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dissertation entitled

AN ANALYSIS OF POLICYMAKING: FINANCIAL AID,
TUITION AND ACCESS FOR LOW-INCOME STUDENTS
AT MICHIGAN PUBLIC UNIVERSITIES

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Terry Brennan Viau

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AN ANALYSIS OF POLICYMAKING: FINANCIAL AID, TUITION AND ACCESS
FOR LOW-INCOME STUDENTS AT MICHIGAN PUBLIC UNIVERSITIES

By

Terry Brennan Viau

A DISSERTATION
Submitted to
Michigan State University
in partial ﬁilﬁllment of the requirements
for the degree of
DOCTOR OF PHILOSOPHY
Department of Educational Administration

2002

ABSTRACT

AN ANALYSIS OF POLICYMAKING: FINANCIAL AID, TUITION AND ACCESS
FOR LOW-INCOME STUDENTS AT MICHIGAN PUBLIC UNIVERSITIES

By
Terry Brennan Viau

In the current environment of limited ﬁnancial resources for higher education,
there is evidence to indicate that national access policy has been undermined by ﬁnancial
constraints at the state and institutional levels. Spiraling tuition rates, the declining
purchasing power of need-based ﬁnancial aid programs and increasing competition for
high-quality students are factors that may be contributing to the widening gap between
the participation rates of low-income and high-income students (McPherson & Schapiro,
1998). Evidence also indicates tlmt it is rare today to ﬁnd states enacting policies that
explicitly link ﬁmding for public higher education, tuition rates and funding for state
ﬁnancial aid programs. Without this coordinated effort, it has been posited that low-
income student access to public higher education is unlikely to be sustained.

The purpose of this study was to determine the extent to which coordinated efforts
exist at the university level. Speciﬁcally, this study sought to determine the extent to
which institutional policymakers at Michigan public universities link decisions related to
need-based ﬁnancial aid and tuition pricing, and to determine if these policies support
institutional goals related to access and affordability. Resource dependence theory was
utilized to ﬂame and analyze the results of this study. In this context, university
policymaking is interpreted as the institutional response to external forces that control

needed resources (Pfeﬂ‘er & Salancik, 1978).

This study may be of signiﬁcance to state and university policymakers as they
evaluate university policies and practices that facilitate or negatively affect low-income
student access to higher education, speciﬁcally access to public universities in Michigan.
The research strategy for this study was a case study of policymaking at the 15 public
universities in Michigan. The study included the use of qualitative and quantitative
research methods and data was collected from three primary sources: state and university
documents, archival reports and records and a survey of ﬁnancial aid and budget omcers
at Michigan’s 15 public universities.

The results of the study indicate that policy decisions related to funding for
institutional need-based aid and tuition pricing are coordinated at Michigan public
universities and indicate that the extent to which the policies are linked may be based, in
part, on university type and the university’s mission and goals related to access and
affordability. The results of the survey also reveal that a growing share of institutional
ﬁnancial aid funding is being allocated to merit-based scholarships; at most of the
institutions responding to the survey questionnaire, the share of institutional aid allocated

to merit-based scholarship exceeds the share allocated to need-based grant.

ACKNOWLEDGMENTS

This study would not have been possible without the assistance of my committee,
colleagues and family. Their encouragement contributed to the successful completion of
this dissertation. I am particularly grateful to Dr. Bruce Roscoe and my CMU colleagues
for their invaluable assistance and support throughout this project.

I wish to thank my committee members Dr. Marilyn Amey, Dr. Anna Ortiz, Dr.
Reitumetse Mabokela and Dr. David Arsen. Each contributed their particular expertise
and wisdom to this project that served to strengthen the ﬁnal product. I will be eternally
grateful to my advisor and committee chair, Dr. Marilyn Amey, for ﬁrst “adopting” me
and then guiding me throughout this journey. Her tremendous knowledge of and
enthusiasm for postsecondary education research, teaching and advising have been a
constant source of encouragement for me throughout my experience as a doctoral student
and this project. I also wish to thank fellow HALE students and the HALE faculty at
MSU for the camaraderie and enlightenment I have enjoyed these last few years.

Finally, I wish to thank my husband, Bob Viau, and my son, Mike Viau, for their
patience and sacriﬁce throughout my educational career. Without their support, this

effort would never have been possible.

iv

TABLE OF CONTENTS

LIST OF TABLES ........................................................................... vii
LIST OF FIGURES .......................................................................... ix
CHAPTER 1
INTRODUCTION ............................................................................ 1
Statement of the Problem ................................................................ 1
Purpose and Research Questions ........................................................ 3
Signiﬁcance ................................................................................ 4
Context and Background ................................................................. 5
Resource Dependence Theory ........................................................... 7
Conceptual Framework .................................................................. 10
CHAPTER 2
REVIEW OF RELATED LITERATURE ................................................. 11
State and Institutional Policymaking ................................................... 11
Policies and Practices in Michigan ...................................................... 18
Institutional Financial Aid ............................................................... 20
Summary .................................................................................... 23
CHAPTER 3
METHODOLOGY/RESEARCH DESIGN ............................................... 25
Methods .................................................................................... 25
Analysis .................................................................................... 29
Validity ..................................................................................... 30
Limitations ................................................................................. 31
Ethical Considerations ................................................................... 31
CHAPTER 4
RESULTS/PRESENTATION OF FINDINGS .......................................... 32
Section 1: Revenue, Expenditure and Enrollment Trends ........................... 33
Institutional Financial Aid Expenditures .......................................... 34
Institutional Revenues ............................................................... 34
Enrollment ............................................................................ 36
Summary .............................................................................. 38
Section 2: Coordinated Tuition and Aid Policy ....................................... 40
Survey Results ........................................................................ 40
Bi-variate Regression Results ...................................................... 47
Need-Based Aid ...................................................................... 55
Summary .............................................................................. 64
Section 3: Support for Institutional Mission ........................................... 70
State Policy ........................................................................... 71

TABLE OF CONTENTS (CONTINUED)

University Mission .................................................................. 72
Summary ............................................................................. 76
Section 4: Resource Dependence Theory as a Valid Framework .................. 77
University Revenues ............................................................... 78
Expenditures for Institutional Aid ................................................ 79
Strategic Allocations ............................................................... 81
Altemative/External Sources of Aid ............................................. 82
Summary ............................................................................. 85
Summary of Results/Findings .......................................................... 86
CHAPTER 5
SUMMARY, CONCLUSIONS AND IMPLICATIONS .............................. 88
Purpose of Research ..................................................................... 88
Tuition and Financial Aid Trends in Michigan ....................................... 90
Conceptual Framework .................................................................. 91
Research Design .......................................................................... 91
Results ..................................................................................... 92
Revenue, Expenditures and Enrollment Trends .................................. 93
Coordinated Tuition and Aid Policy ............................................... 93
Support for Institutional Mission ................................................... 99
Resource Dependence Theory ...................................................... 100
Conclusions ............................................................................... 101
Implications ............................................................................... 106
APPENDICES .............................................................................. 111
Appendix A: Financial Aid Oﬂicer Survey Questionnaire ........................ 112
Appendix B: Budget Oﬂicer Survey Questionnaire ................................. 116
Appendix C: Survey Questionnaire Cover Letter .................................... 119
REFERENCES .............................................................................. 121

vi

LIST OF TABLES

Table 1: Carnegie Classiﬁcation of Michigan Public Universities ............... 27
Table 2: Description and Number of Survey Participants ........................... 29

Table 3: Average Tuition Discount Rates and Average Tuition and Fee
Revenues as a Percent of Average Total Current Fund Revenues
In Fiscal Year 2000 ............................................................. 39

Table 4: Relationship Between Tuition & Fee Policy and Institutional
Financial Aid Policy ........................................................... 41

Table 5: Financial Factors Linked to Funding for Institutional Financial Aid
Programs ......................................................................... 42

Table 6: Linkage between Tuition & Fee Revenue and Funding for
Institutional Aid ................................................................. 42

Table 7: Summary of Bi-variate Regression Analysis of Variables Predicting
Change in Average Institutional Financial Aid Expenditure for All
15 Michigan Public Universities ............................................. 48

Table 8: Summary of Bi-variate Regression Analysis of Variables Predicting
Change in Average Institutional Financial Aid Expenditure by
Carnegie Classiﬁcation ......................................................... 49

Table 9: Summary of Bi-variate Regression Analysis of Change in Tuition
& Fee Revenue Variable Predicting Change in Institutional
Financial Aid Expenditure ..................................................... 51

Table 10: Surmnary of Bi-variate Regression Analysis of Change in Tuition
& Fee Revenue Variable Predicting Change in Institutional
Financial Aid Expenditure With Outliers Removed ....................... 52

Table 11: Summary of Bi-variate Regression Analysis of Other Variables
Predicting Change in Institutional Financial Aid Expenditure ............ 54

Table 12: Three-year Trend in Average Allocation to Financial Aid as
Estimated by All Survey Participants ......................................... 57

Table 13: Institutional Response to the Increase in the Number of Financial
Aid Applicants ................................................................... 58

LIST or TABLES (CONTINUED)

Table 14: Estimated Percent of Institutional Financial Aid by Type of Aid
And Carnegie Classiﬁcation for 2000-2001 ................................. 60

Table 15: Percent of Aid Applicants Awarded Institutional Need-Based Aid
in 2000-2001 ..................................................................... 62

Table 16: MissionNision Statement Content Related to Access or
Affordability At Michigan’s Public Universities ........................... 73

Table 17: Summary of Institutional Access/Affordability Goals Compared
To Institutional Policy ......................................................... 75

Table 18: Estirmted Percent of Institutional Financial Aid by Source of Aid
And Carnegie Classiﬁcation for 2000-2001 ................................. 83

viii

LIST OF FIGURES

Figure 1: Average Revenue/Expenditures—l 5 Michigan Public
Universities ..................................................................... 33

Figure 2: Change in Average Revenue/Expenditures- l 5 Michigan Public
Universities ................................................................... 36

Figure 3: Average Enrollment for Michigan’s Public Universities by

Carnegie Classiﬁcation ...................................................... 37
Figure 4: Need-Based Grant as a % of Institutional Financial Aid ............... 69
Figure 5: Average Sources of Revenue-l 5 Michigan Public Universities ....... 84

ix

CHAPTER 1
INTRODUCTION
ﬁrtement ofthe Problem

Simply deﬁned, access is the goal of providing qualiﬁed students with the
opportunity to participate in higher education by removing the ﬁnancial barriers that
prevent them ﬁom doing so. Indeed, with the passage of the Higher Education Act of
1965 and the federal policies that followed, the provision of federal student aid in the
form of grants, loans and work-study opened the doors to higher education for low-
income students by removing ﬁnancial barriers (Spencer, 1999). Since 1965, the notion
of “access” has become a complex matter. As Eaton (1997) explains it, national access
policy has been extended beyond the early, “simple” consideration of ability-to-pay to
also accommodate diversity, choice, motivation and lack of academic preparation.
Further, public policy related to access is carried out through a myriad of programs at the
federal, state and institutional levels.

To facilitate access to public higher education for low-income students, state
governments and colleges and universities historically sought to hold down the price of
tuition (Halstead, 1990). “Low tuition” policies were prescribed and/or supported by
state legislatures through direct appropriations to public colleges and universities (Eaton,
1997; Halstead, 1990). In Michigan, where public colleges and universities are
constitutionally autonomous, the state legislature has attempted to hold tuition rates down
through the appropriation process and through legislation such as tax incentives for
taxpayers who attend public institutions holding tuition increases below the previous

year’s inﬂation rate (Martinez & Nodine, 1997). In addition to state support in the form

of appropriations, the federal government, the states and institutions have facilitated
access for low-income students through the provision of need-based, ﬁnancial aid
(Creech & Davis, 1999).

In recent history, economic events have signiﬁcantly affected state and
institutional policies for and commitment to access for low-income students. Reduced
state subsidies for public higher education and declining or static enrollments contributed
to spiraling increases in college and university tuition prices during the 19808. From
ﬁscal year 1980-81 through ﬁscal year 1994-95, tuition at public universities increased
by 234% while the median household income increased by only 82%; further, federal
ﬁnancial aid programs failed to keep pace with the rising rate of tuition (Starnpen &
Layzell, 1997). In order to keep higher education affordable to low-income students in
an environment of rising tuition rates, states and institutions were called upon to invest
additional resources in need-based, ﬁnancial aid to offset, or discount, the rising price of
tuition. This pricing strategy is often referred to as “high-tuition/high-aid”. States and
colleges and universities utilizing the “high-tuition/high-aid” strategy, also referred to as
the “market model”, set higher tuition prices that more accurately represent the true costs
of higher education, including the cost of an increased investment in need-based ﬁnancial
aid (Stampen & Layzell, 1997).

Evidence indicates, however, that it is rare today to ﬁnd states enacting policies
that explicitly link funding for public higher education, tuition rates and funding for need-
based, ﬁnancial aid programs. In three different studies, researchers found that states
pursuing a high-tuition policy failed to provide a correspondingly high investment in

need-based ﬁnancial aid (Griswold & Marine, 1996; Hearn & Anderson, 1995; Hossler,

Lund, Ramin, Westfall, & Irish, 1997). These studies conclude that access for low-
income students is unlikely to be sustained in today’s environment of limited resources
unless state tuition policies and state ﬁnancial aid programs are explicitly linked and
supported (Griswold & Marine, 1996; Hossler et al., 1997). These studies, however, do
not describe the linkages between tuition pricing policy and ﬁrnding for need-based aid at
the institutional level nor the impact that institutional policies might have on sustaining
access for low-income students. Although public universities in most states are controlled
by a single governing or coordinating board responsible, to some degree, for the
development and implementation of policy, public universities in Michigan are controlled
by individual, autonomous boards of control (McGuinness, 1997, 1999). Studies of
ﬁnancial aid and tuition policy at institutions in states controlled by a single board may
very likely yield ﬁndings similar to the studies of statewide policy. Given the
constitutional autonomy of the 15 public universities in Michigan, however, a study of
policymaking at the university level could yield ﬁndings divergent from those discovered
in the studies of tuition pricing and need-based aid ﬁmding policies at the state level.
mg and Research Questions

The purpose of this study, then, is to determine the extent to which institutional
policymakers at Michigan public universities link policy decisions related to need-based
ﬁnancial aid and tuition pricing and to determine if these decisions support institutional
goals related to access and affordability. To this end, the research questions examined in
this study are as follows:

To what extent are institutional policy decisions related to funding for need-based

ﬁnancial aid programs and tuition pricing linked at the 15 Michigan public
universities?

To what extent do these policies support or counteract the institutional mission or
goals related to access and/or affordability?

Si ' cance

Expanding access to higher education by eliminating ﬁnancial barriers for
qualiﬁed students has been the historic purpose of federal, state and institutional ﬁnancial
aid programs. This coordinated effort to provide ﬁnancial assistance to disadvantaged
students has supported the educational goals of social equality and economic growth. As
the value of a college education has increased, the need for programs that facilitate access
to a higher education for the disadvantaged have become even more critical. In 2002, the
annual earnings of a college graduate were estimated to be 80% higher than that of a high
school graduate (College Entrance Examination Board, 2002a). To the extent that
ﬁnancial aid is not available to low-income students to facilitate their access to a college
education, social inequality is perpetuated. Because the results of this study include the
various pricing strategies and ﬁnancial aid funding policies utilized by Michigan’s public
universities, the study may be useful to university administrators attempting to facilitate
access for low-income students by identifying institutional models that are successful in
this regard. Further, the study may be of signiﬁcance to state policymakers as they
evaluate policies and other factors that facilitate or negatively affect low-income student
access to higher education, speciﬁcally access to public universities in Michigan.

While there is documented evidence of growth in institutionally funded ﬁnancial
aid, information about how institutions are allocating this funding between merit-based
and need-based ﬁnancial aid is elusive (Mortenson, 1999). A recent study of trends in
expenditures for ﬁnancial aid noted that institutional expenditures for need-based grant

and non need-based grant are not distinguished within the report because accurate

information is not available (College Entrance Examination Board, 2002b). This study is
signiﬁcant because it reveals estimated allocations to need-based grant and merit-based
scholarship at Michigan’s public universities.

Context and Background

Despite the historical efforts to eliminate ﬁnancial barriers for low-income
students, their participation in higher education continues to lag behind that of high-
income students. While the percentage of low-income students participating in higher
education increased ﬁ'om 46% in 1970 to 58% in 1994, participation by low-income
students continued to lag behind participation by high-income students by approximately
30 percentage points (Hartle & King, 1997; Mortenson, 1999). In their analysis,
McPherson and Schapiro (1998) found that the enrollment gap between low-income and
high-income students actually increased by 12 percentage points during the period 1980
to 1993. A recent report by the Advisory Committee on Student Financial Assistance
predicts that this trend will continue; the Committee estimated that ﬁnancial barriers will
prevent 48% of qualiﬁed, low-income, high school graduates ﬁ'om attending a four-year
college and 22% ﬁ'om attending any college at all within two years after graduating from
high school (Advisory Committee on Student Financial Assistance, 2002).

Low-income students that are participating in higher education are increasingly
doing so at community colleges. Between 1980 and 1994, the number of low-income
students attending cormnunity colleges increased while the number of middle-income and
high-income students attending community colleges decreased (McPherson & Schapiro,
1998). In 1999-2000, only 25% of the lowest-income, ﬁrst-year, traditional

undergraduate students attended a public, four-year university while 55% attended a

public, two-year university (Institute for Higher Education Policy, 2002). Factors such
as increasing tuition prices and the reduced purchasing power of federal and state
ﬁnancial aid may have contributed to the low participation rates of low-income students
at public universities. It is not surprising to learn that the enrollment gap between low-
income and high-income students has been found to be greatest in high-tuition states
(McPherson and Schapiro, 1998).

Evidence also indicates that colleges and universities are increasingly engaging in
selective tuition discounting by awarding merit-based scholarships and/or leveraging
need-based ﬁnancial aid to attract high-quality students (McPherson & Schapiro, 1998).
Colleges and universities utilizing a selective tuition discounting strategy, invest tuition
revenue in merit-based scholarships that are designed to attract high-quality students who
can enhance the prestige of the institution and/or that are designed to meet other
enrollment goals. Merit-based scholarships are most often awarded based on the student’s
high school grade point average and/or standardized test score. Because of the effect of
family income on high school grade point average and standardized test scores, merit-
based scholarships are more likely to be awarded to students ﬁ'om aﬂluent families.

The 1997 ACT Mean Composite Score was lowest for students ﬁ'om families with
the lowest family income and highest for students from families with the highest family
income (Mortenson, 1997). Further, average high school grades in 1996 increased as
family income increased (Mortenson, 1999). The ﬁnancial aid packages of students ﬁom
low-income families are therefore less likely to include institutional ﬁnandﬂm'd and are
more likely to include a relatively higher self-help (work and loan) component at colleges

and universities practicing selective tuition discounting.

In an analysis of data gathered by the I 993 National Postsecondary Student A id
Stuafy, King and Redd (1997) found that there was a greater burden on low-income
students to borrow to cover the cost of attendance at colleges and universities. This is
particularly troubling because other studies have shown that the receipt of self-help
assistance is not positively correlated to the low-income student enrollment decision
(Somers & St.John, 1997). And McPherson and Schapiro (1998) found that increases in
the net-tuition price negatively affected the enrollment rates of low-income students.
Therefore, low-income students faced with rising tuition rates and ﬁnancial aid packages
largely comprised of loan and work assistance are less likely to enroll.
Resource Dependence Theory

As Baldridge (1971) describes it, the study of policymaking is the study of those
institutional decision processes that are critical and are likely to have long-lasting effects
on the institution. Although few studies of the application of organizational theory to
higher education were conducted before the mid-19703, the ﬁeld has advanced
signiﬁcantly since that time (Peterson, 1991). Internal models that attempt to explain the
governance process or unique attributes of post-secondary institutions, external models
that describe the impact of external forces on the institution, cultural and value system
models, and inter-organizational models are examples of the types of models that have
been developed and/or studied in recent decades (Peterson, 1991). Peterson (1991)
explains that while the early models were primarily concerned with explaining the
internal dynamics and impacts on organizational performance, models that are more
recent are concerned with studying external forces and their impact on the organizational

decision process. Other models that have been applied to the study of higher education

policymaking in the last decade include contested state theory, resource dependence
theory and positive political theory (Pusser, 1999; Slaughter & Leslie, 1997).

For example, Pusser (1999) used several policymaking models to frame his
research of the contest over afﬁrmative action at the University of California. Contested
state theory was utilized to frame the study of this conﬂict as a struggle for access to
public higher education; the positive theory of institutions (PTI) ﬂamed the study as a
political struggle among interest groups to control a public beneﬁt; interest articulation
theory framed the study of the University’s efforts to ‘Tnediate” the conﬂict into policy;
and, institutional cultural theory assisted in framing the evolution of the contest (Pusser,
1999). But because the change in policy enacted by the University of California was not
in concert with the majority party of the state legislature (from which the university
received approximately 35% of its revenues), Pusser (1999) rejected the use of resource
dependence theory as relevant in ﬂaming this contest.

Resource dependence theory holds that organizations will adapt to the
environment in order to obtain resources that are critical to the survival of the
organization; those that control the resources, then, have signiﬁcant power over the
organization (Pfeﬂ‘er & Salancik, 1978). Unlike internal organizational theories that
explain higher education policymaking in terms of management theory or governance
models, resource dependence theory ﬁnds that many of the policies enacted by an
organization are in response to the external forces that control needed resources (Pfeﬁ‘er
& Salancik, 1978; Slaughter & Leslie, 1997). Pfeﬂ'er and Salancik (1978) argue that the
resource dependence perspective “denies the validity of the conceptualization of

organizations as self-directed, autonomous actors pursuing their own ends and instead

argues that organizations are other-directed, involved in a constant struggle for autonomy
and discretion, confronted with constraint and external control” (p.257).

Slaughter and Leslie (1997) utilized resource dependence theory to explain the
emergence of academic capitalism in higher education in the United States, the United
Kingdom, Australia and Canada. Their research suggests that as public, “undesignated”
funding for higher education declines, universities and their faculty must compete for
alternative sources of external funding resulting in “acute resource dependence”. As
Slaughter and Leslie (1997) explain it:

Resource dependence theory suggests that as unrestricted moneys for higher

education constrict, institutions within a national system will change their

resource-seeking patterns to compete for new, more competitively based ﬁlnds.

To respond to new opportunities, institutions will have to shift away ﬁ'om basic

research toward more applied science and technology. Further, they will likely

increase tuition and become more active in expanding sales and services while
lowering labor costs, primarily through replacing full-time faculty with part-time
professors. To manage the shift from more unrestricted to more restricted
moneys, institutions will likely spend more ﬁmds on administration as they
attempt to oversee the transition as well as to manage new revenue generating
endeavors (such as institutional advancement-fund raising ﬁom private sources-
arxl sales and services of their own educational activities) and academic

capitalism (such as ofﬁces for patenting and licensing, technology transfer, arm’ 3-

length corporations, spin-off companies and research parks). (p. 65)

Slaughter and Leslie’s (1997) ﬁndings also conﬁrm that since the 19803, the share
of revenues ﬁ'om state appropriations for public higher education has declined while the
share ﬁom tuition continues to steadily increase. Due to this grth in tuition revenue,
students are increasingly viewed and treated as important customers; Slaughter and Leslie
(1997) posit that student power and control over institutional policymaking will also
steadily increase. Slaughter and Leslie (1997) further ﬁnd a growing institutional
investment in student recruiting efforts as yet another outcome of the increasing reliance

on tuition revenues at US. higher education institutions. Perhaps resource dependence

theory should not lmve been dismissed as a valid ﬁarnework for evaluating the contest
over afﬁrmative action at the University of California. It is likely that tuition also
represented an important revenue source and the student movement galvanized as a result
of this contest has been credited for changes in admissions standards that redress
educational inequality (Pusser, 1999).
Conceptual Framework

Resource dependence theory is utilized to frame this study: determining the extent
to which institutional policymakers at Michigan public universities link policy decisions
related to need-based ﬁnancial aid and tuition pricing, and to determine if these decisions
support institutional goals related to access and affordability. From a resource
dependence perspective, one expects to ﬁnd accelerating rates of tuition at Michigan
public universities in response to moderating or declining state appropriations. In order
to maximize tuition revenues, one expects to ﬁnd decreasing expenditures for
institutional ﬁnancial aid; however, the use of ﬁnancial aid as an effective recruiting tool
lms previously been noted. The adage ‘you have to spend some money to make some
money” may apply here. From a resource dependence perspective, it seems likely for one
to ﬁnd expenditures for ﬁnancial aid to be strategic and to ﬁnd institutions seeking
external sources of ﬁmding to cover the cost of institutional ﬁnancial aid programs. In
addition to answering the research questions, the research data gathered and analyzed

expands knowledge about the useﬁrlness of resource dependence theory as a framework

for studying higher education policymaking.

10

CHAPTER 2
REVIEW OF RELATED LITERATURE

The number of studies that have been conducted to determine the extent to which
state and/or institutional policymakers link policy decisions related to need-based
ﬁnancial aid and tuition pricing are few. Those studies that have been conducted are
reviewed in this chapter and the limited data that are available regarding such
policymaking in Michigan are highlighted. In addition, the trends in institutional
ﬁnancial aid policy including the literature that describes the emerging practice of
selective tuition discounting in higher education are reviewed.

State and Institutional Policy_nﬂo_r_1g’

Recent reports conﬁrm that tuition and fee rates have increased dramatically in
the last decade and tuition revenue as a percentage of current fund revenue for public
higher education continues to rise; for example, the State Higher Education Executive
Ofﬁcers (SHEEO) report that average tuition and fee rates increased 94% (in current
dollars) ﬁ'om ﬁscal year 1990-91 to ﬁscal year 2000-01 (McKeown-Moak, 2001). The
report also indicates that tuition revenue comprised 12.9% and state appropriations
comprised 44% of total current fund revenues for public colleges and universities in
1981; by 1998, tuition revenue’s share increased to 20% and state appropriation’s share
decreased to 30% (McKeown-Moak, 2001 ). Although the cost to attend public higher
education as a percentage of family income has stabilized overall, the percentage has
increased signiﬁcantly for low-income families in the last decade; average cost of
attendance as a percentage of family income increased from 40% to 62% for families in

the lowest quintile of income distribution (AASCU & NASULGC, 2002;

ll

McKeown-Moak, 2001).

Similarly, expenditures for institutional ﬁnancial aid more than doubled in the last
decade (McKeown-Moak, 2001). Institutional aid increased at a slightly higher rate than
federal and state aid, increasing by 92% in the last decade while federal aid increased by
83% and state aid increased by 90% (in current dollars) (AASCU & NASULGC, 2002).
And in the categories of federal and state aid, there has been a shift in the focus of
ﬁmncial aid programs from need-based aid targeted for low-income students to tax
incentives and merit aid that predominantly assist middle and high-income students.
Non-need based aid as a percentage of total state ﬁnancial aid increased ﬁ'om 11% in
1989-90 to 21% in 1999-2000 and the number of states that implemented a state merit
based scholarship program has increased by 60% since 1998 (AASCU & NASULGC,
2002; McKeown-Moak, 2001). Further, it is estimated that the lost federal revenue
resulting from federal tax incentives in the form of education tax credits, deductions and
saving incentives will exceed the combined cost of all of the other federal ﬁnancial aid
programs in existence (McKeown-Moak, 2001).

Although these general data describing trends in university revenues and
expenditures are available, research studies that speciﬁcally analyze the extent to which
institutional policymakers link policy decisions related to need-based ﬁnancial aid and
tuition pricing are apparently non existent. Research studies have, however, been
conducted of such policymaking at the state level.

For example, Hossler et al. (1997) conducted research that encompassed all 50
states and included the study of the extent to which funding for state ﬁnancial aid

programs and the setting of tuition rates at public colleges and universities are linked.

12

Data for the study were collected from three sources: state ﬁnancial, economic and
governance factors from the early 19908 collected ﬁom primary and secondary sources;
surveys of each state’s higher education executive ofﬁcer (SHEEO) and ﬁnancial aid
director; and in-depth telephone interviews with SHEEOs, state ﬁnancial aid directors,
other state policymakers and analysts. Frequencies, CROSS-TABS, t-tests, regression
analysis and factor analysis were utilized to examine the data and to identify relationships
between variables.

The results of the survey and in-depth telephone interviews indicate that little
relationship exists between the two areas of policymaking. Approximately 52% of the
state ﬁnancial aid directors surveyed reported that there was little relationship between
funding for state ﬁnancial aid programs and the setting of tuition rates, approximately
37% reported that there was a less formal relationship and approximately 9% of the
respondents indicated that state ﬁnancial aid and tuition pricing policies were formally
linked in their state. In addition, 59% of the respondents reported that the average state
ﬁnancial aid award per student had remained either stable or decreased. Further, the
majority of the study participants reported no plans in their state to control affordability at
public universities through the linkage of state appropriations for ﬁnancial aid and the
setting of tuition rates.

In addition to the surveys and interviews of state higher education policymakers
and analysts, Hossler et a1. (1997) conducted statistical analysis of the relationship
between average tuition levels and state ﬁnancial aid appropriations. They hypothesized
that if state ﬁnancial aid and tuition pricing policies were linked then average public

tuition levels should be associated with state ﬁnancial aid appropriations. Results ﬁ'om

l3

the t-test run to compare average public tuition levels and state ﬁnancial aid
appropriations were insigniﬁcant. Regression analysis was also employed to identify
potential independent variables predicting funding for state ﬁnancial aid programs. None
of the independent variables tested, including average public tuition levels, were
identiﬁed as signiﬁcant predictors of funding for state ﬁnancial aid programs. Hossler et
a1. (1997) suggest that the “rhetoric of the market model is being used as a justiﬁcation
for reduced state appropriations to public institutions and increased tuition levels in the
public sector, but public policy makers have ignored the other part of the market model
equation —higher levels of state ﬁnancial aid” (p.182). They conclude that educational
opportunity is unlikely to be sustained without a commitment to coordinated tuition and
ﬁnancial aid policy.

Hearn, Griswold and Marine (1996) discovered similar ﬁndings in their study of
the differences and similarities in tuition pricing and ﬁnancial aid policies in the 50 states
in the early 19908. Data for the study were collected from secondary data sources for the
period 1985 to 1990 and bi-variate descriptive analyses, analysis of variance and multiple
regression analysis research methods were utilized to examine the data. They analyzed
the rehtionship between state factors (i.e., regional location, available resources and
higher education governance structure) and tuition pricing and ﬁnancial aid policies.
Their results included ﬁnding a strong relationship between both region and tuition
pricing and region and ﬁnancial aid ﬁrnding, a strong relationship between population
and funding for ﬁnancial aid, a strong, negative relationship between state economic
development and tuition pricing, and mixed results in their examination of educational

resources. They also examined the relationship between state tuition policies and state

14

ﬁnancial aid policies and found the Pearson correlation between the average tuition level
at public institutions and per capita need-based aid to be .41 , indicating that only about
17% of the variation in per capita need-based aid could be explained by the average
tuition level. Another interesting and relevant ﬁnding of this study was that both those
states with planning agency governance structures and those states with strong
coordinating boards were identiﬁed as high tuition states. Michigan is one of four states
identiﬁed as a planning agency state. McGuinness (1997) describes a planning agency
governance structure as one that has no statutory authority to govern or coordinate policy
and whose responsibility is often limited to facilitating communication among institutions
and sectors.

Griswold and Marine (1996) conducted a case study of changes in tuition and
ﬁnancial aid policies during the 19808 and early 19908 in ﬁve states; two of these states
were identiﬁed as states with explicitly linked tuition and aid polices (Minnesota and
Washington) and three were identiﬁed as having unlinked policies (New York,
Massachusetts, and California). They reviewed news and research publications, policy
initiatives and interviewed state policymakers. Their study found that all of the states had
attempted to implement signiﬁcant tuition increases in response to economic problems.
However, in those states with explicitly linked policies, the inﬂuences of ﬁscal exigency
and politics were lessened because of the existence of coordinated plans. Similarly, Beam
and Anderson’s (1995) case study of the development and implementation of a high
tuition/high aid policy in Minnesota concluded that the “experiment” was largely
successful in meeting this state’s goals of maintaining educational quality and access

while preserving limited ﬁnancial resources. Griswold and Marine (1996) conclude that

15

better planning and better coordination of state ﬁnancial aid and tuition policies is needed
to support a high tuition/high aid strategy but also suggest that the implementation of
such a strategy may be difﬁcult to accomplish. As Griswold and Marine (1996) put it:
“One of the challenges facing supporters of such programs is garnering support for a
program which seems to aid groups with less political clout at the expense of those with
more power and who are more likely to vote” (p.384).

In his examination of how state ﬁnancing policies (appropriations to public higher
education, tuition pricing and state ﬁnancial aid programs) can better support access and
accountability, Hauptman (2001) reports that spending for state ﬁmncial aid programs is
limited to, on average, 5% of state higher education budgets. Further, he ﬁnds that most
often the budgets set for state ﬁnancial aid programs are not the result of explicit
policymaking but instead are based on “residual” moneys available to ﬁmd such
programs. Hauptman (2001) recommends coordination of state ﬁnancing policies in
order to achieve accessibility and affordability.

One of many conclusions that McPherson and Schapiro (1998) draw from their
analysis of higher education ﬁnancing and its impact on postsecondary access and choice
in recent decades is that reductions in state funding have led to rising public tuition prices
without a concomitant increase in aid for ﬁnancially needy students. They further posit
that rising expenditures for merit based ﬁnancial aid by both states and institutions have
also reduced the resources available to facilitate access for low-income students.

A number of the research studies that Donald E. Heller conducted (1996, 1997,
1999; Heller & Laird, 1999) have examined the impact of state tuition and ﬁnancial aid

policies on access to public higher education. Heller’s (2001) most recent update

16

examines the relationship of college tuition prices, state ﬁnancial aid ﬁrnding and
enrollment in public colleges and universities across all 50 states for the period 1976 to
1999. The evidence indicates that a relationship does, in fact, exist between tuition
prices, ﬁnancial aid and college attendance. The model that he developed ﬁom these
relationships found that, on average, a 10% tuition increase would need to be offset by a
15.9% increase in state grant spending per capita to maintain current enrollments in four-
year public institutions. In an earlier study, Heller and Laird (1999) found that the largest
growth in expenditures for need-based aid ﬁom 1989 to 1995 occurred in public
institutions; they surmise that this increase in institutional ﬁnancial aid expenditures was
necessary to mitigate high tuition increases.

The US. Department of Education’s National Center for Education Statistics
(2001) conducted a research study of college costs and prices for the period 1988-89 to
1997-98; data for the study were collected ﬁom the Integrated Postsecondary Education
Data System (IPEDS). The research methods of the study included identifying trends in
the data and multiple regression amlyses of the relationships between variables. One of
the purposes of the research study, as requested by Congress, was to determine the effect
of institutional aid on tuition increases. The study found that expenditures for
institutional scholarships and fellowships increased more than most other expenditures at
all types of public higher education institutions; the average annual percentage increase in
expenditures for scholarships and ﬁnancial aid for the 10 year time period of the study
was 4.5 for research doctoral universities, 3.6 for comprehensive universities, 2.5 for
bachelor’s universities and 4.3 for 2-year colleges (U .S. Department of Education

Natiorml Center for Education Statistics, 2001). Using a correlation regression model,

17

the study also found a signiﬁcant relationship between the change in institutional
scholarships and fellowships and the change in ill-state undergraduate tuition at public
institutions; the relationship was signiﬁcant for all types of institutions for the time period
1988-89 to 1997-98 with the exception of two-year institutions (U .S. Department of
Education National Center for Education Statistics, 2001). Authors of the study warn
that the relationship between ﬁnancial aid and tuition is unlikely to be a “direct link” as
interrelationships among many factors, including those external to the institution, likely
aﬂ'ect changes in tuition pricing (U .S. Department of Education National Center for
Education Statistics, 2001).

Policies and Practices in Michigg

There were no studies identiﬁed in the review of the research that were
undertaken for the purpose of determining the extent to which state and/or university
policymakers in Michigan link policy decisions related to need-based ﬁnancial aid and
tuition pricing. However, the reports and studies summarized below illuminate the status
of higher education ﬁnancing in Michigan.

Due to concerns about rising tuition rates and the potential impact on educational
quality and access, the Michigan Senate commissioned a study of tuition policy at
Michigan colleges and universities in 1989 (Senate Select Committee on Higher
Education To Study Tuition Policy at Michigan Colleges and Universities, 1990). It was
found that ﬁ'om 1977 to 1989, tuition revenues at Michigan colleges and universities
increased by 155%. One of the largest expenditure increases at Michigan colleges and
universities during this same time period was a 37% increase in ﬁnancial aid

expenditures. The researchers posited that this increase in institutional ﬁnancial aid was

18

necessary to “mitigate” signiﬁcant tuition increases. In this same report, Halstead (1990)
stated that Michigan ranked 47th in affordability, as a higher percentage of family income
was required to pay for postsecondary education in Michigan than in most other states.

Martinez and Nodine (1997) conducted a case study of the critical ﬁnancial issues
affecting Michigan for the period 1990-1995 by interviewing public ofﬁcials and higher
education administrators through December 1996. Martinez and Nodine (1997) found
great legislative concern with Michigan’s continuing status as a high tuition state. Their
report also included the following data: in 1995-96, the amount that students in Michigan
public universities paid in tuition as a percentage of total revenues was 43% compared to
the national average of 3 1 .6%, and the proportion of median family income required to
make tuition payments was 11% in Michigan compared to 6.9% nationally. Martinez and
Nodine (1997) reported moderate growth in expenditures for state and four-year public
institutional ﬁnancial aid programs during the period 1989-90 to 1994-95; the most
signiﬁcant growth ill aid expenditures during this time period was in the category of
federal student loans. Martinez and Nodine (1997) surmised that the existence of these
factors signal a potential affordability problem in Michigan.

In 1999, Governor Engler created the Michigan Commission on Financing
Postsecondary Education to identify ﬁnancial challenges facing Michigan students and
potential solutions to these challenges. Although the apparent intent of the ﬁnal report of
the Commission (2000) was to introduce the new Michigan Education Savings Plan, it
presents percentage increases in tuition at the public universities in the state. For the
period 1988-1998, tuition increased by as much as 52% at some of the universities.

Unfortunately, the report does not provide much illumination regarding the status or

19

adequacy of state or institutional aid programs, simply noting that need-based ﬁnancial
aid programs exist.

In November 2000, Measuring Up 2000: The State-by-State Report Card for
Higher Education (National Center for Public Policy and Higher Education, 2000)
assessed state performance in six categories: preparation, participation, affordability,
completion, beneﬁts and learning. Michigan “earned” a grade of ‘C’ in the affordability
category. Low scores for two of the factors considered, “Need-based Financial Aid” and
“Low-Priced Colleges”, contributed to this average grade. In comparing Michigan’s
scores to those of ‘A’ rated states, a pattern is discernible. The ﬁve ‘A’ rated states
appear to have implemented, explicitly or otherwise, either low tuition/low aid or high
tuition/high aid linked policies; Michigan, on the other hand, appears to be operating with
a high tuition/low aid strategy.

The National Center for Public Policy and Higher Education (2002a) recently
examined the aﬁordabiﬁty of American higher education by analyzing national trends as
well as state trends. For the last decade in Michigan, the study found that tuition at
public four-year institutions increased 39% (adjusted for inﬂation) while state grant aid
per student increased by only 2% (National Center for Public Policy and Higher
Education, 2002a).

Institutional Financial Aid

As reported previously, evidence in the literature shows substantial growth in
expenditures for institutional ﬁnancial aid on an annual basis. Over the last decade, from
1999-2000 to 2000-2001, expenditures for institutional ﬁnancial aid increased 9% per

year in current dollars (AASCU & NASULGC, 2002). However, none of the evidence

20

indicates that the majority of this ﬁrnding has been allocated to need-based ﬁnancial aid
programs. In fact, evidence indicates that institutional aid is increasingly allocated to
programs intended to attract high academic achievers or other special populations to
campus.

Colleges and universities utilizing a selective tuition discounting strategy invest
tuition revenue in merit-based scholarships that are designed to attract high-quality
students who can entrance the prestige of the institution and/or that are designed to meet
other enrollment goals. The following is a review of studies that report the growth in the
practice of selective tuition discounting. In Lapovsky’s (1997) analysis of the results of a
NACUBO sponsored survey of private colleges and universities, she found that more
institutions were publicly engaging in the practice of selectively discounting tuition in
1996 than had reported doing so in the 1995 survey. Although in a recent update to her
study Lapovsky and Hubbell (2001) report a stabilization in the average discount rate for
new freshmen, they warn that at 37.7 percent, the rate is likely too high for many
institutions to bear. Institutions reported discounting the tuition for students ﬁom
speciﬁc geographic locations, students who were members of speciﬁc honor societies and
students who were children of alumni. In an analysis of the US. Department of
Education ’3 National Postsecondary Student Aid Study, Lee (1999) found that 30% of
federal, state and institutional grants were awarded to students with Emily incomes
greater than $50,000 in 1995-96. In a continuing longitudinal study of higher education
national databases, Starnpen and Layzell (1997) found that 20% of available aid per
student was comprised of non need-based grants in 1995. Wilkinson (1998) reports that a

1994 survey of colleges and universities, sponsored by the National Association of

21

College Admission Counselors, found that 64% of the private and 34% of the public
colleges and universities that responded to the survey indicated they practiced
preferential aid packaging. In a study of the impact of ﬁnancial aid strategy on the
enrollment decision, Somers and St. John (1997) found that each of the four institutions
they studied were selectively discounting tuition to some extent by offering institutional
merit-based scholarships.

In their study of 29 highly selective private colleges and universities, Mulugetta,
Saleh, and Mulugetta (1997) found that for the period 1985-86 to 1995-96, the average
tuition and fees of these institutions increased by 96% while expenditures for institutional
ﬁnancial aid increased by 124%. Mulugetta et al. (1997) also found that there was a
higher growth rate in expenditures for institutional ﬁnancial aid at the institutions that
awarded aid to students based on an admission rating of the student’s competitiveness
than at those institutions that awarded aid to students based on ﬁnancial need. Mulugetta
et al. (1997) suggested that selective tuition discounting has become common practice.

From their analysis of data ﬁom the Integrated Postsecondary Education Data
System (IPEDS), McPherson and Schapiro (1998) reported that both public and private
research and doctoral universities dramatically increased spending for scholarships ﬁom
unrestricted sources and for total institutional ﬁnancial aid during the period 1987 to
1994, increasing expenditures at an average annual rate of 9%. This tremendous grth
in institutional ﬁnancial aid explains why net tuition and fee revenue grew slower than
gross revenue during this same time period (McPherson & Schapiro, 1998). McPherson
and Schapiro’s (1998) analysis of data ﬁ'om Peterson ’s Institutional and Financial Aid

Database of 379 colleges and universities found that the average, merit-based aid per

22

student increased from $177 in 1983-84 to $505 in 1991-92. While the greatest spending
for merit-based aid in public universities occurred at the least selective institutions, the
highest growth rate in spending for merit aid from 1983-84 to 1991-92 occurred in the
most selective institutions (annual real growth rate of 20%) (McPherson & Schapiro,
1998).

In his analysis of a mtional research study of ﬁnancial aid awarding policies
Kenneth Redd (2000) found that the percentage of institutions awarding institutional
grants based on merit grew ﬁom 20% in 1988 to 41% in 1996. Approximately 1,500
ﬁnancial aid administrators ﬁom public, private and proprietary two-year and four-year
institutions participated in this national survey conducted in 1996. The results of the
survey were compared to an earlier but similar study conducted in 1988. Four-year
public institutions reported an increase of 163% in the number of merit scholarship
recipients and 3 grth of 193% in the value of these scholarships ﬁom 1988 to 1996.
Redd (2000) concludes that the data prove that public colleges and universities are
actively competing for undergraduate students by utilizing selective tuition discounts.
Heller (2000) also found that GPA was a consideration when awarding both need-based
and non need-based grants.

SUM!

The review of the literature indicates that it is rare today to ﬁnd states enacting
policies that explicitly link funding for public higher education, tuition rates and ﬁrnding
for need-based, ﬁnancial aid programs. The evidence regarding the status of such
policymaking in Michigan is inconclusive, as few studies have been conducted that

expressly describe the status of such policymaking in this state. Given the data and trends

23

depicting a pattern of low affordability, however, it appears that higher education
funding, tuition and need-based aid policymaking are not coordinated in Michigan.
Finally, few of the resources identiﬁed descrlbed the extent to which policymakers at the
university level link policies related to need-based aid and tuition pricing but a great deal
of evidence was discovered indicating that universities are increasingly discounting
tuition with merit-based scholarships to attract high-quality students.

Although studies have been conducted at the state level, it appears that little
research has been conducted to determine the linkages between ﬁnancial aid policy and
the setting of tuition rates at the institutional level and to determine if these policies
support institutional goals related to access and affordability. The ﬁndings ﬁ'om this
research study could prove to be useful to both university and state policymakers as the

research questions appear to be largely unexplored.

24

CHAPTER 3
METHODOLOGY/RESEARCH DESIGN
The design of this research was a case study of policymaking at public
universities in Michigan. Speciﬁcally, the study was conducted to determine the
following:
1. To what extent are institutional policy decisions related to funding for need-
based ﬁnancial aid programs and tuition pricing linked at the 15 Michigan

public universities?

2. To what extent do these policies support or counteract institutional mission or
goals related to access and/or affordability?

The study was designed to elicit data about the case and to expand knowledge about the
usefulness of resource dependence theory as a framework for studying higher education
policymaking. According to Leedy and Orrnrod (2001), researchers utilizing the case
study design collect a great deal of data, through varied methods, about the phenomenon
to be studied. Both quantitative and qualitative research methods were employed in this
study. Data for the study were collected from three primary sources: state and
university documents, archival reports and records and a survey of ﬁnancial aid and
budget ofﬁcers at the 15 public universities in Michigan.
Mark

A review was conducted of existing Michigan statute and/or mandate informing
the public university community of expectations and standards related to access and
affordability (e.g., tuition restraint legislation and/or mandate). To determine institutional
goals related to access and affordability, university mission and/or vision statement

documents were collected and analyzed.

25

University reported ﬁnancial data were gathered to determine tuition and fee
rates, tuition revenue, revenue appropriated by Michigan and expenditures for ﬁnancial
aid. Annually reported ﬁnancial data for each of the 15 Michigan public universities for
ﬁscal years 1989-1990 through 1999-2000 were downloaded from the US. Department
of Education’s National Center for Education Statistics (N CES) Integrated
Postsecondary Education Data System (IPEDS)-Peer Analysis System (Years 1990 to
2001). Because the IPEDS data are self-reported, two years of the data (1998-1999 and
1999-2000) were validated by comparing them to the data presented in each university’s
audited ﬁnancial statements. An adjustment was made to the IPEDS reported
institutional aid expenditure for one university as a result of this comparison. To assist in
answering the ﬁrst research question regarding the extent to which ﬁnancial aid and
tuition pricing policies are linked, the ﬁnancial data were also analyzed to determine if
relationships exist between expenditures for institutional ﬁnancial aid and the other
variables (i.e., tuition and fee rates, tuition and fee revenue, state appropriation revenue,
etc.) Because the documents and reports referenced above are public, access permission
was not required.

Additional data for this study were solicited via a survey questionnaire direct
mailed to each university’s ﬁnancial aid director and budget director. The purpose of the
survey was to collect data regarding institutional ﬁnancial aid and tuition policies and to
determine if any models or strategies exist linking these policies. Personal interviews of
the ﬁnancial aid and budget ofﬁcers were considered but a mailed survey instrument was
determined to be the more appropriate research tool due to the sensitivity of some of the

questions and the need for the participants to gather information for some of their

26

responses (Fowler, 1993).

Although the respondents were not asked to disclose their identity nor the identity
of the institution they represent, the surveys were coded so that responses could be
categorized by Carnegie Classiﬁcation. The 2000 Carnegie Classiﬁcation differentiates
institutions based on the type and number of degrees awarded by the institution (The
Carnegie Foundation for the Advancement of Teaching, 2001). Table 1 presents the

Carnegie Classiﬁcation for each of the 15 public universities in Michigan.

Table l. Carnegie Classiﬁcation of Michigan Public Univeraities (200D

 

Carnegie Classiﬁcation Michigan Public Universities

 

Doctoral/Research Universities-Extensive Michigan State University
University of Michigan-Ann Arbor
Wayne State University
Western Michigan University

Doctoral/Research Universities-Intensive Central Michigan University
Michigan Technological University
Oakland University

Master’s Colleges and Universities 1 Eastern Michigan University
Grand Valley State University
Northern Michigan University
Saginaw Valley State University
University of Michigan-Dearbom
University of Michigan-Flint

Master’s Colleges and Universities II Ferris State University
Lake Superior State University

 

The 15 public universities in Michigan are categorized by four of the Carnegie
Classiﬁcations: Doctoral/Research Universities-Extensive (50 or more doctoral degrees

ﬁom at least 15 disciplines awarded per year); Doctoral/Research Universities-Intensive

27

(10 or more doctoral degrees from at least three disciplines awarded per year or 20 or
more doctoral degrees awarded per year overall); Master’s Colleges and Universities I
(40 or more master’s degrees ﬁom at least 3 disciplines awarded per year); Master’s
Colleges and Universities II (20 or more master’s degrees awarded per year).

The surveys of the ﬁnancial aid ofﬁcers (Appendix A) were differentiated ﬁom
the surveys of the budget ofﬁcers (Appendix B) by the addition of questions regarding
ﬁnancial aid awarding practices. Per a written request by the researcher, Dr. Donald
Hossler provided copies of the protocols utilized in the Hossler et al. study (1997).
Although the content of the questions differ, to a great extent the format of the questions
and the design of the survey questionnaire for this study replicate the protocols utilized in
the study conducted by Hossler et al. (1997).

To further protect the personal identity of the respondents, postage-paid, pre-
addressed return envelopes were provided. Because the personal identities of the
participants who actually responded to the survey were unknown to the researcher, a
second letter and survey were delivered to the entire group of potential non-respondents
via e-mail. As an incentive to complete the questionnaire, the ﬁnancial aid and budget
oﬁcers were informed that they would receive a summary report of key ﬁndings at the
conclusion of the study. Nine of the 15 ﬁnancial aid oﬁicers and 11 of the 15 budget
ofﬁcers responded to the survey questionnaire. Two of the completed surveys
represented both the response of the ﬁnancial aid ofﬁcer and tlurt of the budget oﬂicer;
these responses were counted in both participant categories. A description of the

participants is presented in Table 2.

28

Table 2. Description and Nunlber of Survey Participants

 

 

 

Carnegie Classiﬁcation Budget Ofﬁcers Financial Aid Universities
Oﬂicers
Research-extensive (4) l 2 2
Research-intensive (3) 3 2 3
Master’s I (6) 5 4 5
Master’s II (2) 2 1 2
Total (15) 11 9 12
MES

Content analysis was conducted of the Michigan statute and university
mission/vision documents for reference to the speciﬁc terms “access” (ﬁnancial) and
“affordability” or for reference to similar concepts. The frequencies and the actual
terminology used in the university mission/vision statements were categorized by
Carnegie Classiﬁcation and recorded in a matrix for comparison to other ﬁndings.

Descriptive statistics were used to analyze trends in the ﬁnancial data and bi-
variate regression was employed to analyze relationships among the ﬁnancial data
variables. Speciﬁcally, bi-variate regression was used to analyze the relationships
between change in the dependent variable ‘average institutional ﬁnancial aid expenditure’
and change in the independent variables: ‘average federal ﬁnancial aid expenditure’,
‘average state and local ﬁnancial aid expenditure’, ‘average tuition and fee revenue’,
‘average state appropriation revenue’, ‘average tuition and fee rates’, and ‘average Ell
semester enrollment’. Trends and relationships were analyzed of changes in each

variable over the time period 1989-90 tol999-2000 (a=10) for the 15 public universities

29

overall, for each Carnegie Classiﬁcation category of universities and for each university.
Further, bi-variate regression was used to analyze the independent variable ‘change in
revenue ﬁ'om tuition and fees’ as a predictor of the dependent variable ‘change in
expenditures for institutional aid’ for the most current year available (1999-2000) across
all universities (a=15).

Frequencies and mean comparisons were used to analyze the responses to the
survey questionnaire. CROSS Tabs were used to analyze the responses by participant
(budget oﬁcer or ﬁnancial aid ofﬁcer) and by Carnegie Classiﬁcation (Research-
extensive, Research-intensive, Masters I or Masters II). The returned surveys from one
university did not include responses to the questions requesting estimates of the sources
and types of aid funded by institutional resources; institutional ﬁnancial aid expenditures
by type were, however, made available at the university’s web site and this data was
included in the overall results.

The results ﬁ'om the analysis of the three data sources were recorded in matrices
to facilitate identifying relationships, to validate emerging patterns and to identify
divergent data. Patterns and themes were identiﬁed by comparing the ﬁndings ﬁ‘om the
three data sources to patterns predicted by resource dependence theory and the literature
(Creswell, 1994; Yin, 1994).

Lam

Validation of the data was accomplished through triangulation of research
methods by comparing the ﬁnancial data collected from audited ﬁnancial statements to
the IPEDS reported data and by comparing the ﬁnancial data analysis to the ﬁndings

from the survey questionnaire.

30

Limitations

Because this is a case study of ﬁnancial aid policy at public universities in
Michigan, speciﬁc generalizations of the ﬁndings may not be extended to other higher
education sectors or to other states; unlike many states, public universities in Michigan
are constitutionally autonomous. The theory that emerges from the study may, however,
be applicable to other states, public universities and to other types of higher education
institutions. The ﬁndings of this study may also be useﬁll as a basis for similar research
in other states, other universities and other types of higher education institutions.

Ethical Considerations

Survey responses were aggregated by Carnegie classiﬁcation, minimizing risk to
study participants and the universities they represent. Further, the personal identities of
the actual survey respondents were unknown to the researcher. These privacy and
conﬁdentiality safeguards were outlined in the survey questionnaire cover letter
(Appendix C). Because the IPEDS data and the mission/vision statements analyzed in

this study are public records, results were reported by institutional name.

31

CHAPTER 4
RESULTS/PRESENTATION OF FINDINGS

The data and ﬁndings of this research study are presented in four sections. In the
ﬁrst section, revenue, expenditure and enrollment trends ﬁom an armlysis of the IPEDS
ﬁnancial data are reported in aggregate for the 15 public universities and by Carnegie
Classiﬁcation. To understand the relationship between university revenue and
expenditure policy, the trends and changes in the tuition and fee revenue, revenue from
state appropriation, expenditures for institutional ﬁnancial aid and enrollment were
examined over the 11-year period 1989-1990 through 1999-2000.

The second section addresses the research question: to what extent are
institutional policy decisions related to funding for need-based ﬁnancial aid programs and
tuition pricing linked at the 15 Michigan public universities? To answer this question,
both the budget ofﬁcer and ﬁnancial aid oﬁicer responses to the survey questions
regarding policy linkages were analyzed. Further, using the IPEDS reported ﬁnancial
data, bi-variate regression analysis was employed to measure the relationship between
changes in the average expenditure for institutional ﬁnancial aid and changes in tuition
and fee revenue (and changes in other ﬁnancial factors). FirElly, responses to the survey
items that questioned the amount of institutional ﬁnancial aid allocated to need-based
programs were analyzed.

The third section addresses the research question: to what extent do the policies
support or counteract the institutional mission or goals related to access and/or

affordability? To answer this question, the ﬁndings ﬁom Section 2 regarding the

32

existence of policies and linkages supporting access and affordability were compared to
an analysis of institutional mission statements.

Finally, the fourth section analyzes the ﬁndings to determine if resource
dependency theory is a valid ﬁ‘amework for studying institutional policymaking related to

access and affordability.

 

Section 1: Revenue, Eamnditure and Enrollment Trends
Figure 1 presents the trend in expenditures for institutional ﬁnancial aid and the

trend in institutional revenues ﬁ'om tuition and fees and state appropriations for the time

period 1989-90 tol999-2000. The expenditures and revenues presented in Figure 1

 

 

120,000,000-
100,000,000- , ’
f I ’1
z / /
/ ; ’
/ , .
/ , ’
800000001 /‘\__/’
a 9 3 / " ' o
95 .— __ ' ’ -
f5 ‘ ' , .
s
8 60,000,000- ' ,- ’
o ,I ’
is“ ,x'
h
>
< 40,000,000:
Financial Aid Exp.
20,000,000t ’ ' ' '
T & F Revenue
0 ”iii—if State Appropriation

Figure 1. Average Revenue/Expenditures— 1 5 Michigan Public Universities

Source. Author’s calculations from IPEDS data.

 

33

represent the averages of all 15 public universities in Michigan as reported by IPEDS
(U .S. Department of Education National Center for Education Statistics, Years 1990 to
2001).
Institutional Financial Aid Expenditures

The average per university expenditure for institutional ﬁnancial aid for
Michigan’s 15 public universities increased by 170% for the time period 1989-1990 to
1999-2000, increasing ﬁom approximately $3.8 million to $10.2 million (see Figure 1).
The Research-intensive universities increased average expenditures the most, ﬁom
approximately $2.6 million to $8.4 million, or 220%. Master’s I universities increased
the average expenditure for institutional ﬁnancial aid by 212%, ﬁ'om approximately $1.3
million to $4.1 million; Master’s H universities increased the average expenditure by
174%, ﬁ'om approximately $1 million to $2.8 million; and, Research-extensive
universities increased the average expenditure for institutional ﬁnancial aid by 152%,
ﬁ'om approxirmtely $9.7 million to $24.5 million.
Lnatitutional Revenaea

Average revenue from tuition and fees for Michigan’s public universities
increased by 97% for this time period, ﬁom approximately $48.7 million in1989-90 to
$95.8 million inl999-2000 (see Figure 1). Master’s I universities increased average
revenue from tuition and fees the most (by 127%), ﬁom approximately $18.9 million to
$42.9 million. Research-intensive universities increased average revenue ﬁom tuition
and fees by 114%, from approximately $28.5 million to $60.9 million; Research-

extensive universities increased average revenue by 89%, from approximately $124.8

34

million to $235.9 million; and, Master’s 11 universities increased average revenue ﬁom
tuition and fees by 64%, from approximately $16.4 million to $26.9 million.

Average revenue from state appropriations increased at a slower rate (by 45%) for
Michigan’s public luliversities for this same time period, from approximately $72.4
million to $105.1 million (see Figure 1). Master’s I universities experienced a 55%
increase in average revenue ﬁ'om state appropriations from 1989-90 tol999-2000,
increasing ﬁom approximately $28 million to $43.5 million; Research-intensive
universities experienced a 44% increase in average revenue, increasing from
approximately $41.7 million to $60.1 million; Research-extensive universities
experienced a 43% increase in average revenue, increasing from approximtely $186.4
million to $267.4 million; and, Master’s 11 universities experienced a 41% increase in
average revenue from state appropriations, increasing from approximately $23.6 million
to $33.2 million.

Throughout this 11 year time period, the combined average revenue ﬁom tuition
and fees and state appropriations accounted for approximately 64% of the average total
current ﬁlnd revenues for the 15 Michigan public universities. During this time period,
however, the percentage of revenue from tuition and fees increased while the percentage
of revenue ﬁom state appropriations decreased. On average for the 15 public
universities, tuition and fees increased as a percentage of total current fund revenues from
25% in 1989-90 to 30% in 1999-2000 and state appropriations decreased as a percentage
of total current ﬁrnd revenues from 39% in 1989-90 to 34% in 1999-2000. Figure 2
depicts the change ill the average expenditm'e for institutional ﬁmncial aid and the

change in the average revenue ﬁ'om both tuition and fees and state appropriation for the

35

15 Michigan public universities for the time period 1989-1990 tol999-2000.

1 0,000,000!

8,000,000-

6,000,000-

2,000,000‘

Average (Current $3)

01

-2,000,000l

4,000,0001

Change in Univ Aid

Change in T & F Rev

 

4,000,000

Change in MI Approp

Figure 2. Change in Average Revenue/Expenditure-l 5 Michigan Public Universities

Source. Author’s calculations ﬁ'om IPEDS data.

Enrollment

During this time period, enrollment also increased at Michigan’s public

universities. Average enrollment grew by approximately 4%, from approximately 17,774

students per university in the fall term of 1990 to 18,451 students per university in the

Fall term of 2000.

IPEDS was made

(A change in the institutional procedure for reporting enrollment to

by one of the universities in the Fall of 1993; so that the growth in

36

enrollment would not be overstated, this adjustment was made to the base year, Fall

1990.) Figure 3 presents the trend in enrollment by Carnegie Classiﬁcation.

 

 

 

40,000 I
N ~ .- ’ ’
30,000 1
0
O0
6
is 20,000 .
>
<
"""""""" Research-extensive
10.000 ' Research-intensive
/\ — .—
Masters 1
0 _ A ‘ _ g A Masters II

9093939

f
o

5969798992000

Figure 3. Average Enrollment for Michigan’s Public Universities by Carnegie
Classiﬁcation

Source. Author’s calculations ﬁ'om IPEDS data.

The highest grth in average enrollment was experienced by the Master’s I

universities with a 12% increase, from an average enrollment of 10,949 students per

university in the

university in the

Fall term of 1990 to an average enrollment of 12,316 students per

Fall term of 2000. Research-intensive universities experienced a 10%

growth in average enrollment, increasing from an estimated average enrollment of 14,638

students per university in the Fall term of 1990 to an enrollment of 16,319 students per

37

pul

6111'

PCI

and

and

(201

mil

university in the Fall term of 2000. Average enrollment at the Research-extensive
1miversities increased slightly, growing by 1%, from an average enrollment of 35,390
students per university in the Fall term of 1990 to an enrollment of 35,710 students per
university in the Fall term of 2000 while average enrollment declined at the Master’s 11
universities by 16%, dropping from an enrollment of 7,722 students per university in the
Fall term of 1990 to an enrollment of 6,483 students per university in the Fall term of
2000.
Emma

The trends found in the average expenditures and revenues for the 15 Michigan
public universities, as reported by IPEDS, show that the grth in expenditures for
institutional ﬁnancial aid outpaced the growth in revenue ﬁom state appropriations and
enrollment and surpassed even the tremendous growth in tuition and fees during the time
period 1989-90 to 1999-2000. The average per university expenditure for institutional
ﬁnancial aid increased by 170% while the average revenue from state appropriations
increased by 45%, average enrollment grew by only 4% and average revenue from tuition
and fees increased by 97%. Similar ﬁndings were also true for the average expenditures
and revenues of each category of Carnegie Classiﬁcation.

The US. Department of Education’s National Center for Education Statistics
(2001) reported that expenditures for institutional scholarships and fellowships increased
more than most other expenditures at all types of public higher education institutions
during the period 1988-89 to 1997-98. As McPherson and Schapiro (1998) discovered,
this tremendous grth in expenditures for institutional ﬁnancial aid has moderated the

growth in net tuition and fee revenue in comparison to the growth in gross tuition and fee

38

revenue for the same time period. From the College Board’s Trends in Student Aid 2001,
AASCU and NASULGC (2002) report a 92.4% growth in institutional aid for the time
period 1990-91 through 2000-01; the average growth in expenditures for institutional
ﬁnancial aid at Michigan’s public universities was almost twice the amount of this
national average (170%) for a comparable time period. Table 3 presents the average
tuition discount rates (average expenditures for institutional aid as a percent of average
revenue from tuition and fees) and the share of average current ﬁrnd revenues that tuition
and fee revenue represents for Michigan’s public universities by Carnegie Classiﬁcation
for ﬁscal year 1999-2000.

Table 3. Avgage Tuition Discount Rates and Average Mion a_nd Fee Revenue a8 a
Percent of Average Total Current Fund Reveges in FY2000

 

 

Tuition Discount Tuition as a % of

 

Carnegie Classiﬁcation Rate Current Fund N
Revenues
Doctoral/Research-extensive 10% 21%
Doctoral/Research-intensive 14% 33% 3
Master’s I 10% 36% 6
Master’s II 10% 28% 2

 

Source. Author’s calculations from IPEDS data.

 

The average growth in revenue from tuition and fees for the Michigan public
universities (97%) is similar to that found by SHEEO; SHEEO reports a 94% increase in
average tuition and fee rates for public, four-year institutions for the time period 1990-91

to 2000-2001(McKeown-Moak, 2001). Also similar to the SHEEO report is the ﬁnding

39

that the proportion of current fund revenues ﬁ'om state appropriations and tuition at
Michigan’s public universities has shifted with the proportion ﬁ'om state appropriations
declining and the proportion from tuition and fees growing; SHEEO reports a decline of
14% in the share from state appropriations and an increase of 7.5% in the share from
tuition and fees from 1981 to 1998 for all public institutions (McKeown-Moak, 2001). In
Michigan, the share of revenue from state appropriations declined 13% and the share
from tuition and fees increased by 20% for the time 1989-90 to 1999-2000.
Section 2: Coordinated Tuition and Aid Policy

This section seeks to answer the research question: to what extent are institutional
policy decisions related to funding for need-based ﬁnancial aid programs and tuition
pricing linked at the 15 Michigan public universities?
Survey Results

Both budget ofﬁcers and ﬁnancial aid ofﬁcers at Michigan’s 15 public
universities were asked to describe the policy at their university (if any) that links tuition
and fee rates and ﬁmding for institutional ﬁnancial aid programs. Eight of the 20 survey
participants (40%) indicated that a very formal relationship exists-ﬁmding for
institutional ﬁnancial aid is increased in direct proportion to increases in tuition and fee
rates; nine participants (45%) indicated that a less formal relationship exists-funding for
institutional ﬁnancial aid is increased but not in direct proportion to increases in tuition
and fee rates; and, three participants (15%) responded that little or no relationship exists
between funding for institutional ﬁnancial aid and tuition and fee rates. Table 4

categorizes the responses by participant and by Carnegie Classiﬁcation.

40

Table 4. Rilationahjp Between Tuition & Fee Policy and Institutional Financial Aid

 

 

Policy
Carnegie Very Less Little
Participant Classiﬁcation Formal Formal Relationship Total

Budget Ofﬁcer
Master’s I 2 3 5
Master’s II 1 1 2
D/Research-intensive 1 2 3
D/Research-extensive l 1
Total 5 5 1 11

Financial Aid Off.

Master’s I 1 2 4
Master’s II 1 1
D/Research-intensive 1 1 2
D/Research-extensive 1 1 2
Total 3 4 2 9

 

Fifteen of the 20 survey participants (75%) further reported that their institution
plarmed no change to institutional policy deﬁning the relationship between tuition and fee
pricing and funding for institutional ﬁnancial aid; ﬁve survey participants (25%)
indicated that a less formal relationship was planned.

The survey participants were also asked to describe the linkage between various
ﬁnancial factors and funding for institutional ﬁnancial aid programs. Participants were
asked to indicate the existence of a “direct linkage”—ﬁmding for institutional ﬁnancial aid
is indexed to changes in the ﬁnancial factor, “indirect linkage”-the ﬁnancial factor is
generally taken into consideration when funding institutional ﬁnancial aid, or “no
linkage”-the ﬁnancial factor is not taken into consideration when funding institutional
ﬁnancial aid programs. Table 5 presents the ﬁequency of responses for each of the

categories.

41

Table 5. Financial Factors Liaked to Funding for Institutional Financial Aid Prom

 

 

Factor Direct Indirect No
Linkage Linkage Linkagg_
Increase/decrease in state appropriation revenue 4 12 4
Increase/decrease in tuition & fee revenue 15 5 0
Increase/decrease in ﬁmding for state ﬁnancial aid programs 3 10 7
Increase/decrease in ﬁrnding for federal ﬁnancial aid programs 3 8 9
Other (Projected enrollment added by one participant) 1

 

Clearly, the majority of the survey participants indicated a “direct linkage”
between tuition and fee revenue and funding for institutional ﬁnancial aid programs and
the majority indicated “indirect” or “no linkage” for the other ﬁnancial factors. Table 6
categorizes the linkage between tuition and fee revenue and ﬁlnding for institutional

ﬁnancial aid by participant and Carnegie Classiﬁcation.

Table 6. Linkage between Tuition & Fee Revenue aad Fundiag for Insti_tutional Financial

 

 

5g
Carnegie Direct Indirect No
Participant Classiﬁcation Linkag: Linkgge Linkage Total
Budget Oﬂicer
Master’s I 3 2 5
Master’s II 1 1 2
D/Research-intensive 3 3
D/Research-extensive 1 1
Total 8 3 11
Financial Aid Off.
Master’s I 4 4
Master’s II 1 1
D/Research-intensive 2 2
D/Research-extensive l 1 2
Total 7 2 9

 

42

Carnegie Classiﬁcation. Three of the nine survey participants (33%) from
Master’s I universities indicated that a very formal relationship exists while ﬁve of the
nine (56%) responded that a less formal relationship exists between tuition and fee rates
and funding for institutional ﬁnancial aid; all of the survey participants responding that
little or no relationship exists represented Master’s universities (I or 11). Two of the ﬁve
survey participants (40%) ﬁ'om Doctoral/Research-intensive universities indicated that a
very formal relationship exists and three of the ﬁve (60%) responded that a less formal
relationship exists between tuition and fee rates and funding for institutional ﬁnancial aid.
Participants representing the Doctoral/Research-extensive universities split their
responses between a very formal relationship and a less formal relationship.

The majority of the participants reported a “direct linkage” between tuition and
fee revenue and funding for institutional ﬁnancial aid programs; four of the ﬁve
participants who indicated that the linkage was indirect represented Master’s (I & II)
tmiversities. Three of the four participants who selected “direct linkage” to describe the
relationship between state appropriation revenue and ﬁrnding for institutional ﬁnancial
aid represented Master’s I universities and the four participants who indicated “no
linkage” represented Doctoral/Research universities. The three participants who
selected “direct linkage” to describe the relationship between funding for both state and
federal ﬁnancial aid programs and funding for institutional ﬁnancial aid represented
Master’s II and Research-intensive universities.

Budget ofﬁcers. Five of the 11 budget oﬂicers (45%) responding to the survey
indicated that a very formal relationship exists between tuition and fee rates and funding

for institutional ﬁnancial aid; these budget oﬂicers represented all categories of Carnegie

43

Classiﬁcation. The ﬁve budget oﬂicers (45%) who indicated that a less formal
rehtionship exists represented only Master’s I and Doctoral/Research-intensive
universities. Only one budget ofﬁcer (Master’s 11) indicated that little relationship exists
between tuition and fee rates and ﬁrnding for institutional ﬁnancial aid. Nine of the 11
budget oﬂicers (82%) indicated that no change was planned to the institutional policy
linking tuition and fee rates and flmding for institutional ﬁnancial aid; the two budget
ofﬁcers (18%) indicating that a less formal relationship was planned represented Master’s
level universities.

Eight of the 11 budget ofﬁcers (73%) participating responded that a “direct
linkage” between tuition and fee revenue and funding for institutional ﬁnancial aid exists;
these budget oﬂicers represented all categories of Carnegie Classiﬁcation. The three
budget oﬁcers (27%) indicating that the linkage is indirect represented Master’s level
universities. No other ﬁnancial factor was directly linked to funding for institutional
ﬁnancial aid by a majority of the budget oﬁcers. With the exception of the federal
ﬁnancial aid factor, “indirect linkage” received the highest number of responses by the
budget ofﬁcers for all other ﬁnancial Ectors; three budget ofﬁcers (27%) reported a
“direct linkage” in federal ﬁnancial aid ﬁmding and funding for institutional ﬁnancial aid,
foru‘ budget ofﬁcers (36%) reported an “indirect linkage” and four budget oﬂicers (36%)
reported “no linkage”.

Financial aid ofﬁcers. Only three of the nine ﬁnancial aid ofﬁcers (33%)
responding to the survey indicated that a very formal relationship exists between tuition
and fee rates and funding for institutional ﬁnancial aid; these ﬁnancial aid ofﬁcers

represented Doctoral/Research-extensive, intensive and Master’s I universities. The four

ﬁnancial aid oﬁicers (44%) reporting a less formal relationship also represented
Doctoral/Research-extensive, intensive and Master’s I universities. The only Master’s II
ﬁnancial aid ofﬁcer to respond to the survey reported little or no relationship between
tuition and fee rates and ﬁmding for institutional ﬁnancial aid. Six of the nine ﬁnancial
aid oﬂicers (67%) indicated that no change was planned to policy linking tuition and fee
rates and funding for institutional ﬁnancial aid; the three ﬁnancial aid ofﬁcers (33%)
indicating that a less formal relationship was planned represented all but the
Doctoral/Research-intensive category of universities.

Seven of the nine ﬁnancial aid ofﬁcers (78%) responding to the survey reported a
“direct linkage” between tuition and fee revenue and funding for institutional ﬁnancial
aid; these ﬁnancial aid oﬁicers represented Doctoral/Research-extensive, intensive and
Master’s I universities. The two ﬁnancial aid oﬂicers (22%) reporting an “indirect
linkage” between tuition and fee revenue and flmding for institutional ﬁnancial aid
represented Doctoral/Research-extensive and Master’s II universities. No other ﬁnancial
factor was directly linked to funding for institutional ﬁnancial aid by a majority of the
ﬁnancial aid ofﬁcers. With the exception of the federal ﬁnancial aid Ector, “indirect
linkage” received the highest number of responses by the ﬁnancial aid officers for all
other ﬁnancial factors; four ﬁnancial aid ofﬁcers (44%) reported an “indirect linkage” in
federal ﬁnancial aid funding and funding for institutional ﬁnancial aid and ﬁve ﬁnancial
aid oﬁicers (56%) reported “no linkage”.

Review of survey result_s. The survey results reveal that while other ﬁnancial
factors are considered when funding institutional ﬁnancial aid programs, policy decisions

related to tuition pricing and funding for institutional ﬁnancial aid programs are directly

45

linked for at least nine of the 15 Michigan public universities. Further, this relationship
between tuition pricing and funding for institutional ﬁnancial aid is present, to a greater
or lesser degree, regardless of Carnegie Classiﬁcation.

By counting the number of responses received ﬁom either the budget ofﬁcers or
the ﬁnancial aid oﬁ'lcers (but not both), the survey results indicate that a “very formal
relationship” exists between tuition pricing and funding for institutional ﬁnancial aid for
at least ﬁve of the universities: one of the four Research-extensive universities, one of the
three Research-intensive universities, two of the six Master’s I universities and one of the
Master’s H universities. And a “less formal relationship” is indicated for at least six of
the universities: one of the four Research-extensive universities, two of the three
Research-intensive universities and three of the six Master’s I universities. Similarly, the
survey results indicate that “direct linkage”, likely describes the relationship between
changes in tuition and fee revenue and funding for institutional ﬁnancial aid for at least
nine universities: one of the four Research-extensive universities, three of the three
Research-intensive universities, four of the six Master’s I universities and one of the two
Master’s 11 universities.

The survey responses of the budget ofﬁcers and the ﬁnancial aid ofﬁcers are
comparable. By far, the majority of the budget oﬁcers (91%) and the ﬁnancial aid
oﬂicers (78%) indicate that a relationship exists between tuition and fee rates and funding
for institutional ﬁnancial aid; a higher percentage of the budget ofﬁcers (45%) than the
ﬁnancial aid oﬁcers (33%) indicate that the relationship is formal. A majority of both
the budget ofﬁcers (73%) and the ﬁnancial aid oﬂicers (78%) also report a “direct

linkage” between tuition and fee revenue and funding for institutional ﬁnancial aid and,

46

with the exception of federal ﬁnancial aid funding, “indirect linkage” received the highest
number of responses for the other ﬁnancial factors for both budget ofﬁcers and ﬁnancial
aid ofﬁcers. F ifty-six percent of the ﬁnancial aid oﬂicers report “no linkage” between
federal ﬁnancial aid funding and ﬁlnding for institutional ﬁnancial aid while only 36% of
the budget ofﬁcers report no linkage and 27% actually reported a “direct linkage”.
Bi-vg’ate Regggssion Results

To ﬁrrther analyze the relationship between tuition pricing (or other ﬁnancial
Ectors) and funding for institutional ﬁnancial aid, bi-variate regression was employed.
Speciﬁcally, the relationships between change in actual expenditures and change in actual
revenues at the 15 Michigan public universities were measured. The ﬁnancial data used
in these analyses were downloaded ﬁ'om NCES IPEDS for ﬁscal years 1989-1990
through 1999-2000 and included expenditures for institutional, federal and state ﬁnancial
aid, revenues from tuition and fees and state appropriations, tuition and fee rates and fall
enrollment. Analysis was conducted of changes in the overall averages, changes in the
Carnegie Classiﬁcation averages and changes in the ﬁnancial factors at each university
over time and a cross-sectional analysis was conducted of the 1999-2000 year change for
all 15 public universities. Because the IPEDS data are public records, analysis and
results were reported by institutional name

Mysis of all-universities’ amt; Table 7 presents the relationship between
the dependent variable ‘change in the average institutional ﬁnancial aid expenditure’ for
all 15 Michigan public universities and the independent variables listed for ﬁscal year

1989-1990 through 1999-2000 (13:10). As can be seen in Table 7, neither the

47

relationship between the dependent variable and ‘change in average tuition and fee
revenue’ nor the relationship between the dependent variable and ‘change in average
tuition and fee rates’ are strong or statistically signiﬁcant. These ﬁndings do not
substantiate the results of the survey questionnaire that revealed a linkage between tuition
pricing policy and ﬁnding for institutional ﬁnancial aid.

Table 7. Sunggry of Bi-vaLiate Regression Analysis of Variables Predictmg' Change in
Average Institutional Financial Aid Expen_d_i1ure for All 15 Michrg' an Public

 

 

Universities

Independent Variables Beta(R) R2 t Sig
Change in average state appropriation revenue -. 169 .028 -.484 .642
Change in average tuition & fee revenue .412 .169 1.277 .237
Change in average state ﬁnancial aid exp. .430 .185 1.347 .215
Change in average federal ﬁnancial aid exp. -.249 .062 -.728 .487
Change in average tuition & fee rates .258 .066 .754 .472
Change in average fall enrollment .330 .109 .989 .352

 

‘p<.05
Source. Author’s calculations from IPEDS data.

Analysis of Carnegie Classiﬁcation averages. Further examination was conducted
of the ﬁnancial data by utilizing bi-variate regression to analyze the relationship between
change in average expenditures and change in average revenues for each Carnegie
Classiﬁcation of universities for ﬁscal years 1989-1990 through 1999-2000 (a=10). The
results of the analysis, presented in Table 8, reveal a signiﬁcant, positive relationship
between the change in the average tuition and fee revenue and the change in the average

expenditure for institutional ﬁnancial aid for the Michigan Doctoral/Research-intensive

48

Table 8. Summary of Bi-var_iate Regression Analysis of Varﬁrles Predictm' g Change in
Average Institutional Financial Aid Eapgnditure by Carnegie Classiﬁcation,

 

 

 

 

Independent Variables Beta(R) R2 t Sig
Carnegie Classiﬁcation
Change ill average state appropriation rev.
Doctoral/Research-extensive -.344 .1 18 -l .037 .330
Doctoral/Research-intensive .606 .367 2.154 .063
Master’s I .089 .008 .252 .808
Master’s H -.224 .050 -.650 .534
Change in average tuition & fee revenue
DoctoraVResearch-extensive .359 . 129 1 .089 .308
Doctoral/Research-intensive .684 .468 2.653 .029“
Master’s I .746 .556 3.164 .013*
Master’s II -.474 .224 -1.521 .167
Change ill average state ﬁnancial aid exp.
Doctoral/Research-extensive .406 . 164 l .255 .245
Doctoral/Research-intensive -.727 .528 -2.991 .017"I
Master’sl -.747 .558 -3.176 .013“
Master’s H .015 .0 -.041 .968
Change in average federal ﬁnancial aid exp.
Doctoral/Research-extensive -.262 .069 -.768 .465
Doctoral/Research-intensive -.076 .006 -.216 .834
Master’s I -. 173 .030 -.496 .634
Master’s II -.707 .499 -2.824 .022“
Change in average tuition & fee rates
Doctoral/Research-extensive .090 .008 .257 .804
Doctoral/Research-intensive -.139 .019 -.396 .703
Master’sI -.418 .175 -1.301 .229
Master’s H -.202 .041 -.583 .576
Change in average fall enrollment
Doctoral/Research-extensive .205 .042 .593 .570
Doctoral/Research-intensive -.144 .021 -.413 .691
Master’s I .535 .286 1.789 .111
Master’s II -.286 .082 -.844 .423
‘15.05

Source. Author’s calculations from IPEDS data.

49

and Master’s I universities; 47% and 56%, respectively, of the variability in the change of
the average institutional ﬁnancial aid expenditures for these Carnegie Classiﬁcations can
be accounted for by the change in the average tuition and fee revenue.

For the Michigan Doctoral/Research-intensive and Master’s I universities, a
signiﬁcant, negative relationship was found between the change in the average
expenditure for state ﬁnancial aid and the clmnge in the average expenditure for
institutional ﬁnancial aid; as the change in the average expenditure for state ﬁnancial aid
decreased, the change in the average expenditure for institutional ﬁnancial aid increased.
Similarly, a signiﬁcant, negative relationship was found between the change in the
average expenditure for federal ﬁnancial aid and the change in the average expenditure
for institutional ﬁnancial aid at Michigan Master’s H universities. Although the result did
not reach the .05 level of signiﬁcance, the relationship between change in the average
revenue from state appropriation and change in the average expenditure for institutional
ﬁnancial aid was moderately strong for the Michigan Doctoral/Research-intensive
universities; perhaps a larger sample size might have yielded 9 < .05.

The results of the regression analysis by Carnegie Classiﬁcation support the
ﬁndings of the survey indicating that policy related to ﬁmding for institutional ﬁnancial
aid programs and tuition pricing are linked at one or more of the 15 Michigan public
universities categorized as Research-intensive or Master’s I.

Results pe_r universay' . Although the statistical mean, or average, is sensitive to
extreme data, an effect of averaging ﬁnancial factors like expenditures for ﬁnancial aid
and tuition and fee revenues by all 15 public universities or by Carnegie Classiﬁcation

may be to balance out extreme and/or divergent ﬁndings (Shavelson, 1996). A series of

50

scatter plots and bi-variate regression analyses were therefore run (Table 9) to observe
and measure the relationship between change in actual expenditures for institutional
ﬁnancial aid and change in actual revenues from tuition and fees for each university for
the time period ﬁscal year 1989-1990 through ﬁscal year 1999-2000 (a=10). The results
of the bi-variate regression analyses reveal a signiﬁcant, positive relationship between
change ill revenue from tuition and fees and change in expenditures for institutional
ﬁnancial aid for only one university (Michigan Technological University).

Table 9. Sum of Bi-variate Regression Analysis of Cha_nge in Tuition & Fee
Revenue Variable Predict' Chan e in Institutional Financial Aid E iture

 

 

 

Carnegie Classiﬁcation
University Name Beta(R) R2 r Sig

Doctoral/Research-extensive

Michigan State University .325 .106 .972 .359

University of Michigan-AA .487 .237 1.578 .153

Wayne State University .129 .017 .367 .723

Western Michigan University -.017 .000 -.047 .964
Doctoral/Research-intensive

Central Michigan University .190 .036 .547 .599

Michigan Technological Univ. .642 .413 2.371 .045“

Oakland University .124 .015 .353 .733
Master’s I

Eastern Michigan University -.220 .049 -.639 .541

Grand Valley State University .315 .099 .938 .376

Northern Michigan University .197 .039 .568 .585

Saginaw Valley State University .499 .249 1.629 .142

University of Michigan-Dearbom .055 .003 .155 .880

University of Michigan-Flint .305 .093 .907 .391
Master’s II

Ferris State University -.543 .295 -1.828 .105

Lake Superior State University -.175 .031 -.504 .628
‘p<.05

Source. Author’s calculations from IPEDS data.

51

Due to the lack of signiﬁcant relationships between revenue ﬁom tuition and fees
and expenditures for institutional ﬁnancial aid at the individual university level, the
results ﬁom the scatter plot analyses were examined for the presence of outlier data; the
results were examined for the presence of observations that might be a greater distance
from the regression line causing prediction error in the bi-variate regression model
(Lewis-Beck, 1980). Assuming that the outliers were atypical observations, removal of
the data could improve the prediction model. Therefore, where outliers were identiﬁed,
these observations were removed and bi-variate regression analysis was run again to
determine if a signiﬁcant relationship was found between the expenditure for institutional
ﬁnancial aid and revenue from tuition and fee variables. The revised ﬁndings are
presented ill Table 10. The downside to removing the outliers is that important
information may be excluded ﬁ'om the analysis and the already small sample size is '

Table 10. Sumr_nary of Bi-variate Regression Analysis of Cha_ngin Tuition & Fee
Revenue Variable Predicting Change ill Institutional Financial Aid Expenditure

 

 

 

 

With Outliers Rem_oved
Carnegie Classiﬁcation Outlier
University Name Year(s) Beta(R) R2 r Sig
Doctoral/Research-extensive
Michigan State University 2000 .803 .644 3.562 .009"
Wayne State University 1991,95,99 .760 .578 2.618 .047“
Master’s I
Grand Valley State University 2000 .720 .518 2.745 .029“
Northern Michigan University 2000 .716 .513 2.713 .030"
Saginaw Valley State University 1991 ,92,94 .890 .792 4.367 .007“
Master’s II
Ferris State University 1997 -.763 .582 -3.121 .017“
‘p<.05

Source. Author’s calculations from IPEDS data.

52

further reduced (Lewis-Beck, 1980). Signiﬁcant relationships were identiﬁed for six
additional universities after removing outlying data: Michigan State University, Wayne
State University, Grand Valley State University, Northern Michigan University, Saginaw
Valley State University and Ferris State University.

Bi-variate regression analysis was also employed to measure the relationships
between the other ﬁnancial factors and actual expenditures for institutional ﬁnancial aid;
statistically signiﬁcant results are presented in Table 11. Signiﬁcant relationships were
found between change in expenditures for institutional ﬁnancial aid and change in
expenditures for state ﬁnancial aid for ﬁve universities. For three of the universities
(Michigan State University, University of Michigan-AA and University of Michigan-
Dearbom), the relationship between the two variables was positive-as the change in
expenditures for state ﬁnancial aid increased, the change ill expenditures for institutional
ﬁnancial aid increased. For two of the universities (Michigan Technological University
and Northern Michigan University), the relationship between the two variables was
negative-as the change in expenditures for state ﬁnancial aid decreased the change in
expenditures for institutional ﬁnancial aid increased. Similarly, a signiﬁcant, negative
relationship was found between the change in expenditures for institutional ﬁnancial aid
and the change ill expenditures for federal ﬁnancial aid at University of Michigan-AA
and Central Michigan University-a8 change ill the expenditures for federal ﬁnancial aid
decreased, change in expenditures for institutional ﬁnancial aid increased. Finally, a
signiﬁcant, positive relationship was found between the change in expenditures for

institutional ﬁnancial aid and change ill tuition and fee rates at Northern Michigan

53

University-a8 the change in tuition and fee rates increased, the change in expenditures for

institutional ﬁmncial aid increased.

Table 11. Summary of Bi-variate Regression Analysis of Other Variables Predicting
Change in InstitutionaL F inancial Aid Eamnditure

 

 

 

Independent Variable
University Name Beta(R) R2 T Sig

Change in state appropriation revenue

Western Michigan University .621 .386 2.242 .055
Change in state ﬁnancial aid exp.

Michigan State University .880 .775 5.252 .001 "‘

University of Michigan-AA .735 .540 3.063 .016“

Michigan Technological Univ. -.679 .461 -2.614 .031“

Northern Michigan University -.938 .881 -7.686 .000"

University of Michigan-Dearborn .773 .597 3.446 .009"

Lake Superior State University .611 .374 2.185 .060
Change in federal ﬁnancial aid exp.

University of Michigan-AA -.668 .447 -2.541 .035“

Central Michigan University -.655 .429 -2.45 .040“

Ferris State University -.624 .389 -2.257 .054
Change in tuition & fee rates

Northern Michigan University .958 .918 9.434 .000”
I’p<.05

Source. Author’s calculations from IPEDS data.

Crosa-Sectional Amara Bi-variate regression was also employed to analyze the
independent variable ‘change in revenue from tuition and fees’ as a predictor of the
dependent variable ‘change in expenditures for institutional aid’ for the most current year
available (1999-2000) across all universities (a=15). The variable ‘change in revenue
ﬁom tuition and fees’ was found to be a signiﬁcant predictor and accounted for 63% of

the variation in ‘clulnge ill expenditures for institutional aid’ for the 15 universities.

54

Review of bi-vamte regression. The results of the bi-variate regression indicate
that although other ﬁnancial factors are signiﬁcantly related to the change in expenditures
for institutional ﬁnancial aid, the relationship between expenditures for institutional
ﬁnancial aid and revenues ﬁ'om tuition and fees is also statistically signiﬁcant over time
at several of the 15 public universities in the state: Michigan State University, Wayne
State University, Michigan Technological University, Grand Valley State University,
Saginaw Valley State University, Northern Michigan University and Ferris State
University. Further, this statistically signiﬁcant relationship was found at universities
ﬁom all four categories of Carnegie Classiﬁcation represented in the state. At those
universities where no statistically signiﬁcant relationship was found between the two
variables, it was just as likely to ﬁnd the change in expenditures for institutional ﬁnancial
aid to increase when the change ill tuition and fee revenue decreased, as it was to ﬁnd the
opposite result. At Ferris State University, where a negative signiﬁcant relationship
between expenditures for institutional ﬁnancial aid and revenues from tuition and fees
was found, an examination of the data shows that when the change ill revenues ﬁ'om
tuition and fees declined, the change in expenditure for institutional ﬁnancial aid
increased. Further, results of the cross-sectional regression analysis found the change in
revenues ﬁ'om tuition and fees to be a signiﬁcant predictor of change ill expenditures for
institutional aid in 1999-2000 for the 15 Michigan public universities.

Need-Based Ala

The ﬁndings from the survey questionnaire present convincing evidence that

institutional policy decisions relating to funding for institutional ﬁnancial aid programs

and tuition pricing are directly linked and that formal relationships exist at many of the

55

15 Michigan public universities. Further, the results of the bi-variate regression analysis
support these survey results by presenting evidence of statistically signiﬁcant
relationships between expenditures for institutional ﬁnancial aid and revenues from
tuition and fees at some of the Michigan luliversities. Although these ﬁndings reveal
institutional linkages between ﬁnancial aid funding policy and tuition pricing policy, they
do not describe the extent to which institutional ﬁnancial aid is invested in need-based
programs; that is, what portion of institutional ﬁnancial aid funding is allocated to need-
based grant? Because the research question to be answered asks to what extent
institutional policy decisions related to need-based ﬁnancial aid programs and tuition
pricing are linked, the responses to the survey questions related to the estimated amounts
and percentages of institutional ﬁrnding allocated to need-based ﬁnancial aid were
analyzed.

