategies traditionally associated with efforts to reduce college costs have been
increasingly adopted by New Hampshire high school graduates and their families. Specifically,
between the 2000-2001 and 2010-2011 academic years, the percentage of New Hampshire’s high
school graduates who enrolled in four-year colleges after graduation and who attended public
colleges has increased significantly (Figure 18) , as has the percentage of students who have
enrolled at in-state colleges and universities14 (Figure 6 on page 15).
13 Granite State College (GSC) is the most affordable of NH’s public 4 year colleges and can be considered an
“affordable option “ but at this time the college primarily attracts non-traditional, adult learners seeking an alternative
to a traditional campus learning environment. Only 25% of GSC students are traditional age (18-24) and the average
age of students is 35 according to the “Facts & Figures” section of the college’s website,
http://www.granite.edu/about/facts.php. 14 For this analysis we used NH high school graduates who enrolled for the first time in four-year colleges within 12
months of their high school graduation. Expanding the population to include all NH high school graduates who
eventually enroll in a four-year colleges does not meaningfully change these percentages and does not change the
overall findings or conclusions at all.
26
In theory, shifts in the enrollment patterns of New Hampshire high school graduates over
the past decade, that include a higher percentage of enrollments in public colleges and a higher
percentage of enrollment at in-state colleges, should reduce or slow the rate of growth in the level
of debt of ew Hampshire residents graduating from four-year colleges and universities (although
it would not alter the levels of debt of graduates from colleges located in New Hampshire).
There is no publicly available time-series data on the debt of college graduates by their
state of residence. To see if the change in the four-year college enrollment patterns of New
Hampshire high school graduates has altered the level of debt among graduates from New
Hampshire (or the debt profile of graduates from New Hampshire as we call it), we used the same
methodology as was used in estimating the level of debt of New Hampshire residents who
graduate from college compared to the average debt of graduates from colleges within New
Hampshire. Specifically, we took the enrollment patterns - the actual college enrollments of New
Hampshire high school graduates – from the 2000-01 academic year and applied academic year
2010-11 average debt, by college, to the enrollment pattern of that year to see if the average debt
of graduates would be higher or lower than the average debt of graduates from New Hampshire
that we estimated for the enrollment patterns of high school graduates for 2010-11 academic year.
Because a much higher percentage of New Hampshire high school graduates attended private
colleges and colleges out-of-state in 2000 than did so in 2010, and those factors tend to increase
college costs and levels of student debt, we expected the debt profile of students enrolling in
2000-01 would be comparatively higher than the debt profile for students in 2010-11.
Figure 19 presents our estimate of what the debt levels of New Hampshire students would
be if the same patterns of enrollment from a decade ago existed today, along with our estimate of
the average debt of New Hampshire students from the 2010-11 academic year. The graph shows
that increasing the percentage of in-state and public college enrollments has not likely altered the
27
college debt profile of New Hampshire’s high school graduates between 2000 and 2011. Our
estimate of the debt of New Hampshire residents graduating from four-year colleges for the 2010-
11 academic year is $30,515. Using the enrollment patterns from 2000-01 applied to the current
year average debt of graduates by college suggests that the average debt of graduates would have
been no higher under the 2000-01 enrollment patterns that included higher enrollments in private
and out-of-state colleges. Thus attempting to limit college costs and student debt by attending in-
state and public colleges does not appear to be an effective a strategy for New Hampshire students
and their families. The fact that the average debt levels of graduates from New Hampshire’s
public and private colleges are similar supports this conclusion.
The University of New Hampshire is the primary beneficiary of the increasing trend
toward in-state, public college enrollment among New Hampshire’s high school graduates (Figure
20). To a degree this may reflect an enhanced reputation of the school among New Hampshire
residents but the overall trend by New Hampshire high school graduates of increasing enrollment
in colleges in New Hampshire, and in public colleges especially, may also reflect families’ efforts
to limit college costs during a time when college costs have been rising sharply and economic
conditions have limited growth in family income. Unfortunately, a combination of high in-state
public college costs, low levels of need-based grants at in-state public institutions, few if any
lower-cost public colleges available in the region, and higher tuition costs at private colleges in
New Hampshire, all mean that more students enrolling at an in-state college and more students
enrolling in public colleges has had little effect on limiting the growth rate of the debt of New
Hampshire residents.
28
V. Rising Costs and Reliance on Tuition Revenue Drive Debt Levels Higher
Despite the attention paid to the issue of student loan debt, there is a little research that
directly seeks to determine both the institutional and student level determinants of average student
debt. A study by Macy and Terry (2007) directly examines institutional determinants of student
debt. They examined data from the top 200 colleges and universities based on the U.S. ews and
World Report rankings and concluded that tuition and fees is the single most significant
determinant of variation in average student debt levels across institutions. More recently, Monks
(2012) examined the role that tuition, financial aid policies, and academic outcomes play in
determining variation in average student debt levels across higher education institutions. Monks
found that the cost of attendance plays a significant role in determining levels of student debt
across institutions at private but not at public colleges. He concludes that tuition is not the only
nor necessarily the primary determinant of average student debt levels at colleges. Monks results
suggest that enrollment and financial aid polices such as “need-blind” admissions and academic
selectivity also play a significant role in determining student debt levels at graduation.
By limiting their research to just 200 top-ranked colleges, the Macy and Terry study raises
concerns about the ability to generalize its findings to the much larger and more diverse
population of four-year colleges nationally. Monks’ study uses data from 747 public and private
colleges and includes more control variables and more model specifications. However, his results
explain only about one-third of the variation in debt levels among graduates of different colleges.
Moreover, his conclusion that tuition levels are a significant determinant of student debt levels at
private colleges but not at public colleges warrants further investigation.
This study uses data on 1,300 public and private four-year to assess factors that influence
the average debt levels of college graduates. We use data from the Integrated Postsecondary
Education System (IPEDS) of the U.S. Department of Education, the subscription portion of
Peterson’s college guide, as well as the Institute for College Access and Success’ “College
Insight” project which collects and compiles higher education data. We exclude specialty
colleges and private, for-profit colleges from our data set. New Hampshire has just two private,
for-profit, four-year colleges (Hesser and Daniel Webster). Excluding specialty colleges allows
us to focus on the most common bachelor’s, master’s, and doctoral degree granting institutions.
Key Findings
• For every one dollar increase in tuition and fees, the average debt of students who
graduate with debt increases by 23 cents at private colleges and universities and by
55 cents at public colleges.
• The percentage of student debt that is in the form of federal as opposed to non-
federal (private) loans, has the strongest relationship to average debt levels, but the
percentage of debt that is in federal loans is, in part, a function of higher tuition
levels because as tuition levels rise, maximum federal borrowing limits are reached
and students turn to private loans.
• The financial aid policies of colleges affect levels of student debt. The higher the
average value of need-based grants awarded, the lower will be average student debt,
all other factors equal. The greater the percentage of students with need who have
29
their financial needs fully met, the lower will be the average debt of a college’s
graduates.
• Other factors equal, colleges that enroll more students with financial need and higher
levels of financial need, especially public colleges, will graduate students with higher
average debt levels. This finding highlights the tradeoff between maximizing access
to college and the desire to minimize student debt.
• The more selective a college, defined as those with higher SAT math scores, on
average, the lower will be the average level of student debt.
Methods and Results
It is well established in the research literature that debt levels are generally higher for
graduates of private colleges than are debt levels of graduates from public universities. This is not
surprising. In most cases tuition is much higher at private colleges than it is at public colleges.
Like Monks, we modeled debt separately for both public and private colleges but because
concerns about student debt levels are similar regardless of institutional control (public or private)
we also fit a model combining both public and private four-year colleges. Our results explain a
greater percentage of the variation in student debt across institutions than do the results of either
Macy and Terry or Monks, are more parsimonious (and thus preferred) over Monks’ specification
of separate public and private models, and it overcomes some of the limitations of Macy and
Terry’s findings by including a broader range of colleges in the analysis.
Many colleges do not report student loan debt levels of their graduates. This, along with
the fact that all variables must be reported by an institution for it to be included in a regression
model, resulted in a final sample of 648 public and private colleges used for our debt model
analysis. For other multivariate (regression) analyses in this report our sample includes up to
1,300 colleges.
Figure 21 presents the key explanatory variables in our preferred model of average student
loan debt, with each of the circles on the outer ring representing one of the variables found to be
significantly related to average student loan debt. Each circle is sized approximately to represent
its relative contribution in determining average debt. An arrow connects the tuition and fees
variable to the percentage of student debt that is not federally awarded debt because the level of
tuition and fees, in part, determines the percentage of debt that is non-federal (discussed below).
A negative sign (-) indicates a negative relationship between the explanatory variable and average
student debt, meaning the higher the value of the explanatory variable, the lower will be average
student debt when all other variables held constant, and vice versa. Our final model of the
average debt of graduates includes seven variables: average tuition and fees, the percentage of
debt that is in non-federal loans, the percentage of students with financial need, the percentage of
students with financial need that have their need fully met, the average size of federal Pell Grants,
the average need-based grant provided by the college, and the average SAT mathematics score.
The model explains over one-half (R=.75, R2=.56) of the variation in the average levels of student
loan debt of graduates at public and private four-year colleges and universities. Five of the seven
variables are statistically significant predictors of student loan debt at the .00 level of
30
confidence.15 One variable is significant at .004 and one at .022. Equations were estimated in
both linear and natural log form, so that the coefficient on the natural log of the variables is the
elasticity of student debt with respect to each of the variables and can be interpreted as the
percentage change in the dependent variable (average debt of graduates) that occurs for every one
percent change in a log transformed explanatory variable (such as tuition level, average need-
based grant, etc.). All results were similar using either linear or the log form of the model,
although the coefficients (the strength of the relationship between variables) changes somewhat in
the different forms. Some predictor variables were not included in the model even though they
significantly increased the explanatory power of the model (educational and general expenditures
per full-time equivalent student in particular) but did so while also introducing higher levels of
collinearity among some variables. The educational and general expenditures per full-time
equivalent student at colleges is important to understanding key trends in higher education and
thus will discussed in a later section of this report. A full reporting of the statistics and
coefficients of the model of average student debt is presented in Appendix A.
Discussion
It is not surprising that non-federal student loan debt is associated with higher average
levels of student debt. Non-federal debt has less favorable loan terms and is likely to be used by
students to pay for college only after students have borrowed the maximum amount available
15 Significance at the .01 level means that we can be 99 percent certain that the results we obtain indicate a true
relationship between variables and the results found did not occur by chance. Significance at in the .00 level indicates
that there is essentially no chance that the results occurred by chance, .05 significance that we can be 95 percent
certain etc. In most cases researchers will only consider variables with at least a .05 level of significance for inclusion
in explanatory or predictive models..
31
under the federal subsidized and unsubsidized student loan programs, by definition then, students
who are incurring larger amounts of debt.
Our results show that average tuition and fees is a significant predictor of the average
student debt of graduates. We also found that tuition level is a significant predictor of the average
debt of graduates for both public and private institutions when modeled separately. The elasticity
of student debt with respect to cost of attendance in the combined public and private college
model is .276, indicating that a 10 percent increase in tuition and fees would result in an increase
in average student debt of about 3 percent. Estimated with no log transformation, our results
suggest that every one dollar increase in tuition and fees increases the average debt of graduates at
private colleges by about 23 cents. At public institutions, however, we found the elasticity of
graduate debt with respect to tuition and fees to be higher (.367) indicating that a 10 percent
increase in tuition at public colleges and universities would result in a 3.7 percent increase in the
debt of graduates. Results for public colleges using variables with no log transformation indicate
that for each one dollar increase in tuition and fees, the average debt of graduates increases by 55
cents. These results suggest that when tuition rises at private colleges and universities, a larger
portion of the increase is offset by an increase in grants or other factors that limit the need for
student borrowing to cover increased tuition charges. In contrast, higher tuition at public
colleges is less likely to be offset via grants or other means, and a higher percentage of the
increase is likely to be absorbed by students in the form of additional student loans.
The selectivity of a college, as measured by SAT mathematics scores, is significantly
related to average student debt. Institutions with higher average SAT scores have lower levels of
student borrowing, other factors held constant. Two plausible explanations exist for this. First,
there is a strong correlation between SAT scores and family income, perhaps indicating less need
for students to borrow. Second, colleges with students that have higher average SAT scores also
tend to be colleges with greater institutional resources which they may be able to use to lower
student borrowing. More selective colleges also have higher graduation rates. Using graduation
rates as a proxy for selectivity of a college produces similar results as SAT scores, albeit with a
marginally smaller relationship to debt of graduates.
Admissions and financial aid policies as well as characteristics of the student body also
determine average debt levels of graduates. The higher the percentage of students at a college that
have financial need, the higher will be the average debt of its graduates. Because a higher
percentage of students with financial need enter public colleges and universities, this can
contribute to high debt levels among public colleges despite their generally lower cost of
attendance. Colleges where a higher percentage of students with financial need have their need
fully met (as opposed to meeting only part of a student’s financial need – also known as
“gapping”) have lower average levels of debt. Again, because private colleges are more likely to
fully meet a student’s financial aid needs (20% of students is the median at private colleges, and
14% is the average at public colleges) and they enroll fewer students with need or students with
lower levels of need, this contributes to surprisingly narrow differences in average debt levels
between public and private colleges, despite often large differences in cost of attendance between
public and private colleges..
32
Finally, the average size of need-based institutional grants awarded and the average size of
Pell Grants awarded are negatively associated with average debt at graduation. Grants are a
substitute for loans in covering the cost of college. Thus higher grant levels reduce the need for
borrowing and average debt levels among students with financial need. They may also, however,
increase the cost of college for those not receiving institutional grants but that issue is beyond the
scope of this research. Pell Grants are a means tested award that also provides some
demographic information about students and the student body of a college, specifically the level
of family income, with higher average Pell Grants (along with a higher percentage of students
receiving them) an indication a greater percentage of students from more moderate and lower
income families.
Together, these results suggest that the level of student debt at graduation from colleges
and universities across the country is a function of several factors, with tuition levels being an
important but not the singular factor behind high levels of student debt. For the 924 public and
private colleges that reported the average debt of their graduates in 2011, the average debt of
graduates from public universities was $22,901 while the average at private colleges was $27,901.
This is a significant difference but given a mean difference in tuition and fees between private and
public four-year colleges of over $16,000, it is a clear indication that more than just higher costs
of attendance are playing important roles in the rise of student loan debt.
Do Model Results Explain Why the Debt of Graduates From #ew Hampshire Colleges is So
Much Higher?
At both public and private institutions, students graduate from colleges in New Hampshire
with higher average levels of debt than do graduates of colleges in other states. The average debt
of graduates from New Hampshire’s public colleges was about 40 percent higher than was the
average debt of public college graduates nationally in 2011, but the average debt of private college
graduates in New Hampshire was just 12 percent higher than the national average. How well do
the factors found to be associated with higher levels of student debt nationally help explain the
difference between the debt of graduates from colleges in New Hampshire and the debt of
graduates from colleges in other states?
Table 2 present aggregated mean scores for New Hampshire’s public and private colleges
on the variables found to have the strongest relationships to levels of student debt at graduation.
Table 2 shows that on the key variable of the percentage of debt that is federal loans, New
Hampshire’s public and private institutions are approximately 20 percentage points below the
respective averages for colleges throughout the country. Because higher percentages of federal
loans are associated with lower levels of debt, this finding clearly helps explain why debt levels in
New Hampshire are higher. Only public institutions in Alaska and Delaware have a higher
percentage of graduate debt in non-federal loans.
33
Table 2
Values for #ew Hampshire Colleges on Key Variables Affecting Student Debt Levels
College
Average
Debt
% of
Debt
That is
Federal
Avg. #eed-
Based Grant
Avg. Pell
Grant
% of
Students
W/#eed
Enrollment
Weighted
Tuition &
Fees
%
W/#eed
Fully Met
NH - Public, $32,385 68% $4,925 $3,721 64% $19,209 11%
NH - Private $32,570 57% $24,610 $3,343 66% $30,066 28%
Nation - Public $23,065 85% $7,093 $4,104 60% $8,017 14%
Nation - Private $29,059 73% $17,004 $3,988 67% $24,588 20%
Nation – Total
4-Year $24,854 81% $9,802 $4,053 62% $18,833 16%
Source: IPEDS, The Institute for College Access & Success, PolEcon
The enrollment-weighted (by in-state and out-of-state students) average tuition and fees at
New Hampshire’s public colleges is almost $11,000 higher than is average enrollment-weighted
tuition and fees nationally, and average tuition and fees at New Hampshire’s private colleges is
about $5,500 higher than is the national average. Only Vermont has a higher enrollment-weighted
average tuition at its public colleges than does New Hampshire. On a total cost of attendance
basis for in-state students, New Hampshire ranks fourth for its public institutions. Private
institutions in 10 states have higher average tuition and fees than does New Hampshire and on a
total cost of attendance basis New Hampshire’s private institutions rank ninth nationally.
Higher tuition levels result in higher levels of student debt. When tuitions are high enough
at institutions that do not provide high average levels of need-based grants, federal student loan
limits will not cover tuition charges and students will move to non-federal loans or federal parent
“PLUS Loans” (which are not considered as student debt for this analysis) to cover the cost of
college. Although the percentage of debt that is in federal loans is presented individually as a
predictor of high levels of debt at graduation, that relationship occurs largely because a higher
percentage of non-federal debt is moderately correlated with tuition levels. Thus the role of tuition
levels is likely understated in the model specification and the role of non-federal debt overstated.
New Hampshire’s public institutions have higher than average SAT mathematics scores
for public colleges but average SAT scores at New Hampshire’s private institutions are somewhat
lower than the national average for private colleges and universities (Dartmouth College is a
notable exception). This would imply, as is the case, that tuitions could be expected to be
somewhat higher at New Hampshire’s public colleges, all other factors equal. With the exception
of Dartmouth College and St. Anselm College, where higher SAT scores are consistent with those
schools higher tuition levels, New Hampshire’s private colleges do not all evidence the expected
relationship between SAT scores and tuition and fee charges.
The average need-based grant at New Hampshire’s public colleges is lower than it is at
public colleges in all but four states. This is both a result of higher levels of family income
among students attending these colleges as well as a more limited availability of need-based grant
34
funds at New Hampshire’s public colleges. Because tuitions are higher at New Hampshire’s
public colleges, the percentage of tuition and fees that are covered by the average need based grant
at New Hampshire’s public colleges is the lowest of any state in the nation.
For students with financial need, lower grant levels will generally result in greater use of
student loans. New Hampshire’s private institutions have the second lowest average dollar value
of Pell Grants among private colleges in the 50 states, but the highest level of institutional need-
based grants. However, the small number of private institutions reporting this data in New
Hampshire means that the average need-based grant is heavily influenced by the $36,373 average
grant at Dartmouth College. Without the inclusion of Dartmouth College private colleges in New
Hampshire would be below average among all states on the average size of need-based grants
(Figure 22), with only St. Anselm College and New England College reporting grants at about the
national average for private colleges.16
When a college subsidizes the tuition of some students, funding must come from some
source other than students who receive subsidies. For elite colleges such as Dartmouth College,
with substantial endowments or other resources, the large subsidies provided to some students
may have relatively little impact on tuition charges. But for other colleges, those with more
limited or no endowments and fewer non-tuition sources of revenue, the effect of subsidies for
some students is likely to be increased tuition and fees for those students receiving no subsidies.
Finally, a somewhat higher percentage of students at New Hampshire’s public colleges
have a financial need; New Hampshire ranks 16th among states and above the U.S. average. But
the fact that fewer public college students in the state receive Pell Grants and the average grants
16 Some NH private colleges did not report on the average size of need-based grant awarded, only five did.
35
are smaller (an indication that students at New Hampshire’s public colleges have relatively higher
incomes) suggest that the higher level of financial need at New Hampshire’s public college is as
much or more the result of higher cost of attendance in the state as it is the demographics of
enrolled students. At New Hampshire’s private colleges, a lower percentage of students than the
national average show financial need. Finally, at both public and private colleges in New
Hampshire, a smaller percentage of students have their financial needs fully met than the national
averages for public and private colleges with the notable exception of Dartmouth College where
54 percent of students with financial need have their need fully met by financial aid.
VI. Spending Levels and #on-Tuition Revenues Determine College Prices
Our results suggest that nationally, on average, each one dollar increase in tuition and fees
raises the average debt of graduates at public institutions by 55 cents, and by 23 cents at private
institutions. These amounts vary according to the individual financial and other characteristics of
a college, but across the population of colleges in the U.S. these are the averages. As an example,
for Dartmouth College, each one dollar increase in tuition and fees may translate into less than 23
additional cents to the average debt of graduates because of that college’s large grant awards and
higher than average commitment to fully meeting the financial needs of students. On the other
hand, at the University of New Hampshire, with low levels of institutional grant aid, higher levels
of students with financial need and a lower percentage of students having financial needs fully
met, each one dollar increase in tuition may increase average debt of graduates by more than the
55 cent average for all public, four-year colleges nationally. Later in this report we estimate the
impact that changes in tuition levels would have on the average debt of graduates from the
University System of New Hampshire using data specific to New Hampshire’s public colleges.
