The influence of a Guarenteed Tuition rate
on Undergraduate student retention rates
By
KYLE GRUENHAGEN
UNIVERSITY OF COLORADO COLORADO SPRINGS
Research and Analytic Methods
12/12/2017
Introduction
The University of Colorado at Colorado Springs began as a small commuter school in the mid 1960s. Since then, the university has expanded to over 12,500 students on a sprawling campus with a recreation center, student housing facilities, dining halls, and a new 92,000 square foot center for the arts. The expansion of this university over the most recent decade has been a boon to the University of Colorado and the City of Colorado Springs. It has created bountiful opportunities for students, faculty, and staff as well. UCCS’s expansion over the last 15 years has arrived at a time when public universities have witnessed dramatic cuts in state appropriations to fund operations. Many institutions have responded by raising tuition and fees, creating a barrier to education for some low and middle class families. This new majority dependence on tuition has changed the incentives and operations of public universities. UCCS has created a strong and steady enrollment growth, which increases revenue, but they have also realized a low retention rate of students staying from freshman to sophomore year. With this new model of funding, when a student leaves an institution, their tuition dollars leave with them. In this research, we want to examine how UCCS can improve their retention rate of students. There are two major goals of this research. First, UCCS genuinely wants to help students achieve success in college. This means that the student will stay at the university until he or she graduates with a 4-year degree. Any measure to help students achieve success is a benefit to the administration. Second, a higher retention rate of students will also assist the administration & finance department in forecasting future students, revenue, and expenses while stabilizing annual revenue for the university. Tuition and enrollment fluctuations can make financial modeling a challenge for the university. One measure under contention to improve the retention rate of students is the implementation of a guaranteed tuition rate for students, where a student will pay the same amount in tuition & fees throughout their 4-year college experience.
Research Question:
Will a tuition guarantee program influence the student retention rate at UCCS from freshman to sophomore year?
Hypothesis:
After implementing a tuition guarantee plan, public institutions of higher education will realize an increase in their student retention rates from freshman to sophomore year.
For the duration of this study I will be working alongside Suzanne Scott. Ms. Scott is the budget director for UCCS and she works closely with the admissions department. Although UCCS is not considering implementing a guaranteed tuition rate at this time, the university still wants advanced research over possible methods to increase their retention rate. We hope this research will help UCCS prioritize their recruitment and retention ambitions over the next few years.
Background Information
A guaranteed tuition rate, as defined by the national center for education statistics (NCES) is “a program where the institution guarantees, to entering first-time students, that tuition will not increase for the years they are enrolled. These guarantees are generally time-bound for four or five years” (nces.ed.gov, 2017). Depending on the institution, this flat rate will include tuition, fees, and any other supplemental fees. This does not include textbooks, or supplemental course materials. The flat rate usually does not extend out to cover housing or meal plans. This term is often referred to as tuition guarantee as well.
According to the Integrated Postsecondary Education Data System(IPEDS) website retention rate is defined as “a measure of the rate at which students persist in their educational program at an institution, expressed as a percentage….of first-time bachelors (or equivalent) degree-seeking undergraduates from the previous fall who are again enrolled in the current fall” (nces.ed.gov, 2017). Within the literature, the terms persistence rate and student attrition are commonly used and have similar meanings to retention rate in this context.
A primary problem that UCCS and other public institutions are facing is that the decline in state support has made colleges much more reliant on tuition dollars paid by students. In this environment, colleges have even greater pressure to provide quality education at a reasonable and competitive price. When the prices rise, prospective students are much more selective since the investment is much larger than it used to be. If tuition is set too high, prospective students may choose a different institution, thus reducing the potential revenue the institution receives. If the price fluctuates too much it may result in concerns for low-income and middle class students, causing them to leave the institution. Some students will be more sensitive to tuition hikes that others, thus tuition hikes disproportionally hurt lower income students. According to Jennifer Delaney from the University of Illinois “average tuition and fees at four-year public universities was $3,248 for the 1989–90 academic year and $9,139 for the 2014–15 academic year. Twenty-five years ago a larger than expected increase in tuition of 10%, for example, would have cost students $325. Today, a similar percentage point increase in tuition would cost students over $900, which presents a bigger obstacle to persistence or initial enrollment” (Delaney et.al.,2016, p. 60). Our study wants to examine how much influence the fluctuation in tuition & fees has on a student’s decision to leave the university. We will do this by examining the retention rate against both institutions that offer and do not offer a tuition guarantee plan.
Readers of this study should be aware of the study’s assumptions and considerations when analyzing this data. We assume that a tuition guarantee program will not be a perfect correlation with the retention rate. First year students experience a major lifestyle shift during their first year at college, and some find themselves not ready to attend and decide to leave the university. In addition to this, an institution may not offer a particular program the student wants, or the student realized that their institution is not a good fit for them. These facts are likely to skew our data. We understand that a student may have numerous reasons for transferring away from UCCS other than tuition fluctuation. Therefore, we will perform a time series analysis of the retention rate before and after tuition guarantee is implemented. This series may help us focus solely on the influence a guarantee tuition plan has on the retention rate. This will be discussed in the research design section of the paper.
Literature review
In recent decades’ institutions of public higher education have been financially squeezed by the states they operate in. As state appropriations towards our public universities have been reduced, the price of tuition for those attending college has risen steeply. According to the Department of Higher Education in Colorado the students were responsible for 32% of the cost of a college degree in 2001, while in 2014 students were responsible for 66% of the cost to attend a public university (Tuition & Fees Report, 2015).
The significant increase in tuition has dramatically impacted the operations of these institutions and for the students who attend them. The institutions must now rely on students to maintain revenue and the operations of the university, which has created a new incentive and imperative need for universities to admit and retain students. At the same time, students have a significantly larger financial investment and debt burden if they choose to attend, making their decision much more about money.
Each figure above can be found in the Colorado Department of Higher Education’s Tuition & Fees Report from 2015. According to J. Kerkvliet and C. Nowell from the Journal of Education Economics, “legislators should be aware that greater reliance on tuition to fund public higher education may result in administrators choosing higher retention rates but lower acceptance rates” (Kerkvliet et. al., 2012, p. 662). A high retention rate of students also means a high retention rate of students paying tuition. As more institutions depend on tuition, they cannot risk losing too many students or they will see declines in revenue. Typically, a decline in revenue means more tuition hikes or a reduction in personnel or programs, thus hurting the competitiveness of the university which pressures initial enrollments. Although UCCS seems to have achieved leaps and bounds for enrollment growth, they now want to focus on retaining those students to assure a stable revenue from tuition and increased student success.
According to the National Center for Education Statistics “The retention rate…among first-time, full-time degree-seeking students who enrolled at 4-year degree-granting institutions in 2014 was 81 percent” (nces.ed.gov, 2017). The Institutional Research department at UCCS states that the retention rate for UCCS sits at 65%, or 16% lower than the average rate for 4-year institutions (uccs.edu/ir, 2017). The retention rate can be very indicative of the perceived experience for a first-year student and this number is highly considered and compared across other institutions as a key factor while students seek a university to attend. “A high rate of attrition is indicative of a failure on the part of an institution to achieve its purpose. For institutions that rely heavily on tuition and fees to support academic programs and services, including the library, student retention is critical” (Mezick, 2007, p. 561). The persistence rate can be a vicious circle if it is not managed, as students may not consider attending UCCS since the data shows that 35% of first year students had enough of a reason to transfer or drop out of college. For the institution, these numbers are crucial to long-term academic and financial success and reputation.
After performing an extensive study over the influence tuition hikes have on university participation and enrollment, Donald Heller from the University of Michigan concluded that, “within states and for most groups, enrollment tends to respond negatively to higher tuition prices, all other factors being equal” (Heller, 1999). With each tuition hike, as Heller has described, more students may turn away from a college degree because of the price or decide to leave the university because of major price fluctuations. Heller found that “U.S. enrollments would decline by about 2.1% for each $100 price change” (1999). The $100 price increase is in 1982 dollars, which was a drastically different environment for higher education funding. But this statistic can show us that an increase in tuition will have a real impact to university enrollments.
Guaranteed tuition is not meant to reduce the price of college, rather it is used to make the cost of college more predictable. This sort of consumption smoothing is contested over whether students are charged more or less during their time at college. In most cases, the flat rate of tuition is more expensive the first year than what it would be without a guaranteed tuition rate over the next 4 years. “A student who enrolls under a guaranteed (inflation proof) tuition plan will pay a slight increase over what might have been paid in the first year of enrollment under a standard plan. However, this slight increase buys insurance against higher tuition rates in the future” (as cited in Delaney et. al., 2015, p. 82). The student’s first year essentially buys them into a price locking program. In theory, this can be helpful for students who have a good amount of predictability and enjoy their university and program. The people who lose in this situation are the students who must transfer out of the university for personal or other reasons. The first-year students paying a higher rate will subsidize the lower rate for the senior who has already bought into the system. “Students who do not persist pay more under a guaranteed tuition program than they would with annual tuition increases” (Delaney et. al., 2015, p. 82). This is known as the non-persistence penalty, and it creates a disincentive for students to transfer out, which may positively influence the retention rate, or encourage more students to stay at the university.