Twelve of the 20 survey participants (60%) responded that the most inﬂuential
goal of institutional ﬁnancial aid at their university was to provide ﬁnancial assistance to
the neediest students, six of the 20 participants (30%) responded that supporting the
enrollment growth objective of the university was their most inﬂuential goal and two of
the 20 participants (10%) reported shaping the proﬁle of the undergraduate class as the
most inﬂuential goal of institutional ﬁnancial aid. When asked to estimate the percentage
of institutional ﬁnancial aid funds allocated to need-based grant, merit-based scholarship,
loan and other aid in ﬁscal year 2000-2001, the average of the responses for the 20
survey participants was as follows: 30% to need-based grant, 64% to merit-based
scholarship, 5% to loan and 1% to other flmds. The results of this survey item also show

a downward trend in the average estimated allocation to need-based grant over the last

56

three ﬁscal years for all survey participants; a corresponding upward trend in the average
estimated allocation to merit-based scholarship was also reported. Table 12 presents the

trends in the average estimated allocations to need-based grant and merit-based

scholarship.

Table 12. ﬂee-year Trend in Average Allocations to Financial Aid Estimated

 

 

 

by All Survey Participa_l_lt§
Type of Aid 2000-2001 1999-2000 1998-1999
Need-based Grant 30% 32% 32%
Merit-based Scholarship 64% 62% 61%
Loans 5% 5% 5%
Other Aid 1% 1% 2%

 

All of the survey participants afﬁrmed that their institution had experienced an increase
in the number of students applying for ﬁnancial aid. Table 13 presents the institutional
response to this growing number of student aid applicants. The participants’ answers
indicated that the institutional response was divided. Seven of the survey participants
(35%) indicated that institutional funding for need-based ﬁnancial aid had been increased
resulting ill a higher award per ﬁnancial aid applicant; 13 survey participants (65%)
indicated that funding had been increased providing for the same average award or
increased (but not enough) or not increased, resulting in a decline in the average award

per ﬁnancial aid applicant.

57

Table 13. Institutional Regpgnse to the Increase ill tha Number of Financial Aid

 

 

Applicants
Carnegie Increase Same Ave Decrease
Participant Classiﬁcation Ave Award Award Ave Award Total
Budget Officer
Master’s I 3 2 5
Master’s II 2 2
D/Research-intensive l 2 3
D/Research-extensive 1 1
Total 4 3 4 11
Financial Aid Off.
Master’s I 1 3 4
Master’s II 1 1
D/Research-intensive 1 1 2
D/Research-extensive 1 1 2
Total 3 1 5 9

 

Carnegie Classiﬁcation. All of the survey participants from the Research-
extensive and Master’s H universities and ﬁve of the nine participants (56%) representing
Master’s I universities responded that the most inﬂuential goal of institutional ﬁnancial
aid at their university was to provide ﬁnancial assistance to the neediest students; only
one of the ﬁve survey participants (20%) ﬁom Research-intensive universities listed
providing ﬁnancial assistance to the neediest students as the most inﬂuential goal. Four
of the nine Master’s I university survey participants (44%) and two of the ﬁve Research-
intensive participants (40%) indicated that the most inﬂuential goal of institutional
ﬁnancial aid was to support the university’s enrollment grth objective; two of the ﬁve
survey participants (40%) representing Research-intensive universities indicated that
shaping the proﬁle of the undergraduate class was the most inﬂuential goal of

institutional ﬁnancial aid.

58

Participants representing the Research-extensive universities reported the highest
average allocation to need-based grant (49%) and lowest average allocation to merit-
based scholarship (34%) and reported allocating 13% to loan and 4% to other aid.
Conversely, participants representing the Research-intensive universities reported the
lowest average allocation to need-based grant (11%) and highest average allocation to
merit-based scholarship (88%) and reported allocating only 1% to loans. Master’s I
survey participants reported the second-highest average allocation to need-based grant of
37% and an average allocation to merit-based scholarship of 56% and reported allocating
6% to loan and 2% to other aid. Master’s II survey participants reported an average
allocation to need-based grant of 23% and an average allocation to merit-based
scholarship of 77% and reported no allocation of institutional funding to loans or other
categories. Table 14 presents the average estimated allocations by Carnegie
Classiﬁcation for 2000-2001. Over the last three ﬁscal years, a downward trend in the
average estimated allocation to need-based grant and corresponding upward trend in the
average estimated allocation to merit-based scholarship was found for each Carnegie
Classiﬁcation group.

x All three of the survey participants from Master’s II universities reported tlmt
their institution’s response to the increase in the number of students applying for need-
based ﬁnancial aid was to increase institutional funding for these programs and to
increase the average award. Conversely, only one of the nine survey participants (11%)
from Master’s I universities reported increasing institutional need-based aid to increase
the average award, while three participants (33%) reported increasing institutional need-

based aid to maintain the average award and ﬁve participants (56%) reported increasing

59

Table 14. Estimated Percent of Instigutional Financial Aid by Type of Aid
And—Carnegie Classiﬁcation for 2000-2001

 

Need-based Merit-based

 

Carnegie Classiﬁcation Grant Scholarship Loan Other
Master’s I

Mean 36 56 6 2

S._D. 24 27 17 5

N 9 9 9 9
Master’s 11

Mean 23 77

SD 9 9

N 3 3
Doctoral/Research-intensive

Mean 11 88

SD 1 2

N 5 5
Doctoral/Research-extensive

Mean 49 34 13 4

_S_.I_)_. 40 22 21 8

N 3 3 3 3

 

institutional need-based aid but with a resulting decline in the average award. Two of the
ﬁve Research-intensive survey participants (40%) reported that the average award had
increased while two (40%) reported that the average award had remained the same or
declined. Similarly, one of the three Research-extensive survey participants (33%)
reported an increase in the average institutional aid award while two (67%) reported that
the average award had remained the same or declined.

Budget ofﬁcers. Seven of the 11 budget oﬂicers (64%) responding to the survey
reported that the most inﬂuential goal of institutional ﬁnancial aid at their institution was
to provide ﬁnancial assistance to the neediest students. Three of the 11 budget ofﬁcers
(27%) reported supporting the university’s enrollment growth objective and one budget

ofﬁcer (9%) reported shaping the proﬁle of the undergraduate class as the most

60

inﬂuential goal of institutional ﬁnancial aid. However, when asked to estimate the
percentage of institutional ﬁnancial aid funds allocated to need-based grant, merit-based
scholarship, loan and other aid in ﬁscal year 2000-2001, the average of the responses for
the 11 budget oﬂicers was as follows: 26% to need-based grant, 63% to merit-based
scholarship, 8% to loan and 3% to other ﬁrnds.

Most of the budget oﬂicers (64%) indicated that institutional ﬁmding for need-
basedﬁnancialaidhadbeenincreasedinoneormoreofthelastthreeyearsresultingin
either a higher or the same average award per ﬁnancial aid applicant while four budget
oﬁicers (36%) indicated that funding had either been increased (but not enough) or not
increased, resulting ill a decline in the average award per ﬁnancial aid applicant.

Financial aid oﬂicers. Five of the nine ﬁnancial aid ofﬁcers (56%) responding to
the survey reported that the most inﬂuential goal of institutional ﬁnancial aid at their
institution was to provide ﬁnancial assistance to the neediest students. Three of the nine
ﬁnancial aid oﬁicers (33%) reported supporting the university’s enrollment growth
objective and one ﬁnancial aid ofﬁcer (11%) reported shaping the proﬁle of the
undergraduate class as the most inﬂuential goal of institutional ﬁnancial aid. When asked
to estimate the percentage of institutional ﬁnancial aid funds allocated to need-based
grant, merit-based scholarship, loan and other aid in ﬁscal year 2000-2001, the average of
the responses for the nine ﬁnancial aid oﬁicers was as follows: 34% to need-based grant,
64% to merit-based scholarship, 1% to loan and 1% to other funds.

Five of the nine ﬁnancial aid oﬁicers (56%) indicated that institutional funding for need-
basedﬁnancialaidhadbeenincreased inone ormore ofthe lastthreeyears (but not

enough) resulting in a decline in the average award per ﬁnancial aid applicant while four

61

of the ﬁnancial aid oﬁicers (44%) indicated tlult institutional funding for need-based
ﬁnancial aid had been increased resulting in either a higher or the same average award
per ﬁnancial aid applicant. A similar division in responses was found when the ﬁnancial
aid oﬁcers were asked to indicate the percentage of applicants awarded institutional
need-based grant for the last three ﬁscal years. Table 15 presents the average percent of
ﬁnancial aid applicants awarded institutional need-based aid by Carnegie Classiﬁcation
in ﬁscal year 2000-2001. Four ﬁnancial aid ofﬁcers (44%) reported an increase in the
percentage of applicants awarded institutional need-based ﬁnancial aid, three of the
ﬁnancial aid oﬂicers (3 3%) reported a decrease in the percentage of applicants awarded
institutional ﬁnancial aid and two ﬁnancial aid oﬂicers (22%) reported no change ill the

percentage of applicants awarded institutional ﬁnancial aid.

Table 15. Percen_t of Aid Applicants Awarded In_stitutional Need-Based Ai_d ill 2000-

 

 

2001
Carnegie Classiﬁcation Mean SD. N
Master’s I 35 25 4
Master’s II 18 1
Doctoral/Research- 19 14 2
intensive
Doctoral/Research- 62 3 2
extensive

 

Review of institutional need-based aid. Although 12 of the 20 survey participants

 

(60%) indicated that providing ﬁnancial assistance to the neediest students was the most
inﬂuential goal for institutional aid at their respective universities, all but four of the

survey participants reported a higher institutional investment in merit-based scholarships

62

than in need-based grants; the average of the estimated allocations for all 20 participants
was 30% to need-based grant, 64% to merit-based scholarships, 5% to loan and 1% to
other aid in 2000-2001. Further, all survey participants reported a downward trend in the
average estimated allocation to need-based grants over the last three ﬁscal years and a
corresponding upward trend in the average estimated allocation to merit-based
scholarships for the same time period.

The survey participants from the Research-extensive and Research-intensive
universities represented the opposite ends of the need-based aid ﬁequency distribution.
All of the survey participants from Research-extensive universities indicated that
providing ﬁnancial assistance to the neediest students was the most inﬂuential goal for
institutional aid and these participants reported the highest average allocation to need-
based grant. Only one of ﬁve survey participants (20%) from Research-intensive
universities indicated that providing ﬁnancial assistance to the neediest students was the
most inﬂuential goal for institutional aid and these participants reported the lowest
average allocation to need-based grant. Similarly, the average percent of aid applicants
awarded need-based aid as reported by the ﬁnancial aid ofﬁcers who participated ill the
survey was 62% for the Research-extensive universities and 19% for the Research-
intensive universities in 2000-2001.

The survey responses of the budget oﬁicers and the ﬁnancial aid ofﬁcers are
comparable. The majority of both the budget oﬂicers and the ﬁnancial aid ofﬁcers
reported that the most inﬂuential goal of institutional ﬁnancial aid at their institution was
to provide ﬁnancial assistance to needy students, but the majority of both also estimated

that the percentage of institutional aid funds allocated to merit-based scholarships

63

exceeded the percentage allocated to need-based grant. A higher percentage of the
ﬁnancial aid ofﬁcers (56%) than budget ofﬁcers (36%) reported that the average need-
based award per ﬁnancial aid applicant had declined in one of the last three years.
m

The survey results reveal the existence of a relationship between tuition pricing
policy and funding policy for institutional ﬁnancial aid for at least 11 of the 15 public
universities in Michigan (73%) and the ﬁndings ﬁ'om the bi-variate regression analysis
support these survey results. The effect of the relatively low allocation of institutional
funding to need-based grant, however, may counteract the efﬁcacy of such policy to
maintain access and affordability for ﬁnancially needy students. The answer to the ﬁrst
research question is therefore dependent upon the allocation of institutional ﬁrnds to
need-based aid as well as the existence of coordinated tuition pricing and ﬁnancial aid
funding policy.

A higher percentage of the current survey participants reported that the
relationship between tuition and fee rates and funding for ﬁnancial aid was very formal
than did in the study conducted by Hossler et al. (1997). In the Hossler et al. (1997)
study, only 9% of the survey respondents reported a formal relationship between ﬁmding
for state ﬁnancial aid programs and the setting of tuition rates while 37% reported a less
formal relationship; survey participants from at least ﬁve (33%), of the Michigan
universities reported that a very formal relationship exists between tuition and fee rates
and funding for institutional ﬁnancial aid programs. More participants (representing at

least six of the 15 Michigan universities, or another 40%) reported a less formal

relationship; i.e., funding for institutional ﬁnancial aid is increased in response to
increases ill tuition and fee rates but not in direct proportion.

Further, the survey participants from at least nine (60%) of the Michigan
universities reported a “direct linkage”, indicating that funding for institutional ﬁnancial
aid is indexed to increases and decreases in tuition and fee revenue; one of the Research-
extensive universities, all three Research-intensive universities, four of the Master’s I
universities and one of the Master’s 11 universities responded in this Eshion.

Although the survey results also reveal that other ﬁnancial Ectors are considered
when funding institutional ﬁnancial aid programs, fewer survey participants reported
direct linkages between these factors and ﬁmding for institutional ﬁnancial aid. Survey
participants from at least 3 of the universities (two of the Master’s I universities and one
of the Research-extensive universities) indicated that funding for institutional ﬁnancial
aid is directly linked to increases and decreases ill state appropriation revenue;
participants ﬁom at least 3 of the universities (two of the Master’s H universities and one
of the Research-intensive universities) indicated that ﬁmding for institutional ﬁnancial
aid is directly linked to increases and decreases in funding for both federal and state
ﬁnancial aid programs; and, one survey participant representing a Master’s I university
reported that funding for institutional ﬁnancial aid was directly linked to projected
enrollment.

Unlike the Hossler et al. (1997) study which found no signiﬁcant relationship
between average public tuition levels and state ﬁnancial aid funding and uner the study
conducted by Hearn, Griswold and Marine (1996) which found only a slight relationship

(Pearson correlation of .41) between per capita need-based aid and the average tuition

65

level at public institutions, change in tuition and fee revenue was determined to be a
signiﬁcant predictor of change in expenditures for institutional aid for the 15 Michigan
public universities in 1999-2000 when cross-sectional regression analysis was employed.
No signiﬁcant results were found when bi-variate regression analysis was employed to
measure the relationship between change in average institutional ﬁnancial aid
expenditures and change in average revenue from tuition and fees over time. However,
when bi-variate regression was used to analyze the relationship by Carnegie
Classiﬁcation over time, a signiﬁcant positive relationship was found for both the
Research-intensive and Master’s I universities. Similarly, after outlier data was removed,
bi-variate regression yielded signiﬁcant results for the following universities when
analyzing the relationship between change in expenditures for institutional ﬁnancial aid
and change in revenues from tuition and fees over time: Michigan State University,
Wayne State University, Michigan Technological University, Grand Valley State
University, Northern Michigan University, Saginaw Valley State University and Ferris
State University. A signiﬁcant, positive relationship was also found between the change
in expenditures for institutional ﬁnancial aid and change in tuition and fee rates over time
at Northern Michigan University.

Because the survey participants and the institutions they represent cannot be
identiﬁed, it is not possible to complete a comparison of the survey responses to the bi-
variate regression results by institution. Overall, however, the ﬁndings ﬁ'om the bi-
variate regression analysis support the results of the survey questionnaire; survey
participants from nine, or 60%, of the universities reported that funding for institutional

ﬁnancial aid is directly linked, or indexed, to increases and decreases in tuition and fee

66

revenue and the results of the bi-variate regression analysis indicate a signiﬁcant
relationship between change in the expenditures for institutional ﬁnancial aid and change
in revenue from tuition and fees over time for nearly one-half, or seven, of the
universities. Any difference ill the results of the survey responses and bi-variate
regression analysis may be attributable to a difference in the time period examined; the
bi-variate regression analysis examined relationships between changes in expenditures
for institutional ﬁnancial aid and revenue from tuition and fees over an 1 1-year time
period spanning 1989-90 through 1999-2000 while the survey questionnaire asked
participants to comment on the status of current policy.

Similar statistical results were discovered in the US. Department of Education
NCES (2001) study that found a signiﬁcant relationship between the change in
institutional scholarships and fellowships and the change ill in-state, undergraduate
tuition at all types of four-year public institutions over time. The authors of the US.
Department of Education NCES (2001) study caution that interrelationships among many
internal and external Ectors likely have an effect on changes in tuition and changes in
expenditures for institutional ﬁnancial aid. Indeed, the results of the bi-variate regression
analysis for the 15 Michigan public universities show that the relationships between
change in expenditures for institutional ﬁnancial aid and change in some of the other
ﬁnancial Ectors were also signiﬁcant. A signiﬁcant relationship between change ill
expenditures for institutional ﬁnancial aid and change in funding for state ﬁnancial aid
programs over time was found for ﬁve universities and a signiﬁcant relationship between
change in expenditures for institutional ﬁnancial aid and change ill funding for federal

ﬁnancial aid over time was found for two universities. A moderately strong, but not

67

signiﬁcant relationship (p = .055), was also found between change in expenditures for
institutional ﬁnancial aid and change in revenue from state appropriations over time for
one university. These statistical ﬁndings also support the ﬁndings from the survey
questionnaire as some of the university survey participants reported the existence of a
direct linkage between funding for institutional ﬁnancial aid and changes in funding for
state and federal ﬁnancial aid programs and change in revenue received ﬁ'om the state.

The average of the estimated allocations to institutional ﬁnancial aid for all 20
participants was 30% to need-based grant, 64% to merit-based scholarships, 5% to loan
and 1% to other aid in 2000-2001 with Research-extensive universities reporting the
highest average allocation to need-based grant and Research-intensive universities
reporting the lowest average allocation to need-based grant.

As was illuminated by the literature review, expenditures for institutional merit-
based aid have grown tremendously: McPherson and Schapiro (1998) found a 20%
mm] real growth rate in spending for merit aid from 1983-94 to 1991-92 in their
analysis of highly selective universities while Redd (2000) found that the number of
merit scholarship recipients had grown by 163% and the value of the scholarships had
increased by 193% at four-year public institutions for the period 1988 to 1996. Similarly,
the results of the survey questionnaire of Michigan ﬁnancial aid and budget oﬂicers show
a downward trend in the average estimated allocation to need-based grant and a
corresponding upward trend in the average estimated allocation to merit-based
scholarship over the last three ﬁscal years. Further, Hossler et al. (1997) found that 59%
of the states responding to their survey reported that average ﬁnancial aid awards had

remained the same or declined over the three-year period 1989-90 through 1991-92; 67%

68

 

of the Michigan ﬁnancial aid ofﬁcers and 64% of the Michigan budget ofﬁcers responded
similarly,thattheaverageneed-based awardremainedthesameordeclinedinatleast
one of the last three ﬁscal years.

Although the average percent of institutional aid allocated to need-based grant for
ﬁscal year 2000-2001 for all 20 survey participants was 30%, Figure 4 illustrates that
several of the survey participants reported a smaller allocation of institutional aid to need-
based grant. The average percent of institutional aid allocated to need-based grant as
reported by the survey participants ﬁom Research-extensive universities was 49%, from
Master’s I lmiversities was 37%, from Master’s H universities was 23% and ﬁ'om

Research-intensive universities was 11%.

3.0

 

2.0
‘5
3
O
U
1.0 - Research-Extensive
@ Research-Intensive
Master's-II
0.0 [:1 Master's-I

5101112182025334045646590

Need-based Grant %

Figure 4. Need-Based Grant a8 a % of Institutional Financial Aid

69

Based on the results of this study it appears that institutional policy decisions
related to funding for need-based ﬁnancial aid programs and tuition pricing are more
likely to be linked at universities categorized as Research-extensive or Master’s I than at
universities categorized as Research-intensive or Master’s II. Irrespective of Carnegie
Classiﬁcation, coordinated tuition pricing and ﬁnancial aid funding policy was found to
exist at rmny of the 15 Michigan public universities but, on average, the Research-
extensive and Master’s I universities responding to the survey commit a greater share of
institutional aid ﬁulding to need-based grant than do the Research-intensive and Master’s
H universities.

It is evident from the ﬁndings of the survey questionnaire and the bi-variate
regression analysis that to a great extent institutioml policy decisions related to funding
for institutional ﬁnancial aid programs and tuition pricing are directly linked and formal
relationships exist at many of the 15 Michigan public universities; it is not, however,
evident that these linked policies can effectively support access for low-income students
given the apparent limited investment in need-based ﬁnancial aid programs at many of
the same universities.

Section 3: Support for Institutional Mission

Public mliversities in Michigan enjoy constitutional autonomy; elected or
appointed governing boards have sole responsrbility for directing and approving
institutional policy, including ultimate responsibility for setting tuition prices. Critics
blame university autonomy for low affordability and low accountability while advocates
hail the high educational quality associated with this system and contend that autonomy

allows the “market” to determine tuition rates (Martinez & Nodine, 1997). Regardless of

70

their position on university autonomy, legislators expressed great concern about
affordable higher education in the state when interviewed during a study conducted by
Martinez and Nodine (1997) in the early 19908. Evidence from university mission
statements indicates that many public higher education ofﬁcials also rank access and
affordability as important university goals.

This section seeks to answer the research question: to what extent do institutional
policies linking funding for need-based aid and tuition pricing support or counteract
institutional mission or goals related to access and/or affordability. To answer this
question, state and institutional goals related to access and/or affordability were ﬁrst
reviewed and then compared to the ﬁndings from Section 2 of this chapter regarding
policy linkages that support access and affordability for low-income students.

State Policy

Although Michigan legislators and other elected oﬁicials cannot mandate tuition
rates, they can inﬂuence the setting of rates through the annual budget appropriation
process and through new legislation. In 1995 and again in 2002, the Michigan legislature
and Governor took extraordinary steps to protect access and aﬁ‘ordability at Michigan’s
public colleges and universities.

In 1995, the Michigan legislature passed, and the Governor signed into law, a bill
that provides tax incentives to students who attend a public institution of higher learning
that does not increase tuition and fees by more than the annual average increase ill the
US. consumer price index for the prior tax year (Income Tax Act of 1967, 1967 & Add.
1995, 1996, 1997). Although this amendment to the Income Tax Act of 1967 generated a

great deal of controversy, and continues to do so, it did not prevent public, four-year

71

universities from raising tuition and fees when ﬁscal exigency required that they do 80;
e. g., only four of the public universities met the criteria that would allow their students to
take advantage of the tax credit in 1995-1996 (Martinez & Nodine, 1997).

In February 2002, Governor Engler negotiated and announced an agreement with
the presidents of all 15 public universities guaranteeing that state appropriations would
remain at ﬁscal year 2002 levels for each university that limited tuition increases to 8.5%
or $425, whichever was greater; prior to the agreement, cuts in higher education
appropriations were anticipated (Shafer, 2002). The agreement language was added to
the Higher Education Appropriations Act of 2002 (appropriating ﬁlnds for the 2003 ﬁscal
year) and states in part: “It is also the intent of the legislature to recognize the need for
tuition restraint on the part of Michigan’s public universities, in order to maintain access
and aﬁ'ordability at Michigan’s colleges and universities for students and parents”
(Higher Education Appropriations Act 2002, 2002).

