College Costs Details on the Law

INSTITUTIONAL LISTS

The Lists
It creates 6 “College Affordability and Transparency Lists.”  There are no national lists; all lists are broken down by the 9 IPEDS education sector categories (i.e. 4-year , private, not-for-profit institutions, 2-year private, not-for-profit institutions).  The lists include—

(1)  The top 5% most expensive institutions in terms of tuition & fees in the most recent preceding academic year for which data is available.*

(2)  The top 5% most expensive institutions in terms of net price in the previous academic year.

(3)  The top 5% of institutions with the largest percentage change in tuition and fees over the 3 previous academic years.

(4)  The top 5% of institutions with the largest percentage change in net price over the 3 previous academic years.

(5)  The 10% of institutions with the lowest tuition and fees in the previous academic year.

(6)  The 10% of institutions with the lowest net price in the previous academic year.

*  Note:  “for which data is available” qualifies all academic year references in this section.”

Consequences of Being Listed
Every institution on lists #3 and #4 [the top 5% of institutions with the largest increases in tuition & fees (list #3) and net price (list #4) over the three most recent academic years for which data are available]  will be require to report to the Secretary:

(1)  A description of the areas in the institution’s budget with the greatest cost increases;

(2)  An explanation for the cost increases identified in (1); and

(3) A description of the steps the institution will take toward the goal of reducing costs in these areas.

Further Consequences 
Any institution which is on lists #3 or #4 for 2 or more consecutive years must also submit a report describing its progress on the cost reduction steps described in (3) above. 

This information will be summarized in an annual report to Congress and published on the Department of Education’s College Navigator Website.

Exemptions from List
The new law exempts an institution from being included on lists #3 or #4 if the dollar amount of its increase in tuition & fees or in net price is less than $600 for the applicable three-year period.  This dollar amount will be adjusted every 3 years for inflation increases—beginning in 2014.

Effective Date
July 1, 2011.  This is the first time the lists will be published by the Secretary.  The base year for calculation of the 3-year tuition and fees list will be the 2008-09 academic year.  Based on current Department of Education collection practices, the base year for calculation of the 3-year net price list is likely to be the 2007-08 academic year.

PRICE CALCULATORS

Net Price Calculator
The new law required the Secretary to develop an individual net price calculator by August 14, 2009.  Net price is to be calculated using the same "net price" definition included in the law.  The Department missed the August 14 deadline, but did publish the calculator on October 29, 2009.  Each institution must make a net price calculator available on its website - either the one developed by the Secretary or a comparable one developed by the institution - within two years (i.e., by October 29, 2011).

• Education Department Releases Template for Net-Price Calculator (Chronicle of Higher Education, 11/3/09)
• Link to Department of Education Net-price Calculator

Multi-Year Tuition Calculator
The new law also provides for the development of a “multi-year tuition calculator” by August 14, 2009.  The calculator is to allow consumers to estimate the amount of tuition a student would pay at a particular institution over the duration of the student’s program.  Calculations would be based on the institution’s rate of change over the previous 3 years—with an option for a consumer to use an alternative rate of change.  Each calculation is to carry several disclaimers.

HIGHER EDUCATION PRICING SUMMARY PAGE 

The Secretary is to include a “Higher Education Pricing Summary Page” for each institution on the College Navigator website, which will include the following information:

(1)  tuition and fees for the 3 most recent academic years for which data are available*;

(2)  net price for the 3 most recent academic years;

(3)  beginning in the period between July 1, 2010, and June 30, 2013, net price for students who received Federal financial aid, disaggregated by 5 income categories**;

(4)  beginning July 1, 2013, the average net price disaggregated by 5 income categories for Federally aided students during the 3 most recent academic years; 

(5)  average annual percentage and average annual dollar change in tuition and fees in each of  the 3 most recent academic years;

(6)  average annual percentage and dollar change in net price over the 3 most recent academic years; and

(7)  a link to the institution’s information on College Navigator. 

*  “for which data is available” qualifies all academic year references in this section.

**  The five income categories are:  (1)  $0 – 30,000; (2)  $30,001-48,000; (3) $48,001-75,000; (4) $75,001-110,000; and (5) $110,000 and more.  The Secretary may make adjustments based on CPI.

DEFINITIONS

“Net price” is defined as the average yearly price charged to aided full-time, first-time undergraduates after grant aid has been subtracted from the cost of attendance at the institution.  For public institutions, the net price, tuition & fees, and cost of attendance will be based on in-state rates.

