The Purpose of the PASSHE Universities – Part II

With Act 188 of 1982, the Pennsylvania State System of Higher Education (PASSHE) was given—by law— the following purpose:  “To provide high quality education at the lowest possible cost to the students.”

At the Lowest Possible Cost to the Students

Unlike the term “high quality education” which must rely on proxy measures to establish whether it is being achieved or not, the term “at the lowest possible cost to the students” can be judged directly by comparing PASSHE’s student-cost data with those of the other forty-nine (49) states, as shown below.   

Note that Act 188 imposes a limitation, not on “tuition rates” or “tuition and fees,” but on the “cost to the students,” which brings us immediately to the concept of “sticker price” versus “bottom line.”

The difference between “sticker price” and “bottom line” is something every consumer—especially a student or parent looking at college options—understands well, and cares very much about.  Virtually all family decisions regarding the choice of which college or university to attend involve weighing “bottom line cost” of the education on the one hand, against the “perceived educational value” on the other.

Act 188 also sets a clear and measurable standard with regard to the statutory limitations on student costs:  A high quality education—by law—is to be provided “at the lowest possible cost to the students!”

In recent years college costs have grown so rapidly that the task of financing them for the average family has become a challenge, especially since the current financial-aid process presumably designed to ease their burden has itself become so incredibly complicated and frustrating to students and parents alike.

The good news, perhaps, is that very few students in America today actually pay the full sticker price for a college education.  And that is because of the availability, on an individual case-by-case basis, of a) institutional scholarships, and b) State and Federal grants.  These two sources of funding get subtracted from the sticker price, thereby providing the bottom line cost to an individual student or family. 

State and Federal grants—which don’t have to be repaid, but typically cover only a fraction (20% to 60%) of the actual cost of attendance—vary in dollar amount inversely with family income levels.  That is, these grant programs typically provide slightly more assistance to students from families with lesser financial means.

But when, as it often happens, the student or family cannot come up with the bottom line cost of attendance, they are left no choice but to incur student and/or family loans to cover the difference.    

A typical “financial aid package” today consists of varying amounts from the following five categories:  Federal grants; State grants; Scholarships; Student Employment; and Loans.  The two largest categories, accounting for more than 90% of typical financial aid packages, are grants (which don’t have to be paid back) and loans (which do have to be paid back, with interest).

The data show that a typical financial aid package for all institutions in America in 2011 consisted of 51% grant and 42% loan, with scholarships and student employment accounting for the remaining 7%.

At a typical PASSHE university, on the other hand, a typical financial aid package in 2011 consisted of 27% grant and 65% loan, with scholarships and student employment accounting for the remaining 8%.

Over the last five years, the financial aid trend for students at all institutions has improved substantially. In 2006, a typical package consisted of 54% loan and 42% grant.  By 2011, those figures were reversed!

For PASSHE universities, sadly, the 2011 figures show no improvement over the dismal 2006 figures.

The bottom line in all of this is that, despite Act 188, PASSHE is not providing education to Pennsylvania families at anything like the “lowest possible cost to the students.”  For PASSHE students, almost two-thirds (65%) of their financial aid comes from loans, while for students at all institutions across America, less than half (42%) of their financial aid comes in the form of loans.  The other states are clearly doing a better job of providing higher education at the lowest possible cost to their students, than PASSHE is. 

This reveals a tragic failure by PASSHE’s current political leadership to fulfill the promise contained in Act 188 of 1982, which is to provide high quality education “at the lowest possible cost to the students.”