Tuition and college affordability: The effect of high tuition on institutional aid for needy students

• In Event: Higher education in times of crisis and conflict

Proposal

Background and Purpose
Throughout the history of student protests in South Korea (Korea), one of the primary issues since the 2000s has been unaffordable tuition fees at higher education institutions (HEIs) (Shin et al., 2014). The Korean government concerning the demand launched the “half-price tuition” policy in 2008, which has been a justification to control tuition increases at HEIs. Since then, Korean HEIs have relied more on government subsidies, especially private institutions whose financial structure heavily depends on tuition incomes (Kim & Park, 2018). Recognizing that the chronic financial deficiency of Korean HEIs could devastate the quality of education that college students receive (Kim & Park, 2018), the purpose of this study is to suggest a policy direction accommodating all interests of the HE stakeholders, including students, HEIs, and the government. Hence, this study sheds light on a tuition crisis in Korea by adopting the lens of the “high tuition high aid” (HTHA) model in the United States (US) that charges high tuition to well-off students and provides institutional aid to needy students (Turner, 2018). This cross-subsidizing model decreases the net price of low-income students, which refers to the actual amount of tuition that students pay after deducting all the financial aid that they receive (Doyle, 2008). In doing so, this study aims to figure out both what students need to protest for in practice, and what the government and HEIs in Korea should satisfy for the co-existence with students. To this end, the research question of this study is “What is the effect of high tuition on institutional aid for needy students?”

Literature Review
Some previous studies identified that wealthier HEIs are likely to set lower net prices for low-income students. Regarding diverse income sources, HEIs receiving larger endowments turn out to set lower net prices for students (Baum & Lee, 2018; Gioiosa, 2018; Hill et al., 2005; Lynch et al., 2016). Moreover, Gioiosa (2018) and Mugglestone et al. (2019) discovered that more state appropriations correspond to lower net prices at public institutions. Furthermore, Rose and Sorensen (1992) disclosed that lower tuition tends to bring lower institutional aid including both merit-based and need-based grants and scholarships. Nonetheless, they hardly found a statistically significant relationship between tuition and need-based aid alone.
The relationship between tuition and the enrollment of low-income students in the US is also investigated. Lapid and Douglass (2016) confirm that raised tuition at the University of California system has no negative impact on the enrollment of low-income students, thanks to the robust financial aid offered to them. Although Lassila (2011) found a statistically significant negative impact of increasing tuition on the enrollment of low-income students in the US, the tuition mitigated by cumulative financial aid from federal, institutional, and local sources turns out to enhance the enrollment of low-income students. A few overseas cases also show a statistically significant negative impact of increased tuition on the enrollment of low-income students in Canada (Coelli, 2009) and China (Dong & Wan, 2012). Despite the findings, Dong and Wan (2012) attribute the failure of the rising tuition policy in Chinese HE to its “high tuition low aid” model. Besides, these studies hardly consider need-based institutional aid as a factor.
Thus, the literature seems to make the effectiveness of the HTHA model on college affordability remain arguable. Moreover, it implies the necessity of examining the impact of published tuition and need-based institutional aid alone.

Methodology
To examine the effect of published tuition on need-based institutional aid, a multiple linear regression analysis is conducted. This study targets 149 four-year private universities among “Normal Universities” according to the classification criteria of the Korean Higher Education Act. National or public universities are excluded, because their number that can be analyzed statistically decreases to less than 30 when leaving missing values out. For the institutions having branch campuses, main or first campuses are only considered.
Secondary datasets from ‘Higher Education in Korea,’ the data source from the Korean Ministry of Education and Korean Council for University Education, are utilized. Total need-based institutional aid is set as a dependent variable, and published annual tuition is considered the independent variable of interest. Government subsidies and endowments are controlled, considering their relationships with institutional aid (Baum & Lee, 2018; Gioiosa, 2018; Hill et al., 2005; Lynch et al., 2016; Mugglestone et al., 2019). The number of undergraduate students is also controlled, since more tuition payers would augment institutional wealth. The data are based on the fiscal year of 2022, and the Korean currency (Won, ₩‎) is replaced at ₩‎1,321 for one US dollar according to the exchange rate as of the second quarter of 2023 (Fiscal Data, 2023).

Findings
Except for four samples with missing values, 145 four-year private universities in Korea are analyzed by a multiple linear regression model which appears statistically significant [Adjusted R2=0.814, F(4, 140)=159.041, p<0.01]. The results show that published annual tuition has a statistically significant positive impact on need-based institutional aid (B=187.526, p<0.05). Thus, it can be said that a one-dollar increase in published annual tuition in Korean four-year private universities corresponds to a $187.526 increase in the total amount of need-based institutional aid, when holding the values of control variables which are government subsidies, endowments, and the number of undergraduate students.

Conclusion
According to a multiple linear regression analysis, high published tuition seems to predict high need-based institutional aid at Korean four-year private universities. Thus, raising published tuition is expected to enhance the college affordability of more low-income students. However, given that not all of the benefits of tuition increases go to low-income students (Rose & Sorensen, 1992), the government is required to design a policy letting HEIs increasing tuition rates set a certain ratio of their tuition income as need-based institutional aid. Furthermore, students could urge HEIs and the government to raise the ratio of need-based institutional aid to tuition income. Lastly, this study contributes to research in comparative HE, as it reveals the effectiveness of the US HTHA model in the Korean HE context.

Author

• Young Hoon Koh, University of Arizona