Universay' Mission

To determine institutional goals related to access and affordability, university
mission and/or vision statement documents were collected and analyzed. Table 16
presents the relevant content of the mission/vision statements for those universities with
stated access or affordability goals. Content analysis was conducted for reference to the
terms “access”, “affordability” or terms and phrases descrﬂling similar concepts (e. g.,
educational opportunity regardless of “economic circumstances” or “ﬁnancial resources”,
etc.). Because the mission/vision statements are public documents, analysis and results
were reported by institutional name. Three of the four Research-extensive university

mission statements included access or affordability as an institutional goal, ﬁve of the six

72

Table 16. Mission/Vision Statement Con_t_e_nt Relatad to Access or Affordability At
Michigan’s Public Universities

 

CarnegieClass.

University

Mission Statement Content

 

Research-extensive
Michigan State
University

Wayne State
University

Western Michigan
University

Master’s 1
Eastern Michigan
University

Grand Valley State
University

Northern Michigan
University

Saginaw Valley
State University

University of
Michigan-
Dearbom

Master’s H

Ferris State
University

“. . .committed to providing equal educational opportunity to all
qualiﬁed applicants. . .”

“. . .an obligation to develop special avenues that encourage access
for promising students ﬁ'om disadvantaged educational
backgrounds...”

“To provide access to academic programs at reasonable cost...”

“Opportunity-seeks to attract, serve and accommodate. . .student
body. . .from a variety of ethnic, social and economic
backgrounds. . .”

“Affordable- “. . .committed to ensuring that those individuals who
are qualiﬁed and who desire to participate are not discouraged from
doing so because of ﬁnancial resources. . .”

“...GVSU remains committed to its original tenets...access for all
qualiﬁed citizens of West Michigan and the state.”

“While maintaining accessibility and affordability, the University
shall also seek, when appropriate, the highest standards of
accreditation for its liberal arts and professional programs.”

“To provide academic and support services that address the
educational needs of a diverse student population that varies
by. . .and economic circumstances.”

“We strive to be the institution of choice in southeastern Michigan
for individuals and organizations that value accessibility, ﬂexibility,
affordability, diversity and preeminence in education.”

“. . .providing the opportunity for all students to reach their highest
potential. . .”

“. . .we are determined to make admission to this institution easy; we
are determined to command the attention of backward men and
women, we are determined to adapt our institution to their
needs...miounder’s Mission)

 

73

Master’s I universities included access or affordability as an institutiorml goal and one of
the two Master’s H universities included access or affordability as an institutional goal.
None of the Research-intensive university mission statements included access or
affordability as an institutional goal.

To determine if university access and affordability goals are supported or
counteracted by institutional policy, the goals were compared to the survey questionnaire
and bi-variate regression ﬁndings relating to the existence of coordinated tuition pricing
and ﬁnancial aid funding policy and to the ﬁndings related to the allocation of
institutional flmds to need-based aid. Table 17 summarizes the results of the comparison
by Carnegie Classiﬁcation.

Three of the four Research-extensive universities (75%) have a stated institutional
mission or goal related to access or affordability; based on the results of the survey
questionnaire and bi-variate regression analysis, it appears that the institutional rhetoric
regarding access is supported by coordinated tuition pricing and ﬁnancial aid funding
policy (although not necessarily directly linked policy) for at least two of these
universities (50%). That the Research-extensive universities responding to the survey
reported the highest average allocation of institutional aid to need-based grant and
reported the highest percentage of applicants awarded need-based aid provides further
substantiation that access or affordability is an institutional priority at some of the
Research-extensive universities.

Although all of the Research-intensive universities reported the existence of
coordinated tuition pricing and ﬁnancial aid ﬁrnding policy, none of these universities has

a stated institutional mission or goal related to access or affordability. Further evidence

74

Table 17. Summary of Insti_tutional Accesa/Affordability Goals Compared To

 

 

 

Institutional Poli_c_y
Research- Research- Master’s Master’s
Goals/Policies extensive intensive I II
Number of universities with access and/or 3 of 4 0 of 3 5 of 6 1 of 2
affordability goals
Number of participating universities reporting 2 of 2 3 of 3 5 of 5 1 of 2
that tuition pricing and aid funding policy is
related
Number of participating universities reporting 1 of 2 3 of 3 4 of 5 1 of 2
that the linkage between tuition revenue and
aid funding is “direct”
Number of universities for which the 2 of 4 1 of 3 3 of 6 1 of 2
relationship between tuition and aid
expenditures was determined to be signiﬁcant
Number of participating universities ranking 2 of 2 1 of 3 3 of 5 2 of 2
assisting the neediest students as the most
inﬂuential goal of aid programs
Ave. % of aid allocated to need-based grant in 49% 1 1% 37% 23%
2001 as reported by all 20 survey participants
Number of universities reporting a 50% or 1 of 2 0 of 3 2 of 5 0 of 2
more allocation to need-based grant in 2001
Ave. % of applicants awarded need-based aid 62% 19% 35% 18%
in 2001 as reported by the nine ﬁnancial aid
ofﬁcers
Number of universities awarding need-based 2 of 2 0 of 2 2 of 4 O of 1

aid to 50% or more of applicants

 

that access for low-income students may not be a high institutional priority for

Research-intensive universities are the survey responses reporting the lowest average

percentage of institutional aid allocated to need-based grant and the responses ranking

support of the university’s enrollment grth objective and shaping the proﬁle of the

75

undergraduate class as the most inﬂuential goals for institutional ﬁnancial aid by two of
these three universities (67%).

Five of the six Master’s I universities (83%) have a stated institutional mission or
goal related to access or aﬁcrdability and based on the results of the survey questionnaire
and bi-variate regression analysis, it appears that the institutional rhetoric regarding
access is supported by coordinated tuition pricing and ﬁnancial aid funding policy at
some of these universities. Although the Master’s I universities responding to the survey
reported an average allocation of institutional aid to need-based grant of only 37%, two
of the universities participating in the survey reported allocations that exceeded 50% of
institutional aid ﬁrnds and reportedly awarded need-based aid to more than 50% of the
aid applicants.

The results of the comparison for the two Master’s 11 universities are divided.
Only one of the two ruliversities has a stated institutional mission or goal related to access
or affordability and only one of the two reports the existence of coordinated tuition
pricing and ﬁnancial aid funding policy but neither of the universities report an allocation
to need-based aid greater than 33% of total institutional aid funding.
$111M!

Based on the examination of state mandate it can be said tlult affordability is of
concern to elected ofﬁcials in Michigan. Prior and current legislation illustrate that
lawmakers are concerned about the price of higher education. And a review of university
mission statements indicate that some higher education policymakers are concerned about
access and affordability; although constitutionally autonomous, nine of the 15 Michigan

public universities (60%) identify access and/or affordability as an institutional priority.

76

Overall, the ﬁndings from the comparison of institutional goals to institutional policy
indicate that where access and affordability are stated institutional priorities, it is more
likely that tuition pricing policy and ﬁrnding policy for institutional aid are coordinated
and to ﬁnd a sufﬁcient portion of institutional aid allocated to need-based grant to support
these institutional priorities.

Of the nine universities identifying access and/or affordability as an institutional
priority, eight of the universities are categorized as either Research-extensive or Master’s
I universities. The survey participants representing universities categorized as Research-
extensive and Master’s I also reported the highest average allocations of institutional
funding to need-based grant; survey participants representing ﬁve of these universities
reported allocations of 40% or more of institutional aid ﬁmding to need-based grant. In
contrast, four of the six universities with no stated access or affordability goal, are
categorized as Research-intensive or Master’s H universities and the survey participants
representing these universities reported the lowest average allocations of institutional
funding to need-based grant.

The comparison of institutional goals to institutional policy also illuminated cases
where the limited percentage of institutional aid allocated to need-based grant may
counteract institutional priorities regarding access and/or affordability. For example, ﬁve
of the six Master’s I universities have stated institutional priorities regarding access
and/or affordability but two of the ﬁve Master’s I universities responding to the survey
estimated institutional allocations to need-based grant for 2001 at or below 25%.

Section 4: Resource Dependence Theogy as 3 Valid Framework

The intent of this section is to analyze the validity of resource dependence theory

77

as a ﬁamework for studying institutional policymaking. Speciﬁcally, the intent is to
determine the theory’s value in framing this study: determining the extent to which
institutional policymakers at Michigan public universities link policy decisions related to
tuition pricing and frulding for need-based institutional aid and to determine if these
policy decisions support institutional goals related to access and affordability. In this
context, university policymaking is interpreted as the institutional response to external
forces that control needed resources (Pfeﬂ‘er & Salancik, 1978).
Univers_ity Revenu_es

From a resource dependence perspective, it was posited that one ﬁnding of this
study would be accelerating rates of tuition at Michigan public universities in response to
moderating or declining state appropriations. Indeed average revenue from tuition and
fees for Michigan’s 15 public universities increased by 97% for the time 1989-90 to
1999-2000 while average revenue from state appropriations increased at a slower rate (by
45%) for this same time. Throughout this time period the combined revenue ﬁ'om tuition
and fees and state appropriations accounted for approximately 64% of total current fund
revenues for Michigan’s 15 public universities but the percentage of revenue ﬁ'om tuition
and fees increased while the percentage of revenue from state appropriations decreased.
On average for the 15 public universities, tuition and fees increased as a percentage of
total current fund revenues from 25% in 1989-90 to 30% in 1999-2000 and state
appropriations decreased as a percentage of total current fund revenues from 39% ill
1989-90 to 34% in 1999-2000. Slaughter and Leslie’s (1997) ﬁndings also conﬁrm that

since the 19808, the share of university revenues ﬁ'om state appropriations for public

78

higher education have declined while the share from tuition revenues continues to
Emditures for Institutional Aid

From a resource dependence perspective, one might also expect to ﬁnd decreasing
expenditures for institutional aid ill order to maximize tuition revenues. In Ect, however,
expenditures for institutional ﬁnancial aid at Michigan’s 15 public universities increased
170% for the time 1989-90 to 1999-2000. This tremendous growth in expenditures for
institutional ﬁnancial aid is not unique to Michigan’s public universities and has resulted
overall in moderating the growth of net tuition and fee revenues in comparison to gross
tuition and fee revenues (McPherson & Schapiro, 1998). Resource dependence theory
actually provides a useful ﬁamework for understanding this growth ill expenditures for
institutional ﬁnancial aid.

Although expenditures for federal, state and local, and private ﬁnancial aid also
increased from 1989-90 to 1999-2000 at Michigan’s public universities, the percentage of
total ﬁnancial aid expenditures accounted for by federal aid (excluding loans) declined
substantially. On average for the 15 public universities, federal aid decreased as a
percentage of total ﬁnancial aid expenditures ﬁom 55% in 1989-90 to 37% in 1999-2000
and institutional aid increased as a percentage of total ﬁnancial aid expenditures ﬁ'om
27% in 1989-90 to 41% ill 1999-2000. The average per university expenditure for federal
ﬁnancial aid increased by only 24%, increasing ﬁom approximately $5.6 million in 1989-
90 to $7 million in 1999-2000; this slow rate of grth in federal ﬁnancial aid
expenditures occurred at the same time that Michigan public universities increased

revenue from tuition and fees by 97%. It is likely that the grth in expenditures for

79

institutional aid was in part due to the declining purchasing power of federal ﬁnancial
aid; i.e., federal ﬁnancial aid funding failed to keep pace with tuition prices. Further
evidence of this relationship is the ﬁnding from this study of a signiﬁcant, negative
association between expenditures for institutional ﬁnancial aid and expenditures for
federal ﬁnancial aid for some of the Michigan universities. Therefore, university policy
decisions to increase funding for institutional ﬁnancial aid may have been in part a
response to external forces; i.e., federal policymakers.

It is also likely that the increasing reliance on student-generated revenue is in part
responsible for university decisions to allocate more ﬁrnds to institutional ﬁnancial aid
programs. The literature indicates that universities are increasingly competing for more
and better students by discounting tuition with merit-based scholarships. Slaughter and
Leslie (1997) suggested tlult “marketlike behaviors” such as recruiting efforts necessary
to compete for students are an outcome of shrinking unrestricted sources of institutional
funding and Redd (2000) concluded ﬁom his study that public colleges and universities
were actively competing for undergraduate students by selectively discounting tuition
with institutional aid dollars.

Attracting more students with institutional aid dollars may also result in a higher
appropriation ﬁom the state. In 1999, Governor Engler introduced a new ﬁnancing
formula for public universities in Michigan that divides universities into tiers by mission
and cost of instruction and “recognizes” a “funding ﬂoor” allocation per ﬁscal-year-
equated student; the amount of the ﬁmding ﬂoor per student is dependent upon the

university’s tier placement (Higher Education Appropriations Act 2002, 2002; Schmidt,

80

1999). In theory, then, the more students enrolled, the higher the institution’s base
appropriation from the state.
S_traﬁgic Allocations

Given that university revenues available to fund institutional ﬁnancial aid
programs are limited, one would expect funds to be strategically allocated and ﬁom a
resource dependence perspective, one would expect those funds to be allocated to merit-
based aid programs that spawn additional revenue and perhaps future revenue streams.
The review of the literature indicates that colleges and universities are increasingly
discounting tuition with merit-based scholarships to attract high-quality students who can
enhance the prestige of the university or who meet other university enrollment goals.
Because of the effect of Emily income on high school grade point average and
standardized test scores, the common measures of student quality, merit-based
scholarships are more likely to be awarded to students ﬁom afﬂuent Emilies. The results
of this study indicate that the practice of selectively discounting tuition based on merit is
common practice at Michigan’s public universities. All but three of the universities
responding to the survey questionnaire reported a higher institutional investment ill merit-
based scholarships than in need-based grant. The average percentage of institutional aid
ﬁrnds allocated to merit-based scholarship as estimated by the budget ofﬁcers responding
to the survey was 63%, as estimated by the ﬁnancial aid officers was 64% and as
estimted by all of the survey participants was 64%.

The ﬁnancial aid ofﬁcers participating in the survey were also asked to indicate
the ﬁrst, second and third most often utilized criterion for awarding both institutional

need-based and merit-based aid. As expected, all of the ﬁnancial aid oﬂicers indicated

81

that ﬁnancial need was the most often utilized criterion for awarding need-based aid and
residency and high school grade point average were the second most utilized criteria for
awarding need based aid; no criterion was listed by the majority of participants as the
third most utilized. All but one of the ﬁnancial aid ofﬁcers indicated that high school
grade point average was the most often utilized criterion for awarding merit-based aid
and standardized test score was the second most utilized criterion; talent/skill and I
ethnicity were the third most utilized criteria for awarding merit-based aid. ’

Alternative/External Sources of Financial Aid .

 

From a resource dependence perspective, one would expect universities to seek
out alternative sources of aid to assist increasing numbers of student aid applicants ill
meeting the rising cost of education. The IPEDS reported data for the time 1989-90 to
1999-2000 shows that private aid expenditures increased by 194% for the 15 Michigan
public universities with the average per university expenditure increasing ﬁom $1.26
million in 1989-90 to $3.72 million in 1999-2000. Private aid is deﬁned by IPEDS as
scholarships and fellowships received from private sources such as businesses,
foundations, individuals and foreign governments (U .S. Department of Education
National Center for Education Statistics, Years 1990 to 2001). On average for the 15
public universities, private aid expenditures increased as a percentage of total ﬁnancial
aid expenditures from 5% in 1989-90 to 9% in 1999-2000. Research-intensive
universities experienced the greatest grth in expenditures for private aid at 363%
followed by Master’s I universities experiencing a 258% increase, Research-extensive
universities experiencing a 182% increase and Master’s 11 universities experiencing a

171% increase.

82

It was also posited that ﬁom a resource dependence perspective one would expect
to ﬁnd institutions seeking out external sources of ﬁnding to cover growing expenditures
for institutional ﬁnancial aid. In the current study, survey participants were asked to
estimate the source of funding for institutional ﬁnancial aid for the last three ﬁscal years;
the average of the responses for the 18 participants who responded to this question for
2000-2001 was as follows: 76% from general and unrestricted funds, 11% ﬁ'om gifts and
endowment income and 13 % ﬁ'om other sources. Table 18 presents the average
estinmted somces by Carnegie Classiﬁcation for 2000-2001. There was only a slight

Table 18. Estimated Percen_t of Institutional Financial Aid by Source of Aid
And Carnegie Classiﬁcation for 2000-2001

 

 

General & Gift &

Carnegie Classiﬁcation Unrestricted Endowment Other
Master’s I

Mean 69 6 25

SN). 36 4 39

N 9 9 9
Master’s H

Mean 91 9

E2 6 6

N 3 3
Doctoral/Research-intensive

Mean 94 6

SD 1 1

N 3 3
Doctoral/Research-extensive

Mean 62 32 6

SJ; 17 19 10

N 3 3 3

 

upward trend in gift and endowment income as a source and a correspondingly slight

downward trend in other sources of aid; the average estimated percentage of institutional

83

aid ﬁom general and unrestricted sources remained at 76% ﬁom 1998-99 through 2000-

2001.

F iglue 5 presents the trends in revenues from all sources for the period 1989-90 to

the period 1999-2000. A previous review of the IPEDS reported current ﬁlnds revenue

sources conﬁrmed that although revenue ﬁ'om both tuition and fees and state

appropriations had increased for Michigan’s 15 public universities ﬁom 1989-90 to 1999-

2000, on average, state appropriations as a percentage of total current funds revenue

declined to 34% and tuition and fees increased to 30%. Similarly, revenue ﬁom federal,

200000000

180000000

160000000

140000000

120000000

100000000

80000000

Average (Current $8)

60000000

40000000

2WI

0

 

 

T & F Revenue

State Appropriation

Gift/Endowment Rev.

Revenue-All Grants

Sales/Other Revenue

 

90 9'1 9'2 93 931 9'5 93 9'7 9?; 9'9 2000

Figure 5. Average Sources of Revenue-1 5 Michigan Public Universities

Source. Author’s calculations from IPEDS data.

84

state and local grants increased by 77%, revenue from gifts and endowment income
increased by 116% and revenue ﬂom sales and auxiliary services increased by 105% for
this same period for Michigan’s 15 public universities. On average federal, state and
local grants as a percentage of total current ﬁmds revenue declined ﬂ'om 10% to 9%, gifts
and endowment income as a percentage of total current ﬁrnds revenue increased ﬂom 5%
to 6%, and sales and other revenue as a percentage of total current funds revenue declined
ﬁom 22% to 21% over the same period.
SM!

From this analysis, resource dependence theory is determined to be a valid
ﬂamework for studying institutional policy decisions related to tuition pricing and
funding for need-based institutional aid and the affect of these policies on institutional
goals related to access and affordability. According to resource dependence theory,
university ﬁnancial requirements are paramount in explaining policy initiatives and
responses (Slaughter & Leslie, 1997). The results of the current review indicate that it is
likely that increased allocations of university funding to institutional aid were necessary
due to declining federal ﬁnancial aid ﬂrnding and moderating revenues ﬂ'om external
sources. Similarly, resource dependence theory is determined to be a valid ﬁamework
for explaining university policies that allocate an increasing share of institutional ﬁlnds to
merit-based scholarship programs given the growing competition for students and the
revenue they generate.

The results are inconclusive as to whether resource dependence theory effectively
framed university responses to growing expenditures for institutional aid, speciﬁcally

policy initiatives to seek out alternative and external sources of institutional aid. Private

85

aid expenditures did increase overall and as a percentage of total ﬁrEncial aid
expenditures, however, the amount of private aid expenditures rennins relatively low in
comparison to expenditures for federal and institutional ﬁnancial aid. And although
IPEDS reports a growth in other sources of revenue for the time 1989-90 to 1999-2000,
including a 116% increase in gift and endowment income ﬂom where funding for
scholarships often originates, the percentage of total current funds revenue from this

source increased from only 5% to 6% over this period. Similarly, the survey participants

 

reported very little change in the sources of institutional aid for the time 1998-99 to 2000- l
2001; general and unrestricted sources as an average estimated source of institutional aid
remained at 76% over this period.
SW of Results/Findings

Given the data and trends outlined in the literature review depicting a pattern of
low aﬂ‘ordability for public higher education ill Michigan, it was posited that tuition
pricing policy and funding policy for institutional ﬁnancial aid were not coordinated at
the 15 Michigan public universities. The results of this study, however, contradict this
hypothesis. The results of the survey questionnaire of budget and ﬁnancial aid oﬂicers
and the ﬁndings from the bi-variate regression analysis reveal that such policymaking is
coordinated at many of the public universities in the state. Nevertheless, the results of the
survey also reveal that a growing share of institutional aid has been allocated to merit-
based scholarships; at most of the institutions responding to the survey questionnaire, the
share of institutional aid allocated to merit-based scholarship exceeds the share allocated
to need-based grant.

The results of this study indicate that some of the Michigan public universities

86

link policy decisions related to funding for need-based institutional aid to tuition pricing
to a great extent and these coordinated policies support institutional goals related to
access and affordability. It was also determined, however, that other Michigan public
universities link funding for need-based institutional aid to tuition pricing to a much
lesser extent and these universities were less likely to have stated institutional goals
related to access and aﬁordability.

Based on a review of university mission and vision documents, it was discovered
that Michigan Research-extensive and Master’s I universities were more likely to have
stated institutional goals relating to access and affordability. And based on the responses
of the survey participants, substantiated by the bi-variate regression analysis, these
universities were more likely to support access goals with coordinated policy linking
ﬂlnding for need-based ﬁnancial aid to tuition pricing and with a relatively healthy
investment in need-based grant. Due to the relatively limited allocation of institutional
ﬁrndillg to need-based grant reported by the Michigan Research-intensive and Master’s H
universities participating in the study, it was determined that institutional policy decisions
related to funding for need-based grant and tuition pricing were not linked to any great

extent.

87

CHAPTER 5
SUMMARY, CONCLUSIONS AND IMPLICATIONS

This chapter presents a summary of the research study and outlines the

conclusions and implications that may be drawn ﬂ'om the study’s ﬁndings.
Purpose of tha Resegph

Policy analysts have posited that higher education access for low-income students
is unlikely to be sustained unless policy related to tuition pricing and ﬁnancial aid is
coordinated (Griswold & Marine, 1996; Hossler et al., 1997). Conventional strategies
utilized by both states and institutions to facilitate access for low-income students have
included low tuition/low aid and high tuition/high aid coordinated policies. Recent
studies indicate that the gap between the college participation rates of low-income and
high-income students continues to widen and that the college participation rate of low-
income students may actually be on the decline (Advisory Committee on Student
Financial Assistance, 2002;Hart1e & King, 1997; McPherson & Schapiro, 1998;
Mortenson, 1999). These ﬁndings suggest that tuition pricing and ﬁnancial aid policy are
no longer coordinated or that the conventional strategies are no longer effective. In an
updated analysis of college participation rates, Mortenson (2001a) found that the gap in
participation rates between low-income students and high-income students was almost 40
percentage points by the year 2000 with only 35.4% of the students from the lowest
income quartile participating while 75.2% of the students ﬁ'om the highest income
quartile participated.

