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June 07, 2012 5:22 PM Iowa’s Strange Tuition Plan to End

By Daniel Luzer

Iowa may consider a change to the way it funds higher education. Since the 1980s Iowa public colleges have used “set-asides,” they devoted a portion of student tuition every year to fund scholarships for poorer students. The idea was understandable, it would help colleges distribute resources equitably and provide education to low income students.

But the program became unpopular. According to an Associated Press piece by Ryan Foley:

The Iowa Board of Regents took a first step Wednesday toward eliminating a long-standing program that relies on tuition fees to subsidize tens of thousands of low-income students, after complaints by parents and Republican lawmakers.
The regents voted to create a committee of university officials to develop a plan to end the subsidies, known as tuition set-aside, within five years and replace them with a state-funded grant program and more privately funded merit scholarships. Regents said the strategy should allow them to reduce tuition rates for all undergraduate students from Iowa, but it’s not clear by how much.

It’s also not clear that this is the most effective strategy. Because, unlike many other states, Iowa has no statewide scholarship programs, they created set-asides in the 1980s to try to keep tuition affordable for working-class Iowans.

The trouble is that as it got more expensive to administer the state’s public colleges, colleges charged families higher and higher amounts in order to continue to offer scholarships to students who couldn’t afford their higher tuition.

In 2004 the regents ordered universities to use at least15 percent of tuition dollars for financial aid for poor students. The larger state universities ended up devoting even more money to scholarship programs. Last year, according to the article, the University of Iowa, Iowa State University and the University of Northern Iowa used more than 20 percent of their tuition funds for financial aid.

Some constituents objected that the set-aside program seemed to be causing tuition to increase even more than it normally would.

The solution, the state-funded grant program and more privately funded merit scholarships, won’t necessarily be the most effective solution, however; no one seems to know how much money this can raise.

According to the article, many college administrators would prefer just to keep the program in place since the set-asides “are key tools to keep the universities affordable without a larger state commitment.

Well right, but that’s because the state commitment is the greater structural problem here. This would maybe be the most efficient, responsible fix here.

The set-aside program does seem a little bizarre since it basically means jacking up tuition in order to give money to people who can’t afford tuition. These are public institutions; tuition is supposed to be affordable to everyone in the state, without accounting gimmicks.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer