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

15

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