This study is designed to add more data to the field of university enrollment management, with a focus on variables that influence undergraduate student retention rates. The strength as to which a guaranteed tuition program will influence the retention rate will be helpful to public universities attempting to increase their persistence rates. With our data, they can assume that guaranteed tuition will either be a major contributor to student retention, or that it has little to no impact on retention. If this is the case, the university can invest their time and resources to programs that show more promise to increase the retention rate.
Research Design
The Integrated Postsecondary Education Data System (IPEDS) is a database of surveys that institutions of higher education must fill out annually to record admission, enrollment, financials, faculty and staff, graduation rates and more (nces.ed.gov, 2017). These surveys are required as itemized in the amended Higher Education act of 1965 which states that any institution that participates in a federal financial aid system must review and fill out the IPEDS surveys on an annual basis (nces.ed.gov, 2017). According to IPEDS, over 7,500 institutions complete these surveys every year. This data is collected and sent to the National Center for Education Statistics(NCES) for review. IPEDS and NCES have an interactive, free, and open searchable database system to review the statistics of each institution. This database will be my chief source of information as IPEDS and NCES have already established a level playfield during the survey process.
For this study, we will analyze one independent variable and one dependent variable. Our IV is a nominal variable, simply YES/NO if a tuition guarantee is offered. The dependent variable is a ratio level of measurement, which is the retention rate of students staying from freshman to sophomore year. The retention rate is usually issued as a percentage. Each institution has their own individual IPEDS site with all applicable data to that college. This includes the retention rate for the institution, and a yes/no checkbox if they offer a guaranteed tuition plan. With a total of 7,500 institutions on IPEDS, I plan to analyze at minimum 200 institutions across the nation. As specified by my partnering organization, I have been directed to examine institutions of similar size and nature to UCCS. Therefore, I do not believe the 7,500 cannot accurately be called the study population since some of these institutions will have drastically different features from UCCS. These factors include a similar institution type, similar degrees offered, similar admission rate, and similar enrollment numbers.
A filter can be performed within IPEDS to reveal a select amount of institutions. The filters will include the following:
• Public institution
• Bachelor and Advanced degrees offered
• Enrollment between 7,000-20,000 students
• % of applicants admitted between 70%-100%
• 4-year institution
• Housing offered
This filter will issue a pool of somewhat similar organizations to UCCS. At this time, we cannot filter by retention rate or by a yes/no tuition guarantee plan offered. The data collection will include manual searches through each institution to gather descriptive statistics including enrollment, retention rate, 6-year graduation rate, if guaranteed tuition is offered, first year tuition rate, and % admitted. Although this study will focus on how the dependent variable retention rate is influenced by the independent variable tuition guarantee program, other frequencies will come in use for the analysis. All data will be plugged into SPSS.
After the frequencies have been examined, an independent sample t test will be run using guarantee tuition (Y/N) and retention rate (%). An independent sample t test will provide the retention rate mean between each group that has a guarantee tuition plan, and the groups that does not offer a guaranteed tuition plan. This analysis will help us examine if there is a significant difference in the retention rate for institutions that offer tuition guarantee vs the institutions that do not offer tuition guarantee. The figures attached below display an example of how the data will be entered and what the analysis will look like. This is false data of 54 simulated universities. Data will be categorized with “0” = No Guaranteed Tuition and “1” = Guaranteed Tuition. “RR” = Retention Rate. “GT” = Guaranteed Tuition
The independent sample t test between these replica 54 universities show us that 26 institutions do not offer guaranteed tuition, while 28 institutions do offer guaranteed tuition. The means are very similar with a small difference of .0029 and std. deviations only apart by .01753. Equal variances are assumed, and we can see that the 2 tailed sig. value is at .940 meaning the data has no statistical significance since it is above a p-value of .05. We can assume that the retention rate cannot be associated with the guaranteed tuition plan in this sample, and an improved retention rate cannot be promised if a tuition guarantee plan is implemented. An increase in retention rates will be more attributed to chance.