Mortenson (2002a) also evaluated the college participation rates, by state, of

students who had qualiﬁed for ﬂee or reduced-price school lunches as fourth to ninth

88

 

graders. He found that the average participation rate for all states had peaked at 27.5% in
ﬁscal year 1998 but declined to 23.1% in ﬁscal year 2001; in Michigan, the college
participation rate for these students was 23.3% in ﬁscal year 2001 (Mortenson, 2002a).

A review of related research studies turned up little evidence that coordinated
state policy related to tuition pricing and need-based ﬁnancial aid actually exists today.
Hossler et al. (1997) conducted research that included the study of the extent to which
ﬁrnding for state ﬁnancial aid programs and the setting of tuition rates at public colleges
and universities in all 50 states are linked. The results of their study indicate that little
relationship exists between the two areas of policymaking. Similarly, in their study of the
differences and similarities in tuition pricing and ﬁnancial aid policies in all 50 states in
the early 19908, Hearn, Griswold and Marine (1996) discovered that the statistical
relationship between average tuition rates at public institutions and per capita need-based
aid awards was weak.

Although institutional policymaking related to funding for need-based ﬁnancial
aid and tuition pricing has apparently not been studied, a recent analysis of college costs
and prices conducted by the US. Department of Education’s National Center for
Education Statistics (2001) sheds some light on funding for total institutional aid. The
study determined that expenditures for total institutional aid increased more tlmn most
other expenditures at all types of public higher education institutions and that a
signiﬁcant relationship exists between the change in expenditures for total institutional
aid and the change in undergraduate tuition at most public institutions.

Evidence ill the literature shows substantial growth in expenditures for

institutional aid but evidence also indicates that this funding is increasingly allocated to

89

merit-based scholarships intended to attract high academic achievers or other special
populations to campus rather than to need-based grant (AASCU & NASULGC, 2002;
McPherson & Schapiro, 1998; US. Department of Education National Center for
Education Statistics, 2001). For example, ill his analysis of a national research study of
ﬁnancial aid awarding policies, Kenneth Redd (2000) found that four-year public
institutions participating in the study reported an increase of 163% in the number of merit I?
scholarship recipients and a growth of 193% in the value of these scholarships ﬁom 1988 h

to 1996.

 

Based on the review of the literature, it appeared that very little research had been
conducted at the university level to determine if policy linkages between the setting of
tuition rates and ﬁmding for institutional, need-based ﬁnancial aid programs exist. The
purpose of this study, therefore, was to determine the following:

1. To what extent are institutional policy decisions related to funding for need-based
ﬁnancial aid programs and tuition pricing linked at the 15 Michigan public
universities?

2. To what extent do these policies support or counteract institutional mission or
goals related to access and/or affordability?

Tuiti_on ana Financial Aid Trends in Miphigaal

Recent reports illuminate why a coordinated effort may be necessary to achieve
higher education access for low-income students in Michigan. The latest evidence
conﬁrms Michigan’s status as a high tuition state. Mortenson (2001b) found that, on
average, tuition and fees at state ﬂagship universities represented 10.9% of median state
household income in ﬁscal year 2001; ill Michigan, this percent equaled 14.6% ranking

Michigan fourth highest among all states in the percent of median state household income

90

required to pay for tuition and fees at its state ﬂagship university. Further, ﬂom ﬁscal
year 2001 to 2002, average in-state, undergraduate tuition and fees at all public
universities increased 7.1%, ﬂ'om $3,514 to $3,763(AASCU & NASULGC, 2002). At
Michigan’s public universities, the lower division, tuition and fee rates for in-state,
undergraduate students ranged from $3,897 to $6,935 and averaged $4,811 in ﬁscal year
2002 (Stevens, 2001). The state’s investment ill need-based aid apparently does not '3"
correspond to the relatively high tuition and fee rates clulrged by Michigan’s public

universities. Michigan was ranked 318‘ lowest in the percent of public university tuition

 

and fees paid by state need-based aid (2%) and ranked 46til lowest in the percent of public
university tuition and fees paid by federal Pell grants (8.9%) in ﬁscal year 1997
(Mortenson, 2002b).
Conceptual Framework
Resource dependence theory was utilized to ﬂame this research study. The theory
holds that organizations will adapt to the environment in order to obtain resources that are
critical to the survival of the organization (Pfeffer & Salancik, 1978). For the purpose of
this study, university policymaking was interpreted as the institutional response to
external forces that control needed resources. Based on resource dependence theory,
accelerating rates of tuition in response to moderating state appropriations, strategic use
of institutional ﬁnancial aid and growing external sources of funding for institutional
ﬁnancial aid programs were expected results.
Reseaych Des_igl_l
Data for this case study of policymaking at Michigan’s 15 public universities

were collected from state and university documents, the IPEDS-Peer Analysis System and

91

a survey of the universities’ ﬁmncial aid and budget ofﬁcers. Nine ﬁnancial aid ofﬁcers
and 11 budget ofﬁcers representing at least 12 of the 15 Michigan public universities
responded to the survey questionnaire. In addition to a detailed and summary review of
the survey results, the data were categorized and analyzed by Carnegie Classiﬁcation;
institutional identities of the survey participants were unknown to the researcher and
therefore not reported. The 2000 Carnegie Classiﬁcation diﬁ‘erentiates institutions based 9‘
on the type and number of degrees awarded by the institution (The Carnegie Foundation

for the Advancement of Teaching, 2001). Michigan’s public universities are categorized

 

by one of the following classiﬁcations: Doctoral/Research Universities-Extensive,
Doctoral/Research Universities-Intensive, Master’s Colleges and Universities I and
Master’s Colleges and Universities 11.

Content analysis was conducted of Michigan statute and university mission
statements for reference to mandates or goals related to access and affordability; because
the vision statements are public documents, the results of this analysis were reported by
institutional name. Descriptive statistics were used to analyze trends in the ﬁnancial data
collected ﬁ'om the IPEDS-Peer Analysis System and bi-variate regression was utilized to
analyze the relationship between various ﬁnancial factors including the relationship
between expenditures for institutional ﬁnancial aid and revenues from tuition and fees.
Because IPEDS data are public, the results of the analyses were reported in total, by
Carnegie Classiﬁcation and by institutional name. Frequencies, mean comparisons and
CROSS-Tabs were used to analyze the budget and ﬁnancial aid ofﬁcer responses to the
survey questionnaire.

Results

92

Revenue, Eap_enditure and Enrollment Trends
A review of the IPEDS reported ﬁnancial data for the 15 Michigan public

universities found that the average growth in expenditures for institutional ﬁnancial aid
outpaced the average growth in revenue from state appropriations and enrollment and
even surpassed the average growth in tuition and fees for the time 1989-90 to 1999-2000.
The average per university expenditure for institutional ﬁnancial aid increased by 170%
while the average revenue from state appropriations increased by 45%, average
enrollment grew by only 4% and average revenue ﬁom tuition and fees increased by
97%.

Michigan’s Research-intensive luliversities increased average expenditures for
institutional aid the most (220%) while Research-extensive universities reported the
highest average expenditure for institutional ﬁnancial aid in ﬁscal year 1999-2000 ($24.5
million). Master’s I universities increased average revenue ﬁom tuition and fees and
average revenue from state appropriations the most (127% and 55%, respectively) but
Research-extensive universities reported the highest average revenue ﬁ'om both ill ﬁscal
year 1999-2000 ($235.9 million and $267.4 million, respectively). Master’s I universities
reported the highest average increase in student enrollment (12%) while Research-
extensive universities reported the highest average enrollment for ﬁscal year 1999-2000
(35,710). During the period 1989-90 to 1999-2000, the proportion of current ﬁrnd
revenues from state appropriations and tuition and fees at Michigan’s public universities
shifted with the average proportion for state appropriations declining ﬂom 39% to 34%
and the average proportion ﬂom tuition and fees growing ﬁom 25% to 30%.

Coordj'mated Tuitaln and Aid Policy

93

 

The survey questionnaire asked the ﬁfteen budget ofﬁcers and ﬁfteen ﬁnancial
aid ofﬁcers to describe the policy at their university (if any) that links tuition and fee rates
and funding for institutional ﬁnancial aid programs. The survey participants were also
asked to describe the linkage between various ﬁnancial factors and funding for
institutional ﬁnancial aid programs. The survey results indicate that a ‘Wery formal
relationship” or a “less formal relationship” exists between tuition pricing and ﬁlnding for
institutional ﬁnancial aid for at least 11 of the 12 universities (92%) responding to the
survey. These responses indicate that most of the institutions responding to the survey
increase ﬁrnding for institutional ﬁnancial aid (proportionately or otherwise) in response
to increases in tuition and fee rates. Only one of the Master’s 11 universities indicated
that little or no relationship exists between tuition and fee rates and funding for
institutional ﬁnancial aid programs.

The survey results also reveal that while other ﬁnancial factors are considered
when ﬁmding institutional ﬁnancial aid programs, policy decisions related to tuition
pricing and ﬁmding for institutional ﬁnancial aid programs are directly linked at a
majority of the 1miversities responding to the survey. Survey participants representing 9
of the 12 universities (75%) selected “direct linkage” to describe the relationship between
changes ill tuition and fee revenue and funding for institutional ﬁnancial aid. One of each
of the Research-extensive, Master’s I and Master’s H universities responding to the
survey indicated that the linkage was “indirect”.

The results of the survey show no substantial difference in the responses of the
budget oﬁicers and ﬁnancial aid oﬁcers. The majority of both the budget oﬁicers and

the ﬁnancial aid oﬁcers indicated that a relationship exists between tuition and fee rates

94

and ﬁlnding for institutional ﬁnancial aid; a higher percentage of the budget oﬁicers than
the ﬁnancial aid officers indicated that the relationship is formaL Majorities of both also
report a “direct linkage” between tuition and fee revenue and funding for institutional
ﬁnancial aid.

Bi-variate regression was employed to ﬂrrther analyze the relationship between
tuition pricing and funding for institutional ﬁnancial aid at the 15 Michigan public
universities. Speciﬁcally, the relationships between the dependent variable (change in
institutional ﬁnancial aid expenditures) and the independent variables (change in tuition
and fee revenue, change in state appropriation revenue, change in state ﬁnancial aid
expenditures, change in federal ﬁnancial aid expenditures, change in tuition and fee rates
and change in fall enrollment) were measured. The ﬁnancial data used in these analyses
were downloaded ﬂ'om NCES IPEDS for ﬁscal years 1989-90 to 1999-2000. Analyses
were conducted of changes in the 15 Michigan public university averages, changes ill the
Carnegie Classiﬁcation averages and changes ill the ﬁnancial factors at each university
over time. In addition, a cross-sectional regression analysis was conducted of same year
data for all 15 Michigan public universities. The results of the bi-variate regression
analysis support the survey results indicating that although other ﬁnancial Ectors are
signiﬁcantly related to the change in expenditures for institutional ﬁnancial aid, the
relationship between expenditures for institutional ﬁnancial aid and revenues from tuition
and fees over time is also statistically signiﬁcant at several of the 15 Michigan public
universities. Further, change in tuition and fee revenue was found to be a signiﬁcant
predictor of change ill expenditures for institutional ﬁnancial for the 15 Michigan public

universities in 1999-2000.

95

 

No signiﬁcant relationships were found between the dependent and independent
variables when analysis was conducted of changes in the overall averages over time.
When analysis was conducted of the changes in the averages of each Carnegie
Classiﬁcation over time, a signiﬁcant positive relationship was found between the change
in average institutional ﬁnancial aid expenditure and change in average tuition and fee
revenue for the Doctoral/Research-intensive universities and the Master’s I universities. T
Similarly, a signiﬁcant negative relationship was found between the change in average

institutional ﬁnancial aid expenditure and change in average state ﬁnancial aid

 

expenditure over time for the same university categories. Further, a signiﬁcant negative
relationship was found between the change in average institutional ﬁnancial aid
expenditure and change ill average federal ﬁnancial aid expenditure over time for the
Master’s H universities.

A series of scatter plots and bi-variate regression analyses were run to observe
and measure the relationship between change in actual expenditures for institutional
ﬁnancial aid and change in actual revenue ﬂom tuition and fees for each university for
the period 1989-90 to 1999-2000. A signiﬁcant positive relationship was found for only
one of Michigan’s 15 public universities (Michigan Technological University).
However, when the outliers identiﬁed through the scatter plot analyses were removed
from the data for each university, signiﬁcant relationships between ﬁnancial aid
expenditures and tuition and fee revenues over time were identiﬁed for six additional
universities: Nﬁchigan State University, Wayne State University, Grand Valley State
University, Northern Michigan University, Saginaw Valley State University and Ferris

State University. Statistically signiﬁcant relationships were also found between change

96

in actual expenditures for institutional ﬁnancial aid and change in expenditures for state
ﬁnancial aid, change in expenditures for federal ﬁnancial aid and change ill tuition and
fee rates over time for several universities.

These ﬁndings reveal that institutional linkages exist between ﬁnancial aid
funding policy and tuition pricing policy at many of Michigan’s public universities but do
not speciﬁcally respond to the research question regarding the extent to which
institutional ﬁnancial aid is invested in need-based programs. To answer this question,
the survey participants were asked to describe the underlying goals of their institutional
aid programs and to estimate the percentages of institutional aid allocated to various
programs.

Participants representing 8 of the 12 universities (67%) responding to the survey
reported that the most inﬂuential goal for institutional ﬁnancial aid at their university was
to provide ﬁnancial assistance to the neediest students. Three of the 12 universities
(25%) represented ill the survey (one Research-intensive and two Master’s I universities)
selected supporting the university’s enrollment growth objective as the most inﬂuential
goal and 1 of the 12 universities (8%) represented (Research-intensive university)
selected shaping the proﬁle of the undergraduate class as the most inﬂuential goal.
Although the majority of the survey participants identiﬁed providing ﬁnancial assistance
to the neediest students as the most inﬂuential goal, their average estimated percentage of
institutional aid dollars allocated to need-based grant was only 30%. The average
percentage of institutional ﬁnancial aid allocated to merit-based scholarship, loan and
other aid in ﬁscal year 2000-01 as estimated by the survey participants was as follows:

64% to merit-based scholarship, 5% to loan and 1% to other funds. The results of this

97

survey item show a downward trend in the average estimated allocation to need-based
grant over the last three ﬁscal years for all survey participants and a corresponding
upward trend in the average estimated allocation to merit-based scholarship. The
ﬁmncial aid ofﬁcers participating in the survey estimated a higher average allocation of
institutional aid to need-based grant (34%) than the budget ofﬁcers participating in the
survey (26%).

There also appeared to be differences in the allocations of institutional aid dollars
by Carnegie Classiﬁcation category. The average response for the estinulted allocation
to need-based grant was highest for Research-extensive universities at 49% to need-based
grant, 34% to merit-based scholarship, 13% to loan and 4% to other aid, and lowest for
Research-intensive universities at 11% to need-based grant, 88% to merit-based
scholarship and 1% to loans. The average response for Master’s I survey participants
was 37% to need-based grant, 56% to merit-based scholarship, 6% to loan and 2% to
other aid and the average response for Master’s H survey participants was 23% to need-
based grant, 77% to merit-based scholarship and no institutional aid allocated to loans or
other categories. A similar difference by Carnegie Classiﬁcation was found when the
ﬁnancial aid ofﬁcers participating in the survey were asked to estimate the percentage of
applicants who were awarded institutional need-based grant for ﬁscal year 2000-01. The
average response for Research-extensive universities was 62%, for Research-intensive
universities was 19%, for Master’s I universities was 35% and for Master’s H universities
was 18%.

All of the survey participants indicated that their institution had experienced an

increase in the number of students applying for ﬁnancial aid in one or more of the last

98

three years. Further, 67% of the ﬁnancial aid oﬂicers and 64% of the budget ofﬁcers
also indicated that the average need-based award remained the same or declined during
this same period.
Sappprt for Institutional Mission

To answer the second research question regarding the extent to which institutional
policies linking ﬁrnding for need-based aid and tuition pricing support or counteract

institutional mission or goals related to access and/or affordability, state and institutional I“.

1 A5). I

mission and goal statements were reviewed and compared to the ﬁndings of policy

 

linkages supporting access for low-income students. Based on the examination of prior
and current legislation, it was apparent that Michigan lawmakers are concerned about the
price of higher education and its impact on access. For example, the most recent higher
education appropriations act includes language that limits tuition and fee increases. A
review of university mission statements indicated that many higher education
policymakers are also concerned about access and affordability; nine of the 15 Michigan
public universities (60%) identify access and/or affordability as an institutional priority in
published mission, vision or goal statements. Once again, diﬁ‘erences were noted among
Carnegie Classiﬁcation categories.

Three of the four Research-extensive (75%) and ﬁve of the six Master’s I
universities (83%) have stated institutional missions or goals related to access or
affordability that are supported by coordinated ﬁnancial aid and tuition pricing policy.
Survey participants representing the Research-extensive universities reported the highest
average allocation of institutioml aid to need-based grant and reported the highest

percentage of applicants awarded need-based aid. Although the Master’s I universities

99

responding to the survey reported an average allocation of institutional aid to need-based
grant of only 37%, two of the universities participating in the survey reported allocations
that exceeded 50% of institutional aid dollars and awarded need-based aid to more than
50% of aid applicants. All of the Research-intensive universities reported the existence
of coordinated ﬁnancial aid and tuition pricing policy but none of these universities has a
stated institutional mission or goal related to access or affordability. The Research-
intensive universities reported the lowest average percentage of institutional aid allocated
to need-based grant and one of the three universities ranked support of the university’s
enrollment growth objective and one ranked shaping the proﬁle of the undergraduate
class as the most inﬂuential goals for institutional ﬁnancial aid. Only one of the two
Master’s 11 universities has a stated institutional mission or goal related to access or
affordability and only one of the two reported the existence of coordinated ﬁnancial aid
and tuition pricing policy but neither of the universities reported an allocation to need-
based grant exceeding 33% of total institutional aid dollars.
Resou_rce Dependence Thaw

Resource dependence theory was determined to be a valid ﬂamework for studying
institutional policy decisions related to tuition pricing and ﬁrnding for need-based
institutional aid and the aﬁect of these policies on institutional goals related to access and
affordability. Based on this study, it seems likely that the growing investment in
institutional aid programs by Michigan’s public universities was, in part, a response to
moderating funding from state and federal sources. Resource dependence theory was
also determined to provide a useful framework for understanding that the growing

competition in Michigan for high-quath students and the revenue they generate explains,

100

 

in part, the institutional need to allocate an increasing share of institutional aid dollars to
merit-based scholarship programs. There was little evidence to indicate, however, that
alternative or external sources of funding for institutional aid have been identiﬁed as
would be suggested by the theory. It may be that other economic factors are affecting the
availability of these sources or that any substantial growth in external and/or alternative
sources of institutional aid will require additional time to develop.

Conclusions

 

The four conclusions drawn ﬁom the results of this research study are outlined
and discussed below.

1. Michigan universities lin_l_( policies related to total ﬂlndillg for institutional ﬁnancial
W

The literature reviewed in this study conﬁrmed Michigan’s status as a high tuition
state and a cursory review of the research results suggests that policy linkages are ill
place to support access for low-income students by means of a high tuition/high aid
strategy. The study found that many of Michigan’s public universities coordinate
institutional policy related to funding for institutional ﬁnancial aid and tuition pricing.
Most of the institutions participating in the survey indicated that it is their policy to
increase ﬂmding for institutional ﬁnancial aid (proportionately or otherwise) in response
to increases in tuition and fee rates. The results of the survey also revealed that while
other ﬁnancial factors are considered when funding institutional ﬁnancial aid programs,
the majority of the institutions participating directly link changes in tuition and fee
revenue to changes in funding for institutional ﬁnancial aid. The results of the bi-variate
regression analysis supported these survey ﬁndings as statistically signiﬁcant

relationships between change in the expenditures for institutional ﬁnancial aid and

101

change in revenue ﬂom tuition and fees were found in the data for several of Michigan’s
public universities.

2. An increasm' g share of institutional aid funding is allocaqu to merit-based scholarship
and a deem ' g share is allocated to need-based grant.

In a recently released update to an earlier assessment of higher education
performance in the 50 states, Michigan’s grade for affordability dropped ﬂom a ‘C’
rating in 2000 to a ‘D+’ in 2002 (National Center for Public Policy and Higher
Education, 2002b). Among other ﬁndings, the report concludes that Michigan allocates
very little to need-based ﬁnancial aid and that a higher percentage of the incomes of
ﬁnancially needy Ernilies is required to pay for even the lowest-priced, Michigan higher
education options in comparison to many other states. Likewise, this study of
institutional policy revealed that many of Michigan’s public universities allocate very
little of their institutional aid dollars to need-based ﬁnancial aid. The average of the
estimated allocations of institutional aid dollars to need-based grant as reported by all 20
survey participants was 30%, as reported by the 11 budget ofﬁcers participating in the
survey was 26%, and as reported by the 9 ﬁnancial aid oﬂicers participating in the survey
was 34%. Hossler et a1. (1997) concluded from their study that although high tuition was
a consequence of recent state policies, the corresponding high investment ill need-based
ﬁnancial aid had been forgotten; it appears that institutional policymakers in Michigan
are unaware of or have also ignored the other part of the high tuition/high aid model.

The results of this study of institutional policy at Michigan’s public universities
revealed that allocations of institutional aid, as estimated by the 20 survey participants,
were 30% to need-based grant, 64% to merit-based scholarship, 5% to loan and 1% to

other programs. These ﬁndings are comparable to those from a recently conducted

102

national study of ﬁnancial aid policies, practices and procedures. Kenneth Redd (2002)
discovered that, on average, public, four-year universities distributed 35% of institutional
grants based on ﬁnancial need and 65% of institutional grants based on non-need based
criteria in the 1999-2000 academic year. Comparability of institutiorml allocations to
need-based aid is not, however, an indication that allocations are sufﬁcient. In fact, the
relatively low allocations to need-based ﬁnancial aid at the federal, state and institutional
levels have contributed to the low college participation rates of ﬁnancially needy
students. Evidence ﬂom this study also indicates that recent institutional policy decisions
at many of Michigan’s public universities are unlikely to improve access for low-income
students as survey results reveal a trend of declining allocations to need-based grant and
an average need-based grant award that has remained the same or declined in one of the
last three ﬁscal years. This is of particular concern for low-income students given the
rising cost of attendance at Michigan’s public universities for this same period.

Majorities of both the budget ofﬁcers and ﬁnancial aid oﬂicers responding to the
survey reported that the most inﬂuential goal for institutional ﬁnancial aid at their
university was to provide ﬁnancial assistance to needy students but the relatively low
average allocation of institutional aid dollars to need-based grant (30%) appears to
contradict this response. It may be that the underlying goal for ﬁnancial aid programs at
many of Michigan’s public universities is to assist in removing the ﬁnancial barriers that
prevent low-income students from attending but ﬁscal exigency has forced institutiom to
add merit-based scholarship programs to enhance their recruiting of more and better

students. As reported earlier in this study, Slaughter and Leslie (1997) suggest that

103

“marketlike behaviors” such as recruiting efforts necessary to compete for students are an
outcome of shrinking unrestricted sources of funding.