The critical role that high and rising college tuition and fee charges play in the average
debt of college graduates requires that this report ask “why are tuition costs so high in New
Hampshire and why have they increased so rapidly”. For students across the country looking to
minimize the cost of college and limit the need for borrowing, choosing to enroll in an in-state
public institution has been a preferred option for achieving those goals. That traditional method
of limiting college costs appears to have been used more frequently by New Hampshire residents
over the past decade but with little apparent success. Nationally, the strategy is also becoming
less viable as the cost of public colleges is rising faster than is the cost of private colleges and as
financial support from state government’s declined as competition for state resources increased
and state revenues grew more slowly over the past decade. For New Hampshire’s recent high
school graduates, there is no “low-cost,” in-state, public option for obtaining a four-year college
degree with the exception of Granite State College where just 25 percent of students are
“traditional” (age 18-24) college students and where the average age of students is 35.
As a result of the public funds that they allocate to public colleges and the explicit or
implied public purposes that public colleges serve, lawmakers typically have a stronger interest in
the determinants of the cost of college at public colleges and universities than they do at private
colleges. Most of the higher education policy debates in New Hampshire and in statehouses
across the nation involve public higher education. For those reasons it is especially important to
examine why the cost of attendance is so high at New Hampshire’s public four-year colleges.
Although our research includes analyses of factors associated with tuition costs at both public and
36
private colleges much of the focus of our discussion here will be on the findings related to public
colleges.
Key Findings:
• New Hampshire ranks high among all states on the average tuition and fee charges at
public and private colleges, primarily because of the high cost of its public colleges.
• The most significant determinants of tuition and fee levels are how much a college
spends per student and how dependent a college is on tuition revenue (as opposed to
other revenues including endowments, state education aid, etc.) to cover those
expenditures.
• For every 10 percent higher or lower are student-oriented expenditures per full-time
equivalent student, there is a 5.4 percent difference in tuition and fee charges at
public colleges, and a 4.1 percent difference in tuition and fee charges at private
colleges.
• The selectivity of public and private colleges, as measured by four-year graduation
rates, is significantly related to tuition levels. At private colleges, every 10 percent
increase in college graduation rates is associated with tuition levels that are 4.9
percent higher. The association is much smaller at public colleges, where every 10
percent difference in graduation rates between colleges is associated with tuition and
fee charges that are 1.7 higher or lower.
• The degree of regional competition for students, as measured by the concentration of
higher education employment in a region, is significantly related to tuition levels.
• Competitive factors have a greater impact on tuition at private colleges than on
tuition at public colleges, but the impact on each is significant. Competition among
colleges in the New England region raises tuition and fee charges relative to the U.S.
average by an estimated 14 percent at private colleges in the region and by 10 percent
at public colleges and universities in the region.
• Total wage and salary payments to employees at a college, per full-time equivalent
student, are significantly related to tuition levels. However, because wage and salary
payments comprise the largest portion of student-oriented expenditures per full-time
equivalent student, it is difficult to separate the impact of wages and salaries on
tuition levels separately from the impact that student-oriented expenditures have on
tuition levels.
#ew Hampshire Ranks High on College Costs Largely Because of the Cost of its Public
Colleges
Figure 8 on page 16 showed that combined, the enrollment-weighted total cost of
attendance at public and private colleges in New Hampshire was the seventh highest among all
states, with only four New England states and New York and Pennsylvania having higher
enrollment-weighted average costs.
37
Figure 23 shows that New Hampshire’s public college are largely responsible for New
Hampshire’s relatively high ranking among states on the combined average cost of attendance for
public and private colleges. The chart presents inflation adjusted (to 2012 dollars) tuition and fee
charges and shows that New Hampshire’s public colleges began the last decade with tuition and
fees for in-state students that were 98 percent higher than the U.S. average. The fiscal strains of
state governments produced by a severe recession along with rising costs in large public programs
such as Medicaid, resulted in cuts or smaller increases in state support for many public colleges
throughout the country. In some states, like California, tuition subsidies by state government had
long kept tuition levels at public colleges extremely low. When subsidies were lowered, costs at
public colleges in these states rose dramatically, moving much closer to the U.S. average. By the
2012-13 academic year, tuition and fees at New Hampshire’s public colleges were still much
higher than the national average but the rapid rise in tuition and fees in several other states meant
that tuition and fees at New Hampshire’s public colleges had been reduced somewhat, to 68
percent above the national average.
It would be a mistake, however, to attribute rising tuition prices entirely to reductions in
state support, or even reductions in state support entirely to policymakers. In the next section of
this report we show how both increased expenditures at public colleges and reductions in state
support are approximately equally responsible for rising tuitions at public colleges. There is also
evidence that colleges, both public and private, are losing public support, in part, because of a
belief among the public that colleges are not doing enough to restrain their tuition increases.17 In
that circumstance lawmaker’s decisions to lower support levels in the face of increasing
competition for more limited state resources may simply reflect an increasing ambivalence among
17 J. Immerwahr , et. al, “Squeeze Play 2010: Continued Public Anxiety on Cost, Harsher Judgments on How
Colleges are Run,” The National Center for Public Policy and Higher Education and Public Agenda, February 2010.
38
the public and policymakers around the country about the value of supporting public higher
education.
Figure 23 also shows that average tuition and fees at private, not-for-profit colleges in
New Hampshire are higher than the national average. The gap between tuition and fees at New
Hampshire’s private colleges and the national average is much smaller, however, than is the gap
between tuition and fees at New Hampshire’s public colleges and the national average for public
colleges. The difference between the average tuition and fees at New Hampshire’s private
colleges and the national average has fallen from 30 percent above the U.S. average in 2000-01 to
18 percent above the national average in 2012-13.
Figure 24 presents a different perspective on tuition trends. This graphic shows changes in
tuition and fees as index numbers that represent percentage changes from initial levels, allowing
for easier comparisons of recent tuition growth rates among different types of institutions with
very different tuition rates. The figure highlights the large increases in tuition at New
Hampshire’s public colleges during recent years. The chart also illustrates how much faster
tuition at public colleges has been rising relative to private colleges and how much faster tuition at
New Hampshire’s public colleges has been rising relative to tuition at public and private colleges
nationally.
In-State Tuition at #ew Hampshire’s Public Colleges is #ow a Much Larger Burden on
#ew Hampshire Families
One reason why the rise in college cost seems especially egregious to the public and to
policy makers is that it contrasts so markedly with the changes in the income of average
households. The same incredulity (approaching animosity) that the public has over trends in
39
health care costs is infecting higher education. Unlike higher education however, few in the
public have come to question the basic value and importance of health care services, despite their
rising costs.
Figure 25 shows the percentage of New Hampshire median household income necessary to
pay for in-state tuition and fees at New Hampshire’s public colleges over the past 25 years. In the
early 1990’s, less than 10 percent of the median income of households was required to pay for in-
state tuition and fees at New Hampshire’s public four-year colleges. By 2011 almost 21 percent of
the median household income in New Hampshire was needed to pay for in-state tuition and fees.
Affordability has especially eroded over the past decade. A combination of higher tuition charges
and slower income growth has increased the percentage of household income required to pay for
in-state tuition from 13.5 percent in 2000 to 20.6 percent in 2011 (the last year for which median
household income data is available). That figure compares to 16.6 of median household income
for the U.S. average at public colleges. The chart also shows the average percent of New
Hampshire income required when tuition discounts are included (institutional and state grant aid)
in the calculations. Adding room and board and all other costs brings the total cost of attendance
at New Hampshire’s public colleges to nearly 30 percent of median household income in the state.
Figure 25 highlights one important theme that emerges from this research: at one time
public colleges in New Hampshire were a relatively low-cost option for New Hampshire families
and their children to obtain a four-year college degree, but over the past two decades that has
eroded. Thus one traditional approach taken by families looking to minimize the cost of higher
education, as well as the need to borrow to pay for it, attending an in-state public college, is
40
unavailable to New Hampshire residents.18
Factors Associated With High Tuition at Public and Private Colleges
Using regression analysis, we examined a number of revenue, expenditure, and
institutional characteristics, including the selectivity of colleges, for their ability to explain
differences in tuition and fee levels at 431 public colleges and over 800 private colleges and
universities nationally. We also examined a variable designed to indicate the degree of
competition for students that colleges in different regions of the country and different states face.
In addition, we included a binary or “dummy variable” in our models to capture unique or
unexplained aspects of colleges in New England that account for higher tuition levels in the state
and the region but which are not captured by other variables examined in our regression models.
If this binary or “dummy variable” is significantly related to tuition levels at public or private
colleges then this indicates that there are unique qualities or factors associated with New
Hampshire’s and New England’s colleges that affect their tuition levels but which are not
captured by other variables in the models.
We examined variables for their ability to explain the differences in tuition levels among
individual public and private colleges using three tuition measures: the tuition and fees charged to
full-time in-state residents, the tuition and fees charged to full-time out-of-state students, and the
enrollment-weighted average tuition and fees charged to full-time undergraduates. Models were
able to explain a high percentage of the variation in tuition and fees using all three tuition
measures. For public colleges, models were most accurate in explaining or predicting the
enrollment-weighted average tuition of public colleges. This finding makes intuitive sense as the
decisions related to setting in-state and out-of-state tuition (how costs are allocated) reflect
administrative policies of individual institutions that are not easily captured by financial and other
variables in the models. Regression model results and model specifications are presented in
Appendix B.
Results and Discussion
The more a college spends per student and the more reliant it is on “net tuition revenue”19
to cover its expenditures, all else equal, the higher will be the tuition and fees it charges.
Documenting this seemingly obvious finding is a necessary step in evaluating the relative
contributions of other factors that might explain differences in tuition levels among colleges and it
is necessary for evaluating the relative efficacy of policies and actions designed to address high
tuition levels and their impact on student debt.
Figure 26 presents the variables in our preferred model that best explain differences in the
level of tuition and fee charges at colleges and universities across the country. Again, each circle
on the outer ring represents one variable that helps explain tuition and fee levels, with the relative
size of the circles representing the relative size of each variable’s contribution to explaining
18 Granite State College is a previously noted exception that serves only a small portion of recent NH HS grads. 19 Net tuition revenue is the amount of tuition payments received less any tuition grants funded by the college.
41
differences in tuition and fee charges.
We use the percentage of “student-oriented expenditures20” that is paid for by net tuition
and fee revenue to measure how reliant a college is on tuition revenue to fund its educational
services. An alternate model specification for public colleges uses state education aid per FTE
student to measure reliance on tuition revenue because state aid is typically the largest source of
non-tuition revenue for public colleges. Another model uses a variable that is a vector combining
measures of student-oriented expenditures and the percentage of those expenditures that is paid
for from net tuition revenues. That variable increases the explanatory power of both the private
and public college models but we include net tuition and student-oriented expenditures separately
for simplicity and for clarity when, later in this report, we estimate the impacts of different
policies and actions on tuition levels and student debt at New Hampshire’s public colleges.