As discussed earlier in the paper, there are frequently numerous variable associated with a student’s decision to leave a university after their first year. This can include a change in major, lack of academic program, homesickness, or anxiety. These factors may skew the data, and we cannot infer that retention rate is only impacted by a guaranteed tuition plan. Because of this, a time series analysis will also be performed using data 7 years before and 7 years after the implementation of a guaranteed tuition program. A time series analysis will place more direct focus on the retention rate by examining persistence before tuition guarantee was implemented and after it had taken effect at each institution. This will help to focus the data more on retention rate, without other static variables skewing the data.
Schedule and Budget
The goal for this project is completion by April 2018. Beginning in January, I will launch a more thorough literature review on the benefits and disadvantages of a guaranteed tuition plan. This literature review will also include the potential impact a tuition guarantee plan will have on the financial operations of the university. In late February, I will begin the data collection process within IPEDS for the universities that meet the requirements as described above. This time-extensive step with include inputting data into SPSS to begin the analysis. Around late February I plan to meet again with my partnering organization, Suzanne Scott the UCCS budget director, to assure I am on track with what the university needs. By March, I expect to have all of the IPEDS data within SPSS, where I will commence data analysis including the independent sample t test and the time series analysis. In late March I will compile my findings and write a thorough results, conclusion, and discussion over what I believe the data is telling us in addition to the literature review. As of this writing, there is no budget for this research. All of the required texts, software, and licenses have been purchased for other projects and I do not plan on making any purchases on top of what I have already.
Conclusion
This study will help the University of Colorado at Colorado Springs understand the potential relationship between a guaranteed tuition plan and the influence it has on the retention rate. Our goal will be to assist UCCS in increasing their retention rate, as directed by the UCCS budget director. This does not mean that we will help UCCS implement a guaranteed tuition program, rather we want to help UCCS understand what factors contribute most towards positively influencing retention rate. There is no assurance that a tuition guarantee program will positively influence the retention rate. Institutions with a higher and more predictable retention rate experience more student satisfaction, expanded tuition revenue, and a better environment in which to plan for their financial future. As an expanding institution, UCCS needs to make data driven decisions to best prepare for their future as a regional research institution. A guaranteed tuition plan will be a significant change to the financial operations of the university, and before that investment is enacted they will need data to understand if a tuition guarantee has a significant impact on retention at other institutions.
References
Baird, K. (2005;2006;). The political economy of college prepaid tuition plans. The Review of Higher Education, 29(2), 141-166. doi:10.1353/rhe.2005.0076
Delaney, J. A., Kearney, T. D., & Hemenway, B. (2016). Balancing tuition predictability and affordability: The pitfalls of guaranteed tuition plans. Change: The Magazine of Higher Learning, 48(2), 59-66. doi:10.1080/00091383.2016.1167568
Delaney, J., & Kearney, T. (2015). The impact of guaranteed tuition policies on postsecondary tuition levels: A difference-in-difference approach. Economics of Education Review, 47, 80-99. doi:10.1016/j.econedurev.2015.04.003
Heller, D. E. (1999). The effects of tuition and state financial aid on public college enrollment. The Review of Higher Education, 23(1), 65-89.
Kerkvliet, J., & Nowell, C. (2014). Public subsidies, tuition, and public universities' choices of undergraduate acceptance and retention rates in the USA. Education Economics, 22(6), 652-666. doi:10.1080/09645292.2012.659010
Mezick, E. M. (2007). Return on investment: Libraries and student retention. The Journal of Academic Librarianship, 33(5), 561-566. doi:10.1016/j.acalib.2007.05.002
Tuition and Fees Report Fiscal Year 2014 – 2015. (2015, January). Department of Higher Education . Retrieved from: https://highered.colorado.gov/Publications/Reports/ Budget/FY2015/2015_tuitionfeesreport.pdf
Undergraduate Retention and Graduation Rates . (2017, April). Retrieved from https://nces.ed.gov/programs/coe/indicator_ctr.asp
Webber, D. A., & Ehrenberg, R. G. (2010). Do expenditures other than instructional expenditures affect graduation and persistence rates in american higher education? Economics of Education Review, 29(6), 947-958. doi:10.1016/j.econedurev.2010.04.006
https://www.uccs.edu/ir/data.html (2017)
https://surveys.nces.ed.gov/ipeds/VisInstructions.aspx?survey=11&id=30072&show=all(2017)
https://surveys.nces.ed.gov/ipeds/VisGlossaryAll.aspx(2017)