One common justiﬁcation for adding a new merit-based scholarship program is
that it is ﬁnancial aid that would not otherwise exist and some portion of the aid will
assist low-income students who qualify for the award. From this perspective, a relatively
high institutional investment in merit-based scholarship does not necessarily conﬂict with
an institutional goal to assist ﬁnancially needy students. At a recent conference regarding
state-based merit scholarship programs, several policy analysts indicated that it was
incorrect to assume that funding for state-based merit scholarships had been diverted
ﬂom programs otherwise available to assist ﬁnancially needy students as state lawmakers
Ind invested limited funding in such programs previously (Selingo, 2002). Further, the
analysts claimed that some portion of low-income students (those qualifying for the
scholarship) were better off than they would have been had the state scholarship program
not been introduced (Selingo, 2002). If this is so, then grth in funding for merit-based
scholarships may facilitate access for at least a segment of low-income students. To
assess the validity of these claims and their relevancy to Michigan’s experience, research
should be conducted of the numbers and characteristics of low-income students
qualifying for merit-based scholarships at Michigan’s public universities. Further, future
research should include a comparison of the numbers and characteristics of scholarship-
qualifying, low-income students who do and do not persist to graduation. Identifying the
similarities in the characteristics of low-income students who are qualifying for merit-

based scholarships and persisting to graduation presents an opportunity to strengthen

104

1"“!

funding for and the development of programs and services that will support access and
the success of low-income students.

3. ﬁe exten_t to which Michigan univgsjties lip_k ﬂinging for need-based aid and tuition
pricing mlicies may be related to institutional gpq.

The results of this study revealed differences among Carnegie Classiﬁcation
categories in the percentage of institutiorml aid dollars allocated to need-based grant and
the percentage of aid applicants awarded need-based grant. Relative to the Research-
intensive and Master’s H universities represented in the survey, the Research-extensive
and Master’s I universities reported allocating a higher share of institutional aid to need-
based grant (49% average and 37% average, respectively). The Research-extensive and
Master’s I universities represented in the survey also reported awarding institutional
need-based grant to a higher percentage of aid applicants (62% average and 35% average,
respectively).

Evidence also indicates that two of the three universities categorized as Research-
intensive are admittedly engaged in selectively discounting tuition ill order to attract more
and higher quality students. This ﬁnding suggests tlult competition for students and/or
resource dependence may be particularly acute for universities categorized as Research-
intensive. Survey participants representing these universities indicated that the most
inﬂuential goal for institutional ﬁnancial aid was something other than providing
ﬁmncial assistance to the neediest students. One of the three Research-intensive
universities listed supporting the university’s enrollment grth objective and another
listed shaping the proﬁle of the undergraduate class as the most inﬂuential goals for
institutional ﬁnancial aid. Further, the average tuition discount (average expenditures for

institutional aid as a percent of average revenue ﬁom tuition and fees) of 14% for

105

Research-intensive universities was higher than the 10% discount rate calculated for all
other categories indicating that one or more of the Research-intensive universities is
discounting tuition at a higher rate than most other Michigan public universities.

Two of the Research-intensive universities did report tuition and fee rates ($4,440
and $4,247) that were below the average for Michigan’s public luliversities ($4,811) in
ﬁscal year 2001-02. It is unlikely that these institutions are relying on a low tuition/low
aid strategy to reduce ﬁnancial barriers for low-income students as their tuition and fee

rates remain well above the national average ($3,763) and require a higher share of

 

Emily income to cover in comparison to other states (AASCU & NASULGC, 2002;
National Center for Public Policy and Higher Education, 2002b).

4. Instlutional policies related to need-based ﬁnancial aid support stated go_als related to
access and aﬁ'ordabr'lﬂ' .

Although there is no evidence of cause and effect, there does appear to be a
relationship between an institution’s goals related to access and affordability and the
institution’s share of ﬂlnds allocated to need-based grant. Three of the four Research-
extensive and ﬁve of the six Master’s I luliversities have stated missions or goals related
to access and affordability and universities in these categories reported allocating a
relatively higher share of institutional aid to need-based grant. None of the Research-
intensive universities publishes formal statements regarding access and affordability and
access goals are included in the mission statement of only one of the Master’s II
universities.

Implications
The results of this study indicate that many of the public universities in Michigan

are actively competing for high-quality students by selectively discounting tuition prices

106

with merit-based scholarships. In Michigan, the authority to set differential prices for
students based on academic merit or some other criteria rests with each university’s board
of control. As was noted earlier in this study, universities in Michigan enjoy
constitutional autonomy. Instead of a statewide board or commission authorized to
control public university tuition pricing, separate, elected or appointed boards have
responsibility for setting tuition pricing policy at their respective institutions. This
governance structure purportedly relies on competition to control prices (Martinez and
Nodille, 1997).

The relatively high allocation to merit-based scholarship reported by some of the
survey participants suggests that social equality as an inﬂuential goal for institutional
ﬁnancial aid programs has been forsaken. Instead, these universities are investing
institutional aid dollars in merit-based scholarship programs designed to attract high-
quality students or to meet other enrollment objectives. To attract high-quality students,
less prestigious universities must offer higher tuition discounts than institutions that are
more prestigious; this likely explains why Michigan’s Research-intensive universities
allocate a greater share of institutional aid funding to merit-based scholarships than do
the Research-extensive universities.

Maintaining or reducing the federal, state and institutional investment in need-
based aid at a time when tuition prices are on the rise effectively reduces low-income
student access to a four-year degree and sustains the gap between the “haves” and the
“have-nots”. As was previously reported, the annual earnings of a college graduate are
estimated to be 80% higher than that of a high school graduate in 2002 (College Entrance

Examination Board, 2002a). To the extent that ﬁnancial barriers prevent low-income

107

students from participating in higher education and from earning a four-year degree, their
opportunity for higher earnings is reduced and social inequality is perpetuated.

There is no direct evidence to indicate that institutional ﬂlnding has been diverted
ﬂom need-based grant to fund merit-based scholarship programs at Michigan’s public
universities. Evidence does indicate, however, that students ﬂom afﬂuent families are
more likely to qualify for merit-based scholarships suggesting that scarce institutional
resources are awarded to students who could likely afford college without the award
(Mortenson, 1997, 1999). McPherson and Schapiro (1998) posit that active bidding
among competitors for high-quality students likely results in colleges enrolling the same “I
students they would have enrolled without discounting the price and without forfeiting
scarce revenue. The loss of revenue is particularly egregious when one considers the
social good that could be accomplished or the academic programs that could be enhanced
(and that bear directly on the quality and reputation of the university) with these
resources.

To date, data regarding the dollar and percentage allocations to institutional need-
based and merit-based aid programs have been largely unavailable (College Entrance
Examination Board, 2002b; Mortenson, 1999). The survey results from this study
disclose the ﬁnancial aid ﬂlnding and tuition pricing policies of Michigan’s public
universities overall and by Carnegie Classiﬁcation while protecting the names of
institutional participants. The data presented could be useful to institutional
administrators who benchmark university policies and procedures by state or by Carnegie

Classiﬁcation.

108

Through professional associations and colloquiums, ﬁnancial aid administrators
have called upon federal, state and institutional policymakers to recommit to need-based
aid principles and have called upon one other to ﬁllly disclose institutional ﬁnancial aid
funding and pricing policies to the public (College Entrance Examination Board, 1997).
Intense competition for high-quality students and arcane pricing strategies have not only
threatened access for low-income students but have also threatened the historically
collaborative nature of ﬁnancial aid administration. The data reported in this study could
be the ﬁrst step toward disclosing the policies ill place at Michigan universities to the
“light of day” so that they might be understood and evaluated by our many
constituencies. The evidence presented ill this study could also be useful to Michigan’s
ﬁnancial aid associations and individual aid administrators as they solicit additional
institutional and state support for need-based aid programs. Further, the results of this
research could prove useﬁll to policymakers who are evaluating Ectors in Michigan,
including institutiomll policy, that support or counteract higher education access and
affordability.

Additional research should be conducted of the numbers and characteristics of
low-income students qualifying for institutional merit-based scholarships before state and
institutional policymakers console themselves with the belief that merit aid has facilitated
access for low-income students to any great extent. Not only is the number of high
school graduates expected to grow over the next decade but an increasing share of these
graduates are expected to be ﬂom low-income families (Advisory Committee on Student
Financial Assistance, 2002). Given the beneﬁts of a college education that accrue to the

individual and to society and the positive economic consequences of both, it will be

109

imperative for public universities in Michigan and elsewhere to be prepared with models
and strategies that adequately facilitate access and maintain affordability for low-income

students.

110

APPENDICES

lll

APPENDIX A

Financial Aid Ofﬁcer Survey Questionnaire

112

I. From among the options descnhed below, what are the underlying goals for institutional ﬁnancial aid at your university. Please
rank the three most inﬂuential goals by assigning a l to the most inﬂuential. a 2 to the second most inﬂuential and a 3 to the
third most inﬂuential:

Toprovideﬁnancialassistancetotheneedieststudents.
To support the enrollment growth objective of the university.

__To shape the proﬁle of the undergraduate class 111 terms of acadernlc standing, diversity, academic interest, talent,
residency, or other desired characteristic.

_To shape the proﬁle of the graduate class at terms of academrc standing. diversity, academic interest, talent, residency,
at other desired characteristic.

 

Other. (Please brieﬂy describe)

 

2. Please create the source of Ending for institutional ﬁnancial aid (excluding university employment) by listing the percentage
oftotal ﬁmds that were allocated from the following sources ill the last three ﬁscal years.

 

2000-2001 %GeneralandUm'estrictedﬁmds %GiftsandEndowmartIncome %Other
1999-2000 %GeneralandUm'estrictedfunds %GiﬁsandEndowmentlncome %Other
1998-1999 %GcneralandUmestricted funds %GiftsandEndowmentlncome %Other

3. Pleasemmdistn’bution ofﬁrndingtoinstitutional financial aidbylistingthepercentage oftotal ﬁmdsthatwereallocated
todrcﬁlllowingprograrnsinthelasttln’eeﬁscalyears. (Giﬁassistaneethatisawarded,inpartorinwhole,onthebasisof
ﬁnancial need should becounted intheneed—basedgrantcategory; exclude university unployrnent.)

2000-2001 %Need-basedgrantfunds %Merit-besedscholarshipﬁlnds %Loenfunds %Other
1999-2000 % Need-based grant funds % Merit-based scholarship funds % Loan ﬂlnds % Other
1998-1999 %Need—basedgnntﬁmds %Merit-basedscholarshipﬂmds %Loanfunds %Other

4. Please indicatedleextenttowhichthefollowing ﬁnancial Ectorsaretaken intoaccountindeterminingthelevel offunding for
institutioml ﬁnancial aid programs. By placing a check mark N) in the selected box for each factor indicate whether there is a
direct linkage ("indexing ”) between the factor and funding levels for institutionalﬁnancial aid programs: an indirect
relationship in which the factor is generally taken into consideration; or the factor is not taken into consideration.

 

Factor Direct Linkage Indirect Linkage No Linkage
Financial Aid $ Financial Aid $ Financial Aid 3

 

A. unease/decrease in state appropriation revenue

 

B. Increase/decrease in tuition& feetevenue

 

C. Increase/decreascin funding forstate ﬁnancial aid

 

M3
D. Increase/decrease in funding for federal ﬁnancial aid

 

programs
B. Other (please brieﬂy describe)

 

 

 

 

 

 

113

 

5. From among the options listed below, wlnt are the criteria utilized for awarding institutional need-based ﬁnancial aid to
undugraduate students at your university? Please rank the three criteria most often utilized by assigning a I to the most utilized,
a 2 to the second most utilized and a 3 to the third most utilized:

ﬁnancial need
ﬁrst generation
high school grade point average
standardized test score

high school class rank

membership in honors organization
undergraduate grade point average
ethnicity

residency (regional or national)
alumni parents

academic interest

talent/skill

other (please list)

 

 

6. From among the optiom listed below, what are the criteria utilized ﬁx awarding institutional merit-based ﬁmncial aid to
undergraduate students at your university? Please rank the three criteria most often utilized by assigning a l to the most utilized.
a 2 to the second most utilized and a 3 to the third most utilized:

ﬁnancial need
ﬁrst generation
high school grade point average
standardized test score
high school class rank
membership in honors organization
undergraduate grade point average
ethnicity
residaicy (regional or national)
alumni parents
academic interest

__talent/skill
other (please list)

 

7. Which ofthe following statements is the most similar to policies at your university regarding the relationship between tuition
and fee rates and funding for institutional ﬁmncial aid programs? Please check the most similar statement:

Averyfor-alnhdouhipexistaﬁtndinglbrinstitutionalﬁnancialaidisincreasedindirectproportion
toincreasasinmitionandfeeratea

Alcaafor-alrelatioaahipexistsﬁmdingﬁxinstitutional ﬁnancialaidisincreasedbutnmindirect
pmportiontoincreaswintuitionandfeeratea

There is little or I0 relationship between ﬁnding for institutional ﬁnancial aid and tuition and fee rates.

8. Are there any discussions or plans at your university to change the relationship between tuition and fee rates and ﬁnding ﬁx
imtitutioml ﬁnancial aid programs?

No

Yes. . . please check the statement that best describes the planned change:

Averyfomdnhﬂouhipisplamedﬁmdmglbrinstimﬁonalﬁnancialaidwillbeincreasedindirect
proportiontoinaeaseainmitionandfeeratea

A less formal relationship is planned, funding for institutional ﬁnancial aid will be increased but not
indirectproportiontoincreasesintuitionandfeerates.

There will be little or no relationship between funding for institutional ﬁnancial aid and tuition and fee
rates in the future.

114

 

9. My university formally evaluates the effectiveness of institutional ﬁnancial aid programs. Please check one:

Yes

No

10. The number of students enrolled at my university who ﬁle the Free Application for Federal Student Aid (FAFSA) has increased
in one or more ofthe past three years (2000-2001, l999-2000,l998-l999).
Yes

No

I 1. Please indicate the percentage of applicants (from question it IO) who were awarded institutional need-based grant for each year
listed below.

2000-200i °/o 1999-2000 % l998- l 999 °/o

12. Pleaserespondtothisﬁnalquestion ifthenumberofstudents ﬁlingtheFAFSAhasincreasedduringanyofthepastthreeyears.

Geneally, how has your university responded to increases in the numba of applicants ibr need-based ﬁmncial aid? Please
check the statement that most closely approximates the response at your university:

 

Theuniversity has increased ﬁinding forinstitutional need-based aidsothattheavetage awardlns increased.
TheuniversityhasincrusedMgﬁirmstimﬁomlneed-basedaidsomatmeavaageawardhasn-dudthcu-e.

The university has increased ﬁnding for institutional need-based aid but not enough to keep up with student demand
resulting in a decline in the average award

The university has not been able to increase ﬁnding for institutional need-based aid resulting in a decline in the average
award

Becauseofcompetingdermndsibrinstitutionalﬁrndirrgandlordeclinhgresoureeatheuniversityhashadtoreduce
ﬁmdhgﬁrrmsﬁtuﬁomlneed-basedaidresulﬁnginadecﬂnemdieavaageawud.

Other. (Please brieﬂy explain.)

 

Other Comments:

Thank you for your participation.
Please complete this survey by June 15, 2002 and return it in the enclosed envelope to:
Terry Viau
1865 Beech Street
Mt. Pleasant, Ml 48858

115

APPENDIX B

Budget Oﬂicer Survey Questionnaire

l16

 

From among the options described below, what are the underlying goals for institutional ﬁnancial aid at your university? Please
rank the three most inﬂuential goals by assigning a l to the most inﬂuential, a 2 to the second most inﬂuential and a 3 to the
third most inﬂuential:

To provide ﬁnancial assistance to the neediest students.

To support the enrollment growth objective of the university.

To shape the proﬁle of the undergraduate class in terms of academic standing, diversity, academic interest, talent,
residency, or other desired characteristic.

To shape the proﬁle of the graduate class in terns of academic standing. diversity, academic interest, talent, residency,
or other desired characteristic.

Other. (Please brieﬂy describe)

 

 

 

 

 

 

 

 

 

2. Please m the source of ﬁnding for institutional ﬁnancial aid (excluding university ennployrnent) by listing the pewntage
oftotalﬁindsthatwereallocatedfromtlnefollowingsoureesintlnelastthreeﬁscalyears.
2000-2001 %GenealandUnrestrictedﬁmds %GiﬁsandEndomnentlncome %Other
l999-2000 %GenetalandUnrestrictedﬁmds %GiﬁsandEndowmentlncome %Other
1998-1999 %GenealandUnrestn'ctedﬁmds %GiﬁsandEndowmentlncome %Other
3. Please estlnrate the distribution of ﬁnnding to institutional ﬁnancial aid by listing the percentage of total ﬁnnds that were allocated
totlneﬁnllowingprogramsinthelastthreeﬁscal years (Giﬂassistancethatisawarded,inpartorinwhole,onthebasisof
ﬁnancial need should be counted iii the need-based grant category; exclude university employment.)
2000—2001 % Need-based grant funds % Merit-based scholarship ﬁtnds % Loan funds % Other
1999-2000 % Need-based grant funds % Merit-based scholarship ﬁtnds % Loan funds % Othe'
1998-1999 %Need-based grantfunds °/oMerit-based scholarshipﬁunds %Loan ﬁirnrk %Othe
4. Please itndicate the extent to which the following ﬁnancial factors are taken into account in determining the level of ﬁnnding for
irBtitutional ﬁnancial aid programs. By placing a check mark (\l) in the selected box for each factor, indicate whether there is a
direct linkage (“indexing ”) between the factor and funding levels for institutional ﬁnancial aid programs: an indirect
relationship in which the factor is generally taken into consideration: or the factor is not taken into consideration.
Factor Direct Linkage indirect Linkage No Lirnkage
Firnancial Aid 3 Financial Aid 3 Financial Aid 3
A. Increase/decrease in state appropriation revenue
B. lncreaseldecrease in tuition & fee revenue
C. Increase/decrease in ﬁnding for state ﬁnancial aid
programs
D. increase/decrease in funding for federal ﬁnancial aid
programs
E. Other (please brieﬂy describe)

 

 

 

 

 

 

1-1

117

 

 

 

5. Which of the following statements is the most similar to policies at your university regarding the relationship between tuition
and fee rates atnd ﬁnnding for institutiornal ﬁnancial aid programs? Please check the most similar statement:

Averyfor-al relationshipexists, funding for irnstitutiornal ﬁnancial aid is irncreased indirect woportion
toincreasesintuitionandfeeratea

A less formal rehtionship exists, ﬁinding for institutional ﬁnarncial aid is increased but not in direct
proportiontoirncreasesirntuitionand feeratea

Thee is little or no relationship between funding for irnstitutional ﬁnancial aid and tuition and fee rates

6. Aretlnereanydisensﬂonsorplansatyourunivesitytochangetherelationshipbetweentuitionandfeeratesandfunding for
institutional ﬁnancialaidprograrns?

No

Yes. . . please check the statement that best describes the planned change:

A very formal relationship is planned, funding for institutional ﬁnancial aid will be increased in direct
preportiontoirncreasesintuitionandfeerates.

Aleasforlal relationshlpisplanned, ﬁtndingforinstitutional ﬁnancial aid will beincreasedbut not
indirectproportiontoincreasesintuitionandfeeratea

11neewillbelittieornorehtionshipbetweenﬁnndingforinstitutional ﬁmncialaidandtnitionandfee
ratesintheﬁrture.

7. My university ﬁnrmally evaluates the effectiveness of irnstitutional ﬁnancial aid programs. Please check one:
Yes

No

8. Pleaserespondtothisﬁnalquestionifdnmmbeofstudentsapplyingibrﬁmmialaidhasheuseddurhganyofmepast
threeyears Geneally,howhsywrunhesnyremmddmnuusemdnnumbeofapplienmﬁrned-hsedmmaid?
Please check the statement that most closely approximates the response at your university:

Theunivesitylnsineeasedﬁmdingibrinstitutioml need-basedaidsothattheaveageawardhasincreased.
'l'lneunivesitylnsincreasedﬁmdingforinstitutionalneed-basedaidsotinttheaveageawardhasre-ainedthesa-e.

mmmmmmmmmmmmnamgmmpupmmm
resultinginadeclineintheaveageaward.

The university has not been able to increase funding for institutional need-based aid resulting in a decline in the average
award

Because of competing denands for imtitutional funding and/or declining resources, the university has had to reduce
funding ﬁnr institutional need-based aid resulting in a decline in the avenge award.

Othe. (Please brieﬂy explain.)

 

Otlner Comments:

Thank you ﬁnr your participation.
Please complete this survey by June 15, 2002 and return it in the enclosed envelope to:
Tery Viau
1865 Beech Street
Mt. Pleasant, M] 48858

118

APPENDIX C

Survey Questionnaire Cover Letter

119

May 16, 2002

Name

Title

Address 1
Address 2
City, State Zip

Dear:

Although studies have been conducted of ﬁnancial aid and tuition pricing policy at the national and state levels, few
studies have been conducted of these policies at the institutional level. This survey seeks data on the linkages between
ﬁnancial aid and tuition pricing policies at the 15 public universities in the state of Michigan and will provide much of
the research data required to complete my doctoral dissertation at Michigan State University. Altlnough you will not be
asked to disclose your identity nor the identity of the university you represent, the survey instruments have been coded
by Carnegie Classiﬁcation.

The survey is being forwarded to the administrators responsible for ﬁnancial aid and for budgeting at each of the 15
public universities in the state of Michigan. if you are not the correct person to complete this sm'vey, please forward it
to the individual at your institution who is responsible for ﬁnancial aid {budgeting}. Your privacy will be protected to
the maximum extent allowable by law. However, if you ﬁnd any question objectionable or if the response is unknown
to you, please leave the response blank and complete the remainder of the survey. You indicate your voluntary
agreement to participate in this study by completing arnd returning the survey. Although accuracy is appreciated, please
do not spend an unwarranted amount of time providing exact numbers; educated estimates are sufficient.

A summary report of key ﬁndings will be forwarded to you at the conclusiorn of tlnis study. 1 hope you will ﬁnd the
results to be both interesting and useful. If you have any questions about this study, please contact the responsible
project investigator (Dr. Marilyn Amey, 427 Erickson Hall, MSU, East Lansing, MI 48824, 517-432-1056,
meg/@msuedu). if you have questions or concerns regarding your rights as a study participant, or are dissatisﬁed at
any time with any aspect of this study, you may contact — anonymously, i f you wish — Ashir Kumar, M.D., Chair of the
University Committee on Research involving Human Subjects (UCRIHS) by phone: (517) 355-2180, fax: (517) 432-
4503, e-mail: ucriLs@r_nsu.cdu, or regular mail: 202 Olds Hall, East Lansing, MI 48824.

Please complete your survey as soon as possible but before June 15, 2002 and return it in the pre-addresscd, postage
paid envelope enclosed i appreciate yom' assistance and participation.

Sincerely,

Terry Brennan Viau
Student/Financial Aid Administrator
1865 Beech Street

Mt. Pleasant, MI 48858

Telephone #2 989-289-1208

120

 

 

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121

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