The percentage of expenditures paid for by net tuition revenue incorporates information
about non-tuition sources of revenue that can include more than just state education aid per FTE
student and it improves the ability of the model to explain differences in tuition levels among
colleges. Higher spending per FTE student, all else equal, results in higher tuition levels in the
absence of other revenue sources. By definition, the more that is spent by colleges to educate
students the higher will be tuition charges unless other, non-tuition, revenue sources can cover the
higher level of expenditures. In general, private colleges have higher student-oriented
expenditures per FTE and this accounts for a large percentage of their higher tuition costs
20 “Student-oriented expenditures” include: instructional expenditures, academic and institutional support, student
services and operations and maintenance expenditures but not research, public service, auxiliary and other
expenditures.
42
compared to public colleges.
Other revenue sources, such as endowments, grants etc., offset some of the higher tuition
costs at many private colleges, and the result is that the net price to students per dollar of
educational services they receive can be lower at some private colleges despite their higher cost of
attendance. Figure 27 illustrates this point. It shows how much higher are expenditures per
student at two elite colleges (Dartmouth College and Stanford University) compared to three
public colleges, including the University of New Hampshire System. Figure 27 also shows that
students at the elite colleges, while paying much higher prices to attend college than do students at
public colleges, nevertheless receive a higher amount of educational resources and services per
dollar of tuition they pay because of the lower percentage of expenditures that are paid for by net
tuition revenue (a higher level subsidy).
When modeled using natural log transformations (so that relationships can be interpreted
as elasticities) we found that for every 10 percent in change in student-oriented expenditures per
FTE student, there was a 5.4 percent change in the enrollment-weighted average tuition and fees
charged by public colleges and a 4.1 percent change in tuition and fees at private institutions. The
elasticity of tuition and fee charges with respect to spending per FTE student is slightly larger than
is the elasticity of tuition and fees with respect to the percentage of that spending that is covered
by net tuition charges. For every 10 percent change in the percentage of student-oriented
expenditures covered by net tuition charges, tuition and fee charges change by 5 percent, all other
factors held constant. This means that spending and the ability of public colleges to subsidize
expenditures on students with revenues such as state aid and other non-tuition revenue sources
have approximately the same impact on tuition levels, with tuition levels being slightly more
responsive to differences in spending than to differences in the percentage of spending covered by
tuition charges. This is an extremely important finding in the context of current public policy
43
debates in ew Hampshire and other states where the appropriate level of state support for
public higher education and the likely impacts of that support are debated. The finding supports
what many policymakers understand intuitively, but which higher education advocates sometimes
fail to acknowledge, that efforts to reduce or constrain the cost of public higher education in ew
Hampshire will be most effective if both the revenue and expenditure side of the equation are
addressed.
The selectivity of colleges, as measured by the percentage of students who graduate in four
years, is associated with higher tuition and fees, with the effect being much stronger at private
colleges and universities than at public colleges. More selective colleges and colleges that enroll
higher ability students tend to have much higher four-year graduation rates and this effect is
evidenced in the populations of both public and private colleges. As Hoxby (2010) found,
selective colleges, especially private colleges, are increasingly in demand and becoming even
more selective. Monks (2012) argues that the rise in college enrollment rates has been largely
concentrated at less selective public colleges and this has a number of potentially deleterious
effects, reducing both resources per FTE student and graduation rates as the population of
students increasingly contains less well-prepared and more marginal students. These issues
highlight some of the tradeoffs involved in increasing access to higher education.
Although not a part of our analysis, differences in the educational resources per student as
well as the differences in the per tuition dollar cost of those resources between public and private
colleges appear to be increasing. Driven by the desire of policy makers to increase access to
college and the lure of higher income levels of college graduates, enrollment rates at four-year
colleges have increased sharply in recent decades, with the impacts felt primarily at less selective
public institutions. Higher enrollment rates have resulted in more marginal students attending
college, contributing to lower graduation rates and reducing the resources available per student
even in the absence of budget cuts. Collectively these trends point to a higher education industry
that is moving toward a ‘two-tiered” system with widening differences between them on the
resources available to educate each student.
For now, our findings document the common assumption that more selective schools
command a tuition premium over less selective schools. To that knowledge we add that the effect
on tuition and fee charges is more than twice as large at private colleges as it is at public colleges.
At private colleges, for every 10 percent increase in the four year graduation rate of colleges (say
from 80 percent to 88 percent) our results indicate that tuition and fee levels are 4.9 percent
higher, all other variables equal. At public colleges, the selectivity effect is much smaller, with
the elasticity of tuition and fees with respect to four-year graduation rates suggesting that every 10
percent change in graduation rate (say from 60 percent to 66 percent) there is a 1.7 percent change
in tuition and fee charges all other variables equal.
Wages and salaries per FTE student is correlated with student-oriented expenditures per
FTE student but not so highly to be excluded from our models. It also captures wages and salary
expenditures not directly for student instruction or services and thus includes more information
about the expenditures of colleges. Higher education is a service business and as such labor costs
dominate the industry’s cost structure. Wages and salaries per FTE student is a measure of the
labor cost intensity of a college, irrespective of whether that intensity is a result of the number of
44
employees per FTE student or the wages and salary levels of employees per FTE student.
Because a portion of this variable is also incorporated in the student-oriented expenditures per
FTE student variable, we do not expect the effect of the wage and salary variable on tuition to be
large (although it becomes much larger if the student-oriented expenditure variable is excluded
from the model – again, indicating the relationship between the variables). For every 10 percent
change in wages and salaries per FTE student, tuition and fee charges change by between 1.1 and
1.3 percent.
Finally, our preliminary models of tuition prices included an explanatory variable
incorporating state-level differences in the relative cost-of- living. Our expectation was that
similar to many service industries where labor represents the largest cost component, cost-of-
living differences would significantly influence college costs across states when other variables in
the models were held constant. Our results do not indicate that cost-of-living differences play a
significant role in the differences in tuition and fee charges at public or private colleges. More
surprisingly, we found a negative, but not significant relationship between the cost-of-living in a
state and tuition and fee charges at public colleges, suggesting that the higher the relative cost-of-
living in a state, the lower will be tuition and fee charges at public colleges in that state, all other
factors equal. One explanation for this finding is that higher cost-of-living states tend to have
higher income levels and often higher spending levels and tax burdens. If these states provide
greater subsidies to their public colleges, a spurious negative relationship between cost-of-living
and tuition and fee charges at public colleges could result.
How Well Does the Model Explain Tuition Levels at #ew Hampshire’s Public Colleges?
There are practical reasons for focusing on public colleges in examining the impact of
tuition on student debt. First, there is tremendous variation in the characteristics of private
colleges in New Hampshire and across the country, complicating any analysis and conclusions
about the factors most responsible for tuition and debt levels across these institutions. More
importantly, from a policy perspective, lawmakers (at least at the state level) have fewer policy
levers with which to address the troubling trends in costs and debt levels at private institutions
than they do for affecting costs and debt levels at public colleges. Other than helping to make
students and parents more informed consumers regarding the choices and consequences of
enrolling in different types of colleges, there is little that state lawmakers can do to influence
tuition trends at private institutions. The public (students and parents) is limited to indirect
influences on the cost of private colleges via the enrollment choices that they make. Federal
lawmakers may be able to influence trends at private colleges through their financial aid programs
and policies, through grant programs that are sent directly to colleges, and through their support
for research activities. Ultimately, however, it is most likely to be the aggregate choices made by
the market for higher education services – that is students and their parents - that will produce the
structural changes in the market for private higher education that will alter the current cost and
debt trends at private colleges. Arguably it is the price inelasticity of demand at many private
colleges that maintains and exacerbates the cost and debt trends at these institutions. As the value
of a college degree from many public and less selective colleges is increasingly questioned,
demand at private and more selective institutions has increased, reinforcing their apparent
immunity from the pricing pressures and competition felt by most industries. State lawmakers
can more directly affect tuition levels, and thus indirectly debt levels of their graduates, at public
45
colleges. For these reasons we focus our discussion on tuition at public colleges, and later on
their impact on debt levels.
Our preferred explanatory model of differences in tuition prices predicted an enrollment-
weighted average tuition and fees at New Hampshire’s public colleges of $14,049 for the 2010-11
academic year, while actual enrollment weighted tuition and fees was $19,209. The factors most
related to tuition levels also under predicted in-state tuition and fees at New Hampshire’s public
colleges ($10,283 versus $12,743 actual tuition), and out-of-state tuition and fee charges ($24,312
versus actual charges of $26,713). This means that there are factors outside of the expenditure,
revenue, and selectivity variables used in the model that contribute between $2,400 and $3,000
(depending on in-state or out-of-state) to tuition and fees charges at New Hampshire’s public
colleges.
Table 3 shows the values for New Hampshire’s public and private colleges on key
variables affecting tuition levels at colleges across the country and compares them with the
national averages for public and private colleges. The table includes state aid per FTE student and
student-oriented expenditures per FTE student, the primary components (for public colleges) of
the variable that measures the percentage of expenditures that is covered by net tuition revenues.
The percentage of student-oriented expenditures covered by net tuition revenue is a calculated
variable that includes information about both the revenues and expenditures of a college. It is
most strongly related to tuition levels and is included in our tuition model rather than the
individual revenue and expenditure variables that are used to calculate it. State aid per FTE
students is included separately in Table 3 even though it is also contained as a component of the
share of student–oriented expenditures covered by net tuition because the variable is often cited
by policymakers and others as being responsible for high tuition levels at New Hampshire’s
public colleges. Similarly, lawmakers are interested in the level of expenditures per FTE student
at New Hampshire’s public colleges and it is included in Table 3 even though it is also a
component the percentage of expenditures covered by net tuition revenue variable.
Lower state aid per FTE student is associated with higher tuition levels. State aid per FTE
student at New Hampshire’ public colleges is the variable where New Hampshire shows the
greatest variation from national averages. The state ranks 48th among 50 states in appropriations
Table 3
Values for #ew Hampshire Colleges on Key Variables Affecting Tuition Levels (2010-11
Academic Year)
College
Student-Oriented
Expenditures/FTE
Student
% of SOE
Paid For by
#et-Tuition
Revenue
State Aid per
FTE Student
4 YR.
Grad. Rate
Wages &
Salaries/FTE
Student
“Competition”
Higher Ed.
Emp. Location
Quotient
NH - Public, $15,106 81% $3,703 60% $3,273 2.35
NH- Private $28,188 82% N/A 58% $3,783 2.35
Nation - Public $15,278 53% $6,929 26% $3,098 1.0
Nation - Private $23,148 80% N/A 48% $3,856 1.0
Source: IPEDS, The Institute for College Access & Success, PolEcon
46
per full-time equivalent student.21 As a result, the percentage of expenditures covered by net
tuition (of which state aid is a primary determinant at public colleges) at New Hampshire’s public
colleges is also high. At 81 percent, New Hampshire ranks second only to Vermont’s on the
percentage of student-oriented expenditures paid for by tuition revenue, well above the U.S.
average of 53% for public colleges. State aid per FTE student and the percentage of expenditures
paid for by net tuition revenue are closely and inversely related. If expenditures do not change,
higher state aid reduces the percentage of expenses covered by net tuition and vice versa. In the
next section of this report we demonstrate how changes in state aid per FTE student at New
Hampshire public colleges could affect tuition charges.