“Cost of attendance” is defined as the average annual cost of tuition and fees, room and board, books, supplies, and transportation for a full time, first time undergraduate at an institution. 

OTHER COST PROVISIONS

State Maintenance of Effort
Funds under the College Access Challenge Grant Program *** will be withheld from any state that does not maintain funding for institutions of higher education in the state at or above the amounts provided during the 5 preceding academic years.

*** The College Access Challenge Grant Program was created by the College Cost Reduction and Access Act (P.L. 110-84). 

Rewards for Low Tuition
Incentives and rewards for low tuition are authorized in Title VIII (Part M).   Institutions with the lowest 20% of tuition & fees increases in their category; public institutions with tuition and fees in the lowest quartile; public institutions with tuition and fee increases of less than $600; and institutions with guaranteed tuition plans would qualify for the bonus funds.   These funds are to be provided as need-based grant aid to Pell-eligible students.

NOTE:  These funds are not guaranteed.  Congress would need to make separate appropriations for any of these bonus funds to be provided.

Textbooks

The new law includes textbook provisions which place requirements on both publisher and institutions.  The requirements for institutions include the disclosure “to the maximum extent practicable” the ISBN and retail price information for any textbooks and materials for courses listed on the institution’s course schedule.  These disclosures apply only to the institution’s Internet course schedule—not to written course schedules.  Upon the request of a college bookstore affiliated with the institution, the institution must also provide (“as soon as practicable”) information on course schedules, required textbooks and other materials, and course enrollment information.  These provisions take effect on July 1, 2010.  The Secretary is prohibited from issuing regulations on them. (See the HEA 101 section on Textbooks for more information).

PROVISIONS NOT INCLUDED IN THE FINAL BILL 

Price Controls
Since 2003, a number of proposals have been introduced in Congress in attempt to address the issue of college prices.  NAICU has been successful in stopping efforts to impose federal price controls on colleges.  Proposals that have been put on the table—and subsequently withdrawn—include:

• A 2003 proposal by Representative Howard “Buck” McKeon would have have withdrawn all Title IV student aid except loans and Pell Grants from institutions that increased tuition by more than twice the rate of inflation over a three-year period.
• In 2004, McKeon revised his legislation to drop the Title IV penalties, but retained provisions requiring institutions that exceeded the “college affordability index” (that is, increased tuition by more than twice the rate of inflation over 3 years) to report to the Secretary of Education with an explanation for their price increases and to submit management and action  plans for reducing their tuition and fees.  Institutions that increased prices above the rate of inflation for the following two years would be placed on an Affordability alert status, reported to their accreditation agency, and made subject to audit by the Inspector General of the Department of Education. <!--[endif]-->
• In 2005, these McKeon provisions were included in the House reauthorization bill (H.R. 609) adopted by the House Education and the Workforce Committee.
• In 2006, H.R. 609 was debated by the full House of Representatives.  During this debate, NAICU was successful to getting revisions to the bill that struck the overt price control provisions from the bill—but left the “college affordability index” and public disclosure provisions in place.           

                      The price control provision that were stricken included:

                               *The management and action plans to be submitted to the Secretary;

                               *The report to the institution’s accreditation agency;

                               *The threat of audit by the Inspector General.

•  The 2006 legislation also required that the 25% of institutions with the highest cost increases establish “quality-efficiency task forces” to review their operations.  This number was reduced to 5% of institutions in the final measure, but the provision was not entirely eliminated.  In 2007, the “quality-efficiency task forces” were once again included in the House reauthorization bill and were strengthened by a floor amendment offered by Representative Michael Castle in 2008.  They were dropped from the final bill.

Leap Funding 
House provisions which would have cut off LEAP funding to any State that did not maintain its financial support for public colleges at the previous year’s level were not included in the new law.

Price Indices 
The provisions related to a “Higher Education Price Index” (“HEPI” - Senate) and a “Postsecondary Education Price Index” (“PEPI” - House) were not included in the new law.

Net Price Information on Admissions Materials
The new law does not include the Senate provision that would have required institutions to included net price information broken down by income quartile on their admissions materials.

Penalities Based on Annual Changes in Net Price
The additional reports included in the House bill for institutions with net price increases over the “PEPI” in any year are not in the new law.