FInancial - Issue Briefs - IB99-1 March 18, 1999
Fee complexity as discussed here involves three basic issues: 1) differentiation of rates and fee structures by campus; 2) the relative ease or difficulty of the way price is communicated to students and parents; and 3) the use of supplemental fees in the pricing structure.
Differentiation of Fee Structures by Campus
The topic of differentiation of rates and fee structures by campus has previously been explored in the Planning & Budget document "Enrollment Behavior and Educational Fee Policy," which can be found on the UM System Planning & Budget web page. This study explores the likely effects of educational fee policies on undergraduate enrollment by examining two methods of pricing educational fees. Both the plateau and linear methods have been used at various times at the University of Missouri over the past fifteen years. The plateau or flat-fee structure sets a flat rate for all credit hour loads taken over a certain set amount. At UM the amount was set at 12 credit hours until 1983, when it was increased to 14 hours as the plateau system was phased out. In 1986 the University abandoned the plateau system in favor of a linear or per-credit-hour fee structure, charging an hourly rate for each credit hour taken.
One of the advantages of a plateau fee structure is that it gives students the opportunity to take classes for personal enrichment without adding to the price of their education, providing the student with a more well-rounded and balanced education. In addition, a plateau structure should also lead to shortened times to degree completion. Students may be more inclined to take increased course loads if they do not have to pay for the extra hours and would therefore complete the required number of hours in a shorter time period. Clearly, the plateau fee structure benefits full-time students. If the plateau is set at 12 hours, then a student must be enrolled at least at that level to gain any advantage. A linear fee structure on the other hand favors students taking loads of less than full time, inviting students from a much broader market. Students who want to take classes to enhance particular skills or are not able to take full-time loads due to work or family obligations may find that a linear system better fits their needs.
- Figure 1 shows the percentage of undergraduates enrolled in 15 or 16 hours from 1983 to 1997. From 1983 to 1985, when the University used a plateau fee structure, the percentages of students at each campus taking 15 or 16 credit hours was about 45% at UM-Columbia, 37% at UM-Rolla, 22% at UM-Kansas City, and 18% at UM-St. Louis. Enrollments at this level declined in subsequent years under the linear fee structure, to about 31% at UMC and UMR, 17% at UMKC, and 14% at UMSL in 1997. The declines were most dramatic at UMC and UMR, which experienced a 7-10% drop in just a three year period from 1985 to 1988. Figure 2, which graphs the credit hour distributions of undergraduate credit hour loads at each campus in the plateau and in the linear systems, further illustrates the patterns of enrollment under each fee structure.
- Figure 3 shows the difference in times to degree completion under each fee structure. Due to the limited availability of data, only UMC and UMSL are depicted in this figure. Of the students who graduated within six years, the percentage who took only four years to complete a degree was about 62% at UMC and 40% at UMSL under the plateau fee structure. Under the linear structure the percentage of these students graduating in four years dropped to around 53% at UMC and 28% at UMSL.
Although the data show that enrollments have declined over this period, the reason for this decline cannot be absolutely attributed to the way fee rates are structured. Some may argue that students today work more or are involved in more activities and thus are not able to carry the larger class loads of students in the past. Because the University of Missouri has not employed the plateau structure of fees since 1985, we can only speculate as to whether a change would in fact have an effect on enrollment behavior. However, by looking at the enrollment trends of a peer who has recently changed fee structures, we may gain further insight.
- In 1991, after years of declining undergraduate credit hour loads in a linear fee structure, Indiana University at Bloomington adopted a flat-fee system for enrollment of 12 to 17 hours, a structure that had also been in place at the campus until 1976. Figure 4 and Figure 5 show the mean credit hour loads and percentage of undergraduates enrolled in 15 or 16 hours, respectively, at IU-Bloomington from 1973 to 1998. The differences in enrollment behavior in the years in which fee policy changes were made are striking. Indiana University, like UM, is a multi-campus system with a residential campus, urban campus, as well as other campuses. However, recognizing that differences exist between campuses of a university system, IU implemented the plateau fee structure only at its Bloomington campus, where enrollment is primarily full-time. The fee structures of the other IU campuses remain linear, with different hourly rates for each campus.