Student-oriented expenditures per FTE student at New Hampshire public colleges is
almost at the U.S. average and New Hampshire colleges rank 24th among all states. This suggests
that tuition levels should be closer to the U.S. average, but low levels of state aid would still keep
tuition levels higher in New Hampshire, all other variables equal. It is possible that high levels of
expenditures not included in the student-oriented expenditure variable may be partly responsible
for the model under-predicting the level of tuition at New Hampshire’s public colleges. One
expenditure category that may be contributing is “auxiliary expenditures,” where New
Hampshire’s public colleges have extremely high expenditure levels per FTE student (more than
twice as high as the U.S. average for public colleges). These expenditures are for activities that
are supposed to be self-supporting but may not be. If these activities result in a net cost to
colleges and the costs are passed on to students they could contribute to higher tuition levels.
Some states that have high levels of auxiliary expenditures per FTE student, such as Vermont,
Iowa, and Illinois, also have relatively high tuition levels. It is also possible that large differences
in the tuition charges for in-state versus out-of-state residents, in combination with differences in
the percentage of in-state and out-of-state students at public colleges, contribute to outsized under
or over-predictions of tuition charges at some colleges.
The percentage of students who graduate within four years of enrollment, our measure of
selectivity and quality, is much higher at New Hampshire’s public colleges and this measure is
positively associated with higher tuition levels.
Discussion
Overall, our results explain a large percentage of the variation in tuition levels at public
and private colleges in the U.S. However, the expenditure, revenue and other variables in the
model still leave a large percentage of tuition and fee charges at New Hampshire’s public colleges
and universities not explained (about $5,000 of enrollment-weighted average tuition) by the
variables in the model. This “residual” or unexplained difference between actual enrollment-
weighted tuition and model predicted tuition is the fifth largest among the more than 400 public
colleges used in our analysis. The model under-predicted tuition and fees by a larger margin than
it did for the University System of New Hampshire only for the University of Vermont and Texas
Christian University, and over-predicted by a larger margin only for the University of North
21 Based on 2010-11 academic year, more recent cuts and partial restoration of cuts in state aid to NH’s public
colleges has altered these figures.
47
Carolina at Chapel Hill and the University of California at Los Angeles. Looking for consistent
characteristics among these institutions, as well as others with significantly large prediction errors
or “residuals” may provide additional insights into variables that are associated with especially
higher or lower than expected tuition and fees (compared to comparable institutions).
The purpose of this analysis is not to predict tuition levels at individual colleges or to
conduct an analysis of the revenue and expenditure patterns of public colleges in New Hampshire.
Our purpose is to better understand the key financial and other variables that contribute to high
tuition levels at colleges everywhere, and to use those results to help explain why tuition levels
are so high in New Hampshire, and more broadly, New England. Our results contribute to that
understanding. The fact that these models have a high level of accuracy in explaining variations in
tuition and fee levels but under-predicted the level of tuition and fees at New Hampshire’s public
colleges is an indication that additional analysis of the specifics of New Hampshire’s public
colleges is required, as there are variables that account for higher tuition levels at the these
colleges which are not included among the explanatory variables. Our results also suggest that
the usual explanation for high tuition levels at New Hampshire’s public colleges, low levels of
state support, is a significant contributor to high tuition levels but not enough to completely
explain the high tuition levels at these colleges. Nor does one measure of spending (student-
oriented expenditures per FTE student) sufficiently explain high tuition levels at New
Hampshire’s public colleges. The answer to why tuition is so high at New Hampshire’s public
colleges is more complex than is often portrayed in higher education policy debates in the state.
Regional College Costs are High and Competition is Increasing Costs
About 80 percent of New Hampshire’s high school graduates who enroll in a four-year
college enroll in a college in New England. Thus understanding why student debt levels of New
Hampshire residents is so high requires that we have an understanding of why tuition and debt
levels are generally higher throughout New England than they are elsewhere. The results from
our tuition models can, in part, help explain why tuition at colleges and universities in New
England are, on average, the highest in the country. We used nine U.S. Census Bureau defined
regions to group he nation’s public and private colleges regionally. When we use a binary or
‘dummy” variable in our models to identify colleges as either being in the New England region or
not, we found that the variable was significantly associated with higher tuition and fees at both
public and private colleges. Table 4 highlights how New England’s public and private colleges
vary from U.S. averages on key variables that are associated with higher tuition and fees. The
table suggests that factors such as higher graduation rates, higher expenditures, and higher salaries
per FTE student are all likely to play a role, as is the percentage of student-oriented expenditures
covered by net tuition revenue. Expenditures per FTE student and wages and salaries per FTE
student are especially high at New England private colleges relative to the U.S. average.
The degree to which these variables influence one another is the subject of another report.
It can be argued that the higher level of expenditures contributes to higher graduation rates for
instance, but it is just as likely that higher expenditures attract better students and the more
qualified students rather than that the additional expenditures are the primary reason for the higher
graduation rates. The rising demand and increasing selectivity of many colleges can perpetuate or
strengthen these relationships. Rankings such as those by the U.S. News and World report are
48
used by many students and parents in assessing colleges. Expenditures per student are an
important contributor to those rankings and colleges that provide a quality education at a lower
level of expenditures, or colleges that can restrain expenditures while doing so, would likely
suffer in the rankings. New rankings and metrics are emerging that are likely to change that
dynamic over time. Internet sites such as PayScale.com and Collegerealitycheck.com (from the
Chronicle of Higher Education) are adding new information about the success and earnings of
graduates of individual colleges and universities to traditional measures such as those used by
U.S. News and World Report to help students and parents better evaluate the performance of
colleges and universities.
Competition Contributes to Higher Prices
Hoxby (1997) argues that higher education has transformed over the past several decades
to resemble more of a traditional industrial model complete with competition and that this
competition has contributed to the rise in college costs. It is possible that increased competition
for students and for faculty could increase college costs in New England and elsewhere. To date,
few colleges and universities have been willing to compete on price. Colleges generally compete
by offering more and better faculty, facilities, student services, and amenities. Colleges want to
be the best they can be and they compete with each other for students, for faculty, and with
businesses for talent (PhD’s in fields in demand). This is especially true in a region like New
England where there is a high concentration of higher education institutions and where there is a
large base of technology, business, and professional employment that is more likely to employ
individuals with advanced degrees and to compete with colleges for available “talent”.
To test the degree to which competition among colleges might influence regional college
costs and prices, we first had to develop a meaningful measure of competition among colleges.
For this study we operationally defined the level of competition among colleges in each region as
the percentage of regional employment that is employed in higher education in the region.
Specifically, we calculated a “location quotient” for higher education employment in each state
Table 4
Values for #ew England Colleges on Key Variables Affecting Tuition Levels (2010-11 Academic
Year)
College
Student-Oriented
Expenditures/FTE
Student
% of SOE
Paid For
by #et-
Tuition
Revenue
State Aid per
FTE Student
4 YR.
Grad. Rate
Wages &
Salaries/FTE
Student
“Competition”
Higher Ed.
Emp. Location
Quotient
New England -
Public $16,063 58% $6,447 32% $3,052 2.35
New England -
Private $31,894 82% N/A 60% $4,869 2.35
Nation - Public $15,278 53% $6,929 26% $3,098 1.0
Nation - Private $23,148 80% N/A 48% $3,856 1.0
Source: IPEDS, The Institute for College Access & Success, PolEcon
49
and averaged the location quotients for each state in a region to arrive at regional location
quotients for nine census divisions (regions).22 This measure roughly approximates the degree of
choice students in each region have regarding college enrollment. It does not distinguish between
two and four-year college employment however. If the distribution of two and four-year college
employment differs regionally this could affect our results. Here, we assume that the levels of
higher education employment among regions does not appreciably differ based on differences in
the percentage of two and four-year schools among regions.
Figure 28 shows the concentration of higher education employment (in categories) across
the country to graphically depict where concentrations of higher education institutions are highest
and thus where competition among colleges is likely to be greatest. The map shows the location
quotients calculated for employment in the higher education industry for each of nine U.S. Census
defined regions. The New England region, with the highest college costs, has by far the highest
concentration of higher education employment in the country, followed by the Middle Atlantic
States of NY, NJ and PA, the region with the second highest average college costs.
Testing the impact of our regional competition variable on tuition and fee levels shows the
variable to be significantly related to tuition levels at both public and private colleges, with
regional location quotients showing a larger impact on tuition and fees at private colleges than at
public colleges. The elasticity of tuition and fees with respect to our measure of competition was
22 Location Quotients (LQs) are ratios that allow an area's distribution of employment by industry to be compared to a
reference or base area's distribution. The reference area is usually the U.S.. If an LQ is equal to 1, then the industry
has the same share of its area employment as it does in the reference area. An LQ greater than 1 indicates an industry
with a greater share of the local area employment than is the case in the reference area. Industry’s with LQs of 1.15
or above are often described as “export industries” meaning their products or services serve more than just local
markets.
50
small (.10) at private colleges, and even smaller (.076) at public colleges. However, because the
magnitude of the difference between higher education employment in New England and other
regions, (indicating much higher levels of competition among colleges in the New England
region) this small elasticity still implies that competition has a relatively large impact on tuition
and fees at colleges in New England. As an example, New England’s location quotient of 2.35 is
about 140 percent larger than is the location quotient (or concentration of higher education
employment) in the South Atlantic region. The elasticity of tuition and fees at private colleges
with respect to this measure of competition suggests that for every 10 percent increase in higher
education competition in a region, tuition and fees will be one percent (1%) higher. Thus the 140
percent difference in higher education competition in in New England compared to the South
Atlantic region implies that all else equal, we can expect tuition and fees at private colleges in
New England to be 14 percent higher than in the South Atlantic region. For public colleges, with
a smaller elasticity of tuition and fees with respect to competition, these results imply that tuition
and fees would be about 10 percent higher in New England as a result of higher levels of
competition among colleges in the region.
Compared to the binary or “dummy” variable used to assess the impact that being located
in New England has on tuition and fee levels, our measure of competition in higher education
shows a much stronger association with differences in tuition and fees. When both are included in
our models the binary variable loses significance and is correlated with the competition variable.
This indicates that, in part, the New England binary variable captures some of the effects of higher
education competition in the region.
Figure 30 shows the relationship between regional location quotients (our measure of
competition) and average tuition and fees at public and private colleges by region. The graphic
51
suggest that even with the effect of competition, New England still appears to be an outlier on
average tuition and fees at both public and private colleges. But as the results of our tuition model
suggest, the other variables associated with tuition prices, spending, wages and salaries, net-
tuition revenue etc., account for much of New England’s high tuition prices.
