Association for Public Policy Analysis & Management

As tuition and mandatory fees rise across the nation, the price to attend college has reached a historic height. Researchers, policy organizations, and governments are seeking to preserve broad access to higher education by maintaining or improving affordability—through increasing financial aid, regulating growth in tuition and fees, or some combination of these and other strategies. A group of states have implemented a form of tuition regulation—the centralization of tuition-setting authority—as a mechanism to arrest growth in prices. We present early indicators of statewide tuition regulation effects in Tennessee using a difference-in-differences framework.

In 2016, Tennessee passed the FOCUS Act, centralizing tuition authority with the Higher Education Commission and empowering THEC to set binding ranges, within which any increases must fall (a range of 0-2.5% means an institution cannot increase tuition and fees more than 2.5%).

Prior research in the area of tuition regulation is limited, with few studies to date examining states’ diversity in tuition authority, impacts of de-regulation, and tuition regulation as an accountability mechanism. Similar studies examined state characteristics and tuition control, finding that tuition-financial aid policy links and incentives to reduce tuition were effective control mechanisms. Other studies have suggested tuition freezes and reduced institutional autonomy were associated with lower long-run prices.

To estimate the effect of regulation in Tennessee, we constructed a federal panel dataset from IPEDS consisting of public two- and four-year institutions in the United States (n=1,567) and developed three counterfactual comparison groups: all other two- and four-year public institutions (n=1,545), all within SREB member states (n=564), and all within states contiguous to Tennessee (n=259). Descriptively, two- and four-year institutions in Tennessee had relatively high tuition and fee rates compared to counterfactual groups, but the relative dispersion of prices in Tennessee (standard deviation) appears to markedly decline after policy implementation. The data across Tennessee and all counterfactual groups adhere to a DID parallel-trends assumption.

After applying our DID model—including institution- and year-fixed effects and a matrix of covariates—results suggest that tuition regulation in Tennessee did not have an observable or statistically-significant effect on tuition and fees or their relative dispersion after policy implementation. Total prices continued to rise at similar rates after regulation as three counterfactual comparison groups. Additionally, the observations regarding relative dispersion were not supported with a test of significance in variance (F). Finally, we also conducted post-hoc placebo tests to ensure our estimates were not biased by pre-regulation trends.

In all, we observe no effects of tuition regulation in Tennessee on average, in-state tuition and mandatory fee prices or their dispersion, findings which stand in contrast with prior works in this area. These findings warrant further investigation and may suggest centralized tuition-setting authority—or, at least, this version of tuition centralization (range-setting authority)—may be an ineffective way to reduce growth in tuition and fees. Policymakers should consider the intent, design, and effects of tuition regulation policies, and researchers should evaluate state efforts like this to increase access and affordability to postsecondary education.