An important issue involving educational fee structures is the potential effect on student fee revenue. Some may argue that a plateau fee structure would result in a loss of fee revenue because it permits students to enroll in more hours than which they are charged. However, an institution with primarily full-time enrollment can avoid such a loss by placing a larger burden on part-time students. Consider the following example: an institution currently charges $124.80 for each credit hour taken and is planning to implement a plateau fee structure for students enrolled in 12 or more hours. One way to offset a loss of revenue would be to set the flat-fee amount for students enrolled at or above 12 hours at $1,872 ($124.80 x 15 hours). The per-credit-hour rate to be charged to students taking less than 12 hours could be derived by dividing the flat-fee amount ($1,872) by 14 (or whatever the mean load may be) to get a rate of $133.71 per credit hour. While this method increases the per-credit-hour amount that was previously charged in the linear system, it covers the potential losses that may have occurred due to the increased loads of full-time students. Note that in this example, students taking 12 or 13 hours would actually pay less if they paid by the hour, but because they are at the plateau level, they would have to pay the flat-fee amount. This may encourage a student taking 12 hours to add another class since the fees for another 3 hours are already included in the amount they pay for 12.
Of course this is a simplified example, and more analysis would be necessary in order to determine the effects on student fee revenue.
The Way Price Is Communicated
A second issue of fee complexity is the way in which the price of education is communicated to students, parents, and other interested parties. Because the total price of education is comprised of many educational and required fees, it may be difficult for the customers of the University to understand exactly what is being charged. Does the University do enough to insure that the price of each component of educational fees is thoroughly and effectively communicated?
Below is part of a sample billing statement, which shows a breakdown of charges and credits by category.
Information on the charges included in the billing statement are distributed by the University in a variety of ways for those who are interested. Printed materials, such as Factbooks and Schedules of Courses, are available to both prospective and enrolled students. The Cashier's Office at UM-Columbia distributes a packet of brochures which attempt to explain in detail such issues as monthly billing statements, the student billing system, dates and deadlines for fees, and optional fees. The popularity of the Internet has resulted in yet another method by which the University distributes information on educational costs and policies. The links to the right lead to each UM campus's online educational fee and billing information.
Use of Supplemental Fees
Supplemental fees are fees charged for specific departmental courses in addition to educational fees. Such fees are justified in that they are needed to cover the costs of certain courses that may require special equipment and/or instruction. However, they raise the questions of whether instructional costs of all courses should be considered in the rates being charged and whether supplemental fees are becoming defacto amounts for certain programs and/or campuses (e.g. UMR engineering supplemental fees).
- The total number of supplemental fees has increased markedly over the past 20 years. For FY1979, there were no supplemental fees for the University of Missouri. In FY1999, however, there were 9 such fees. Table 1 depicts the historical trend in the growth in number of supplemental fees at the University.
- There is a caveat to this data which must be noted. In two instances, there was a supplemental fee for which differential rates were charged to the different campuses. In these instances, if two different fee rates were charged, then this was considered to be two supplemental fees - distinguished only by the differential rates charged. If the rates were made uniform across campuses, the supplemental fee was then counted as one fee.
This occurred for the Engineering Course fee and the Instructional Computing fee. In FY1984, there was one Engineering course fee which applied to all applicable campuses. For FY1996 through FY1998, a differential rate was applied to UMR, relative to that at UMC and UMKC. In FY1989, the UMC and UMKC rates were increased to the level of the UMR fee, and there was one uniform rate for all three campuses. When the Instructional Computing fee was instituted in FY1991, there was a higher rate for UMSL than for the other three campuses. In FY1993, all campuses charged the same rate for this fee.