Improved measures of the level of competition faced by colleges in a state or region may
lead to more insight into the effect that competition has on tuition prices regionally and nationally.
VII. Factors Influencing the Rapid Rise in Tuition Levels
Factors that are associated with higher tuition and fees at public and private colleges also
influence the rate of tuition growth over time. Changes in spending by colleges and universities
and the percentage of those expenditures that are paid for by net tuition revenues as opposed to
other sources of revenue largely explain changes in tuition and fees at both public and private
colleges.
Earlier we documented how much faster tuition and fees are rising at New Hampshire’s
public colleges than they are at public and even private colleges nationally. Some of that is the
result of growth in student oriented expenditures where New Hampshire had the 7th highest
growth rate among public colleges of any state. But some is also due to the fact that the
percentage of those expenditures that are paid for by the net tuition of students was second only to
Vermont’s public colleges in the 2010-11 academic year. Since that time, the percentage of
expenditures at New Hampshire’s public colleges that is paid for by net tuition revenues has
increased. Figure 31 shows how the average “subsidy” or percentage of student-oriented
expenditures at New Hampshire’s public colleges paid for by net tuition revenue changed between
1987-88 academic year and the 2010-11 academic year. Even without substantial growth in
52
expenditures, this would imply higher tuition levels for students. Combined with the relatively
high rate of expenditure growth at New Hampshire’s public colleges between 2000-01 and 2010-
11, the increase in the percentage of expenditures paid for by net tuition revenues (or the decline
in the subsidy rate) implies both higher tuition and fee increases and higher increases for each
dollar increase in expenditures, both of which occurred between 2000-01 and 2010-11.
Two examples highlight the interaction between spending, and the degree to which net
tuition revenue supports it, impact growth in tuition and fees. In the following two graphics, we
see what is occurring at one private institution in New Hampshire (Dartmouth College) as well as
at New Hampshire’s public colleges (the University System). Between the 1988-89 and 2010-11
academic years, real, inflation adjusted student-oriented expenditures per FTE student increased
by almost 82 percent or about 3.6 percent above the rate of inflation annually at Dartmouth
College. At the same time, real, inflation adjusted tuition and fees paid for by net tuition revenue
increased by a much smaller amount, 40 percent, or about 2.0 above the rate of inflation on an
average annual basis. The difference in growth rates is due to the fact that the subsidy rate, or
portion of expenditures paid for by non-tuition and fee charges, grew faster than tuition revenue at
Dartmouth, as larger amounts of other revenue sources such as the college’s endowment were
used to offset some of the impact on tuition of increasing expenditures. The increases in
expenditures above the rate of inflation at Dartmouth were large, but their impacts on tuition rates
were significantly mitigated by the increase in the subsidy rate (or the decline in the percentage of
expenditures paid for by net tuition revenue). Figure 32 shows how real expenditures per FTE
student at Dartmouth have changed as well as how real expenditures per FTE paid for by net
tuition revenue has changed. The chart shows that more has been spent on each student but that
increased expenditures have not been fully passed on to students via higher tuition charges. The
implication is that while students at Dartmouth are paying considerably more than they did 20
years ago, they may also be getting more educational services per dollar of tuition that they pay.
53
In contrast, Figure 33 shows that real, inflation adjusted, student-oriented expenditures at
New Hampshire’s public colleges increased by about 39 percent, or an average annual rate above
inflation of 1.7 percent between 1988-89 and 2010-11. This is a much smaller increase than at
Dartmouth College, but still almost two percent annually above the rate of inflation. The impact
on tuition of these annual expenditures increases is made much worse, however, because the
portion of those expenditures paid for by net tuition revenue has increased even faster, by 66
percent, or about 2.9 percent annually above the rate of inflation, implying that students at New
Hampshire’s public colleges are experiencing price increases well above those related to the
54
increases in the expenditures directed toward them. This implies that students at New
Hampshire’s public colleges are paying more but are receiving less in educational services per
dollar of tuition that they pay.
Other Factors Influencing the Rise in Tuition
Some recent studies (including Greene 2010, Vedder 2012) have examined the rise in
tuition prices by examining expenditures patterns and trends in expenditure growth, but few use
multivariate or econometric methods to examine the interactions between revenue and
expenditure trends in developing their findings and drawing their conclusions. It is accurate that a
portion of rising tuitions are attributable to increases in administrative costs, higher levels of
employment and wages, etc., but expenditure patterns and trends alone do not capture the greater
complexities and interactions between the revenue and expenditure side of the issue of rising
college costs. Difficult issues are not amenable to simple or intuitive answers or analyses; they
often require difficult and complex analyses, at a minimum, assessing the relative importance of
both expenditure and revenue variables in a multivariate context.
In addition to the student-oriented expenditure and net tuition variables associated with
high tuition and fees and their increases, we examined broad expenditure categories in a
multivariate context to determine which are associated with increases in average tuition and fees
between the 2000-01 and 2010-11 academic years. For both public colleges and private colleges,
once again more selective colleges are associated with larger increases in tuition and fees, as are
the percentage of expenditures paid for by net tuition revenues. Again, the percentage of
expenditures paid for by net tuition variable captures, in part, changes in state support for public
colleges. For specific expenditure categories, we found that at public colleges, increases in
student services expenditures per FTE student have a significant relationship to changes in tuition
and fees. With increased enrollment among more marginal students and increased concerns about
completion and graduation rates, it is not unexpected that such expenditures are contributing to
rising college costs. Some researchers (Ehrenberg 2012, Monks 2012) have documented the
importance of these expenditures to raising academic success rates among public colleges.
Employment per FTE student as well as larger changes in wages and salaries per FTE
student are also significantly related to larger tuition and fee increases, while changes in salaries
for full-time faculty members is both significant and not significant depending on which other
variables are included in the model. Because faculty salaries are a component of total wages and
salaries per FTE student, the relationship between changes in faculty salaries per FTE student and
tuition can be masked. Changes in real, inflation adjusted salaries for full-time faculty at New
Hampshire’s public colleges increased by 21 percent between 2000-01 and 2010-11 compared to
an average of 2 percent nationally, while total wages and salaries per FTE student grew by 6
percent, a figure below the national average of 8 percent for public colleges. This rise in faculty
pay may reflect a movement among many public colleges to use more part-time, adjunct and non-
tenured track faculty while maintaining and increasing salary levels for tenure track faculty. This
is supported by results that show the changes in the number of employees per 100 FTE students is
significantly related to changes in tuition and fee levels. Not unexpectedly, employing more
people per FTE student would likely result in large expenditure and tuition increases.
55
Changes in academic support expenditures narrowly missed being significantly associated
with changes in tuition levels. Two other variables often suggested as contributing to rising
tuition and fees, changes in the amount of research per FTE student and institutional support
(administrative functions) per FTE student were not found to be significantly related to tuition and
fee increases when examined in a multivariate (regression) analysis. This does not mean that they
do not contribute to rising tuition at some or even most institutions, but rather their relationship to
tuition and fees may be masked by some intervening variable or relationship between variables
and tuition and fees. The primary purpose of the current research is to examine the factors
associated with student debt and thus a more complete analysis of the impact of trends in specific
categories of spending by colleges has on tuition trends is left to other researchers.
Table 5 shows how New Hampshire’s public colleges compare on several variables found
by this or other research to be associated with changes in tuition and fees at public colleges. There
are also factors that cannot be readily investigated empirically but nevertheless are likely
contributors to the trend of rising college tuition. Ehrenberg (2012) notes the normative nature of
college expenditures by function. He argues that most colleges peg their expenditures to the
average or norm of similar institutions with whom they compete. One result is that expenditures
rise in some categories simply to keep up in the “arms-race” of higher education, whether or not
the expenditure increases are warranted. When college rankings are based, in part, on
expenditures per student, this result can be expected especially among colleges and universities
where competing on price is generally viewed as antithetical to the educational mission of the
academy.
VIII. What Can #ew Hampshire Policymakers Do?
It is easy to assign all of the responsibility for high debt levels among college graduates to
the rising cost of college. While generally true, the debt level of college graduates from New
Table 5
Values for #ew Hampshire Colleges on Some Key Variables Affecting Changes in Tuition Levels
Between 2000-01 and 2010-11 Academic Years
College
Change in Real
(Inflation-Adj.)
Student-Oriented
Expenditures/FTE
Student
Change in %
of SOE Paid
For by #et-
Tuition
Revenue
Change in Real
(Inflation-
Adj.) State Aid
per FTE
Student
Change
in Emp.
Per 100
FTE
Students
Change in
Real
(Inflation-
Adj.) Wages &
Salaries/FTE
Student
Change in
Avg. Full-
Time Faculty
Salary
New Hampshire
- Public $2,551 .03 -$686 -1.83 $188.6 $14,691
New
Hampshire-
Private $6,562 .09 N/A 1.41 $545.9 $4,774
Nation - Public $975 .17 -$2,040 -.50 $66.5 $1,237
Nation - Private $3,303 .065 N/A .14 $203.8 $3,410
Source: IPEDS, The Institute for College Access & Success, PolEcon
56
Hampshire is also high, in part, because of the enrollment choices that New Hampshire high
school graduates and their families make. Choosing to enroll in more costly private colleges and
in colleges in regions with the highest college costs in the country also contribute to New
Hampshire students having the highest average debt levels in the nation.
Still, almost one-half of all New Hampshire high school graduates enrolling in a four-year
college choose to enroll in a public college in the Granite State, and that percentage has been
increasing. In theory, this should slow the rate of growth in the debt levels of students from New
Hampshire. Our research suggests that it has not. One reason why debt levels of college
graduates from New Hampshire are so high is that New Hampshire’s public colleges graduate
students with debt levels that are as high or higher than most private colleges and universities.
New Hampshire lacks public, four-year colleges that provide truly affordable options for students
who want to limit the cost of college and the amount they borrow to fund an undergraduate
education.
Tuition is high at New Hampshire’s private colleges as well, but private college tuition is
high everywhere and policymakers have no obligation, less interest, and even less influence over
the actions and decisions that affect tuition at these institutions. Eventually the market for higher
education services will adjust and at many private colleges where the cost of attendance does not
appear warranted, based on the success of their graduates, tuition prices will have to adjust for the
colleges to remain viable. There are signs that this is already beginning to happen. To the extent
that state policymakers want to influence higher education, specifically making it more affordable,
they will have the greatest impacts via the policies that affect the public institutions they help
fund.
Appropriating state funds is the primary way policymakers in New Hampshire and
elsewhere influence higher education, tuition levels, and indirectly student debt. Policymakers,
however, have limited influence over the expenditures and tuition rates of the colleges that they
support. To date, state funding comes with few, if any, strings attached and no explicit or implicit
expectation that state funding will directly translate in impacts on tuition levels. Few if any
lawmakers know enough about the revenues and expenditures of public colleges to be able to
estimate how different levels of state support might affect tuition levels. The expectations policy
makers have for the impact of state support on tuition levels is largely determined by what public
college administrators say the effect will be. Low levels of state support are offered as an
explanation for high tuition levels at New Hampshire’s public colleges but there are no assurances
that increased funding will produce the more affordable, in-state, public institution that New
Hampshire lacks and which are a key to access and affordability of higher education in many
states. Explicitly linking levels of state support for public colleges to expenditure levels and uses
may be one way to provide state policymakers with the assurances that state support will have the
effects desired by lawmakers. Doing so could increase the confidence of lawmakers that choosing
support for higher education over other competing uses of public funds would produce greater
benefits over the benefits from competing uses of public money. Currently, in New Hampshire as
in many states, lawmakers do not appear confident that that is the case.
57
Potential Impact on Tuition and Fees from Changes in State Aid and Expenditure
Reductions
State aid to higher education is at the heart of budget and policy debates over higher
education nationally and in New Hampshire. A key theme of this study is how the lack of an
affordable, public college option in New Hampshire precludes the use by New Hampshire
residents of a primary strategy by which students and parents seek to lower college costs and
reduce the need for borrowing. To put the findings of this study into context for policymakers,
we estimate the impact that different levels of state education aid could have on tuition and fee
charges at New Hampshire’s public colleges. Although we highlight New Hampshire’s public
colleges in this report, the data, methods and analysis used could be applied to any public or
private college. The impacts will be different at different public colleges depending on the
particular revenue and expenditure patterns at each institution, and the actual impacts on tuition
rates would ultimately depend on the decisions made by the administrators at each college.
We used the results of our analysis of the factors affecting tuition charges to simulate the
effect on tuition and fees at New Hampshire’s public colleges that could result from different
levels of state support per FTE student. We also used our analytical models to simulate the
impacts that changes in other variables known to influence tuition and fees, such as changes in
expenditures per FTE student could have on tuition and fees. As a baseline reference point, we
first simulated the impacts on tuition of an increase in state education aid per FTE student to a
level equal to the national average in the 2010-11 academic year (from $3,703 to $6,929).23
Under this scenario, reliance on net tuition revenue at the University System of New Hampshire
could have fallen from 80.8 percent in 2010 to 57 percent (still slightly above the 53 percent
national average indicating expenditure reductions may be warranted as well). At this level of
state support in the 2010-11 academic year, we estimate that tuition and fee charges at New
Hampshire’s public colleges and universities could have been decreased by $2,366 (or about
12%). Alternatively, a greater reduction in tuition for in-state students could be achieved if a
smaller reduction in tuition and fees were allocated to out-of-state students. However, even with
that level of reduction in tuition and fees, New Hampshire’s public colleges would still have the
second highest charges of public colleges in the 50 states (second only to Vermont). At the same
time, the increase in education aid would have cost the state about $84.5 million in 2010 and by
perhaps as much as $130 million today. Because of reductions in state appropriations that
followed the 2010-11 academic year, the amount required to have New Hampshire’s aid per FTE
student reach the national average is higher but by an unknown amount at this time.
Using results from our tuition model, estimated using over 400 public colleges nationally,
and applying unique New Hampshire values to the variables in the model, we altered the amount
of state aid per FTE student in increments of $200 and calculated how the changes would affect
the percentage of expenditures paid by net tuition (increasing state aid lowers the percentage of
expenditures paid for by net tuition revenue) and determined how those changes would alter
23 Since the 2010-2011 academic year, significant reductions in state aid have lowered NH’s aid per FTE student
significantly. Reductions have also occurred in most other states but because detailed state by state data has yet to be
reported for later years, we continue to report figures for the 2010-2011 academic year.
58
tuition levels. Figure 34 shows the potential impact that various levels of state aid per FTE student
would have had on enrollment-weighted tuition and fee levels at New Hampshire’s public
colleges in the 2010-11 academic year.24 The chart shows how much each $200 incremental
increase in state aid per FTE student to New Hampshire public colleges would cost the state (the
red line), and the potential impact (on a percentage basis) that the same increase would have on
tuition levels (the blue line).
Since the 2010-11 academic year the finances of New Hampshire’s public colleges have
changed and thus the estimates of the impacts of state support on tuition for future years would
change as well. The purpose of this exercise, however, is to help provide a method of evaluating
potential changes in state support for public higher education for their potential impacts on the
affordability of New Hampshire’s public colleges, and to help evaluate the benefits of changes in
state support for public colleges against competing options for the use of public funds in the state.
Caveats
The analysis above presents potential reductions in tuition and fees based on the
relationship between different levels of state aid and tuition charges evidenced at public colleges
and universities across the country and applying data unique to New Hampshire’s public colleges
to those relationships while holding all other variables that affect tuition (including spending)
constant. There are no guarantees that greater or lesser amounts of state support would translate
into potential changes in tuition rates. Actual reductions in tuition and fees in response to
24 We use enrollment weighted tuition here rather than in-state or out-of-state figures because the university system
could choose to have the impacts of potential tuition reductions fall differently on the tuition and fee charges of in-
state or out-of-state students.
59
increases in state aid per FTE student would depend on how the additional state support was used.
What is presented here is based on the demonstrated relationship between changes in state aid and
changes in tuition at public colleges across the country. Greater or lesser impacts on tuition
depend on how public colleges in New Hampshire use the additional funds. Without an increased
understanding of the relationship between state support for public colleges and the tuition prices
they charge, it is very difficult for lawmakers to evaluate and choose state support for higher
education over a number of other important and competing uses of public funds. The findings of
this study of 431 public colleges, applied to the particulars of individual public colleges or
systems, can help policymakers better understand the implications and magnitudes that can be
expected from alternative policies and actions designed to impact tuition charges and ultimately to
help reduce the debt level of college graduates.
Another caveat is that these results are based on data from the 2010-2011 academic year.
Expenditures and tuition charges have increased since that time and much of the increase in state
aid would be absorbed by those increases so that the resulting percentage declines in tuition and
fees would be smaller even under the best circumstance (all funding increases went to decrease
tuition charges). Even with these caveats we believe this modeling exercise is useful in framing
some of the choices policymakers have when looking at strategies to increase the affordability of
New Hampshire’s public colleges and universities and to reduce the need for borrowing to pay for
college by its students.
Alternative Actions to Make Public Colleges More Affordable and Reduce Student Debt
Figure 34 above makes clear how costly it will be to make public colleges in New
Hampshire more affordable by increasing state aid alone. Even an $84-$130 million increase in
state aid to reach national averages of aid per student would still leave New Hampshire’s public
colleges with the second highest tuition costs in the country. Moreover, there is no guarantee that
additional state aid will be used primarily to reduce tuition costs.
The fiscal challenges facing state government as well as the economic challenges facing
New Hampshire families argues for efforts to increase affordability of New Hampshire’s public
colleges that minimize the impacts on state government finances while maximizing the benefits to
students and families in terms of tuition cost reductions. Some combination of spending
reductions and increases in state support is likely to be the most viable method for achieving those
complementary goals.
To calculate the potential impact on tuition levels that a combination of spending
reductions and increases in state support would have at New Hampshire’s public colleges we used
the same basic procedure we used for calculating potential the impacts of increases in state
education aid only. For each level of increase in state support per FTE student we calculated the
total amount of additional state support that would be required and subtracted that amount from
the total amount of direct educational and general expenditures that would be covered by net
tuition revenue. For each level of reduction in expenditures per full-time equivalent student we
calculated the total amount of spending reductions that would be required across campuses in the
university system and subtracted that amount from the aggregated level of expenditures that must
be covered by some source of revenue. For each combination of spending reduction and increase
60
in state support we then adjusted the percentage of direct educational and general expenditures
that would be paid for by net tuition revenue. Using our model of the determinants of tuition and
fee charges that explains a high percentage of the variation in tuition and fee charges at public
colleges, we then applied the most recent data available for the university system to estimate how
tuition and fees could be affected by changes in the percentage of expenditures covered by net
tuition revenue given each change in expenditures and state support.
The elasticity of tuition and fee charges with respect to changes in expenditures is
somewhat greater than is the elasticity of tuition and fees with respect to the percentage of
spending covered by net tuition. This implies that decreases in spending will have a slightly
larger potential impact on tuition and fee charges than will increases in state aid. Table 6
presents potential impacts on enrollment-weighted tuition at New Hampshire’s public colleges of
increases in state support per FTE and equal reductions in student-oriented expenditures in $200
increments. Our results suggest that for every $100 dollar increase in state aid per FTE student,
tuition could be reduced by just under 0.4 percent (four-tenths of one percent), while every $100
in spending reduction per FTE student could reduce tuition by just under 0.5 percent (five-tenths
of one percent).
Table 6
Potential Tuition Impacts of Equal Increases in State Aid and Reductions in
Spending at #ew Hampshire's Public Colleges
Change in State
Aid Per FTE
Student &
Reduction in
SOE/FTE
Cost to
State ($
Millions)
Potential
impact
on
Tuition
Rank
Among
States
SOE/FTE
Expenditure
Reduction
Impact on
Tuition
Combined State
Aid &
Expenditure
Reduction
Potential Impact
on Tuition
$200 $5.3 -0.72% 25 -0.99% -1.71%
$400 $10.5 -1.48% 25 -1.98% -3.47%
$600 $15.8 -2.25% 25 -2.98% -5.23%
$800 $21.0 -3.01% 26 -3.97% -6.98%
$1,000 $26.3 -3.77% 26 -4.96% -8.73%
$1,200 $31.5 -4.53% 34 -5.95% -10.48%
$1,400 $36.8 -5.30% -5.30%
$1,600 $42.0 -6.06% -6.06%
$1,800 $47.3 -6.82% -6.82%
$2,000 $52.6 -7.58% -7.58%
$2,200 $57.8 -8.35% -8.35%
$2,400 $63.1 -9.11% -9.11%
$2,600 $68.3 -9.87% -9.87%
$2,800 $73.6 -10.63% -10.63%
$3,000 $78.8 -11.40% -11.40%
$3,200 $84.1 -12.16% -12.16%
$3,400 $89.3 -12.92% -12.92%
$3,600 $94.6 -13.68% -13.68%
$3,800 $99.8 -14.45% -14.45%
$4,000 $105.1 -15.21% -15.21%
61
Again, these results are based on data from the 2010-11 academic year, the most recent
available for all colleges used in developing our tuition and debt models. Much has changed since
then for the finances of New Hampshire’s public colleges; nevertheless this exercise is useful in
providing some information on the possible orders of magnitude of various combinations of
increases in student aid and spending reductions. Table 6 reiterates the data on potential tuition
impacts from increases in state support that are depicted in Figure 34. Additionally, it presents the
potential impact on tuition of spending cuts along with how spending reductions per FTE student
would have affected the rankings of New Hampshire’s public colleges on student-oriented
expenditures per FTE student in the 2010-11 academic year. The table shows that spending
reductions up to $1,000 (or $26 million total) would have had minimal impacts on the rankings of
New Hampshire’s public colleges. This does not mean the impacts would not be significant and
difficult for the colleges and their students. It is simply an acknowledgement of how the rankings
of New Hampshire’s public colleges would have been affected among public colleges systems
nationally. Beyond $1,200 in reductions, the ranking of New Hampshire’s public colleges would
fall precipitously and for that reason spending reductions above that amount are not included in
the calculations for Table 6.
The table suggests that a combination of increased state support and reductions in
spending can have a potentially large impact on tuition levels, and far greater impacts than either
action alone, and at a lower overall cost. Increasing state support per FTE student by $2,000
would cost the state over $52 million and could reduce tuition levels by 7.6 percent. However, a
combination of $1,000 in increased state support per FTE student along with a reduction of $800
per FTE student in expenditures (or about $21 million across all campuses) could potentially
decrease tuition levels by an equivalent amount (7.7 percent) at a cost of just $26.3 million to the
state.
IX. Lowering Tuition Prices Will Lower the Debt of Graduates
The results of our study suggest that lowering tuition costs at New Hampshire’s public
colleges will have a large impact on the debt of graduates. For every dollar reduction in tuition
and fees at public colleges, we found the average debt of students who graduate with debt to be
lower by 55 cents. At private colleges the link between tuition prices and average student debt is
much weaker. This is not surprising. Private colleges vary greatly in the degree to which they
have resources available with which to subsidize the cost of an education for students. For some
private colleges, increases in tuition charges may be largely offset by increases in student
subsidies for those students in need, resulting in little or no increase in average debt of graduates
in the face of tuition increases. At colleges with fewer resources to subsidize students, especially
students with financial need, the impact of higher tuition on student debt can be large. At public
institutions the variety and range of resources available to offset tuition increases is much
narrower and as a result tuition increases are more likely to directly translate into impacts on
student debt levels.
New Hampshire policymakers have little influence on tuition levels at private institutions
and short of providing scholarship and grant money to students who attend private institutions,
there is even less they can do to lower the level of debt of their graduates. As a matter of policy,
New Hampshire lawmakers exert their greatest impact on the state’s public institutions. New
62
Hampshire lacks the avenue most often pursued by students to obtain a college degree at a lower
cost and with lower levels of debt at graduation, relatively low-cost (for in-state students) public
colleges. The absence of affordable public college alternatives to the generally high cost colleges
in the region and the state is an important contributor to the high levels of student debt of New
Hampshire residents.
In this section of our report, we briefly consider how tuition impacts might translate into
changes in the debt levels of students who graduate from public colleges in New Hampshire.
Although we focus on the impact that tuition decreases at public colleges in New Hampshire
could have on the average debt of graduates, the same methodology could be applied to any one of
New Hampshire’s private colleges using the appropriate parameter estimates of the relationship
between tuition charges and student debt at private institutions.
Figure 34 on page 59 and Table 6 on page 61 each show how tuition might be affected by
different levels of state aid and spending reductions at New Hampshire’s public colleges. Figure
35 uses the elasticity of average student debt with respect to changes in tuition gleaned from our
econometric models to estimate how policies and actions that affect tuition and fee charges at
New Hampshire’s public colleges might affect average levels of student debt. Our analysis of the
determinants of student debt found that the percentage of student debt that is federal debt (as
opposed to private student loans) is an important predictor as is the level of tuition and fee
charges. As we noted in that section of the report, these variables are related and the percentage
of student debt that is federal is, in part, a function of the level of tuition and fees at colleges. At
higher tuition levels the level of borrowing needed for some students to cover the cost of
attendance will exceed the maximum amounts available from federal subsidized and unsubsidized
loans. In that case, students with unmet financial need would be more likely use loans from
private financial institutions. When the percentage of student debt that is federal is removed from
our regression models, the impact of tuition and fees on average student debt nearly doubles.
Although the explanatory power of the model in predicting average levels of debt is reduced
somewhat, a truer assessment of the impact of tuition on student debt is the result.
Estimated in natural log form, the elasticity of the average student debt of graduates with
respect to tuition and fees at public colleges and universities is .547, indicating that for every 10
percent increase in tuition, the average debt of students who borrow to attend college will increase
by 5.47 percent. For the 2010-2011 academic year, the average debt of graduates from New
Hampshire’s public colleges was $32,385 thus a 10 percent increase in tuition and fees implies an
increase in student debt upon graduation at New Hampshire’s public colleges of $1,771 (.0547 *
$32,385 = $1,771) and a decrease in tuition of 10 percent implies student debt that would be
$1,771 lower at graduation.
Figure 35 shows how tuition changes at New Hampshire’s public colleges and universities
would affect the debt of graduates. The average effect that changes in tuition levels have on debt
at graduation is the sum of the effects of the change in tuition over as many years as a student
takes to graduate. Thus for a reduction in tuition of $1,750 that is estimated to reduce the debt of
a graduate by $1,639, can be viewed as a cumulative reduction in tuition expense of $7,000 if a
student graduates in four years, and the $1,639 reduction in student debt over that time is equal to
an annual reduction of about $410 per year. Although the numbers presented in the graph are
63
specific to New Hampshire’s public colleges, the relationships (elasticity) between variables can
be applied to any institution or any aggregation of institutions to estimate impact on debt levels of
changes in tuition.
X. Conclusions
The findings of this report suggest that the characteristics of and college enrollment
decisions of New Hampshire high school graduates combine with the generally higher cost of
colleges in New Hampshire and the New England region, and the higher education policies of
state governments, to result in college graduates from New Hampshire colleges and college
graduates from New Hampshire with the highest levels of student debt in the nation. But the
report also highlights how the absence of affordable public college options in New Hampshire
contributes to the higher debt levels of college graduates from New Hampshire.
The report documents factors that contribute to higher college costs in New Hampshire
and the New England region and points to actions that can be taken to slow the rise of tuition or
reduce tuition prices at New Hampshire’s public colleges. Unfortunately, the findings of this
report are discouraging for students and parents wanting to remain in New Hampshire and the
New England region while minimizing the cost of a college education and reducing their need to
borrow to pay for it.
New Hampshire and New England face a number of demographic challenges.
Historically the region has thrived because a concentration of individuals with high levels of
educational attainment allowed the region to be innovative enough to overcome the many other
disadvantages it faced. All regions in the country are confronted with the challenge of producing
or attracting individuals with the educational attainment and skills needed to prosper in today’s
64
economy. Skilled individuals with high levels of educational attainment want the same for future
generations. These individuals have the most economic opportunities and are the most mobile
members of society. New England will continue to prosper as long as it remains a beacon for
those looking to attend some of the best higher education institutions in the world. New
Hampshire will thrive as long as it has access to the talent that the higher education institutions
throughout New England produce. Neither will continue to thrive if other states or regions
develop a reputation and become innovative enough to find ways to produce the kind of skilled
individuals with high levels of educational attainment that New England is noted for, at a
relatively more affordable price. New England has always been innovative; reducing the cost of
producing skilled and talented individuals is among the most important challenges to its ability to
innovate and to its future that it has ever faced.
65
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67
Appendix A
Model of the Average Debt of Graduates
Model Summary
Model R R Square Adjusted R Square
Std. Error of the
Estimate
1 .75 .56 .55 4687.68
Model Summary a Predictors: (Constant), % With Need Fully Met, % of Debt That is Federal, %t FT Undergrads. With Need, Avg. Need-Based Grant, Avg. Pell Grant, SAT Math, TUITION b Dependent Variable: Avg Debt of Graduates
ANOVA
Model Sum of Squares Degrees of Freedom
Mean Square F Sig.
1 Regression 17534954228.60 7 2504993461.23 113.99 .000
Residual 14019626104.25 638 21974335.59
Total 31554580332.86 645
ANOVA a Predictors: (Constant), % With Need Fully Met, % of Debt That is Federal, %t FT Undergrads. With Need, Avg. Need-Based Grant, Avg. Pell Grant, SAT Math, TUITION b Dependent Variable: Avg. Debt of Graduates
Coefficients
Unstandardized Coefficients
Standardized Coefficients
t Sig. Collinearity Statistics
Model B Std. Error Beta Tolerance VIF
1 (Constant) 64346.49 4329.13 14.86 .000
SAT Math -23.24 3.99 -.235 -5.82 .000 .425 2.350
TUITION .189 .028 .293 6.71 .000 .364 2.750
% of Debt that is federal
-28217.76 1552.64 -.547 -18.17 .000 .769 1.300
Avg. Need Based Grant
-7.424E-02 .026 -.108 -2.86 .004 .491 2.037
% FT Undergrads. With Need
6515.202 1735.74 .130 3.75 .000 .580 1.724
% With Need Fully met
-8994.41 1364.18 -.195 -6.59 .000 .797 1.255
AVG PELL -1.61 .699 -.064 -2.30 .022 .896 1.117
a. Dependent Variable: avg debt of grads
68
Appendix B
Model of Enrollment-Weighted Average Tuition and Fees (Public Colleges)
Model Summary
Model R R Square Adjusted R Square
Std. Error of the
Estimate
1 .83 .68 .68 1739.04
Model Summary a Predictors: (Constant),4 Yr Grad Rate, Net Tuition Share, Location Quotient, Wages & Salary per FTE Student, Student-Oriented Expenditures per FTE Student b Dependent Variable: 2010 Enrollment-Weighted Average Tuition
ANOVA
Model Sum of Squares
Degrees of
Freedom
Mean Square F Sig.
1 Regression 2732146025.45 5 546429205.09 180.68 .000
Residual 1285311805.76 425 3024263.07
Total 4017457831.21 430
Model Summary a Predictors: (Constant),4 Yr Grad Rate, Net Tuition Share, Location Quotient, Wages & Salary per FTE Student, Student-Oriented Expenditures per FTE Student b Dependent Variable: 2010 Enrollment-Weighted Average Tuition
Coefficients
Unstandardized
Coefficients
Standardized Coefficients
t Sig. Collinearity Statistics
Model B Std. Error Beta Tolerance VIF
1 (Constant) -3883.41 481.02 -8.07 .000
Wages & Salary per
FTE
.530 .149 .157 3.55 .000 .385 2.599
4 yr Grad rate 4215.34 682.94 .223 6.17 .000 .578 1.731
Net Tuition Share
9848.75 577.49 .496 17.06 .000 .888 1.126
Location Quotient
456.04 173.06 .076 2.66 .009 .894 1.118
Student- Oriented
Expenditures per FTE Student
.236 .025 .415 9.46 .000 .390 2.563
a. Dependent Variable: TUITION