Does Tuition mitigation work?

University spending

When Governor McMaster first requested tuition mitigation in his FY2019-20 Executive Budget, he wrote "rampant spending has resulted in skyrocketing tuition rates at our state institutions of higher learning.” Tuition mitigation successfully froze in-state tuition, but this has no bearing on university spending habits. 

For insight, we analyzed the spending habits of the largest and second largest recipients of tuition mitigation, the University of South Carolina (USC) and Clemson University, who have received a combined $235 million. 

In the past, the Policy Council used state population growth plus inflation as the benchmark to ensure lawmakers budget responsibly. The formula has been altered for this analysis to student population growth plus inflation to calculate responsible budget benchmarks for Clemson and USC. 

*Start of tuition mitigation  **COVID-19 lockdowns 

Budget figures were sourced from official budget documents published by USC and Clemson. Population data was sourced from the total fall semester enrollment in the corresponding fiscal year at USC and Clemson.

Clemson dramatically increased its spending once it started receiving tuition mitigation. The responsible budget model estimates that Clemson overspent by $305 million prior to tuition mitigation. Since receiving tuition mitigation, Clemson has spent $1.95 billion over our responsible budget model.

Our analysis of USC looked at funding for the entire university system, including the Columbia campus and all satellite campuses. The model estimates that USC overspent by $369 million in the seven years prior to tuition mitigation. Despite spending below the target in FY2023-24, more recent budgets show USC continues to increase spending beyond the responsible limit, spending $335 million above the model since receiving tuition mitigation funding. USC did not increase spending at the same rate as Clemson, but their spending habits remain similar to what they were prior to receiving tuition mitigation.

When comparing these massive budgets to the $159 million and $75 million in tuition mitigation received by USC and Clemson respectively, one might wonder whether the universities could have found the money in their massive budgets to freeze in-state tuition without the additional funding.

Who does tuition mitigation work for? 

The goal of tuition mitigation is preventing in-state students from paying higher tuition. The problem is that it relies on government subsidies to suppress the true cost of tuition.

When state tax dollars are used to artificially lower the price students pay, colleges are insulated from the normal market pressures that encourage institutions to control costs. Demand for higher education remains relatively steady because students do not see the full cost of tuition. Without additional state subsidies, tuition increases might lead to lower enrollment. Economists refer to this as a market signal. A drop in enrollment would signal that tuition has become too expensive, creating pressure on colleges and universities to lower costs, improve efficiency, or better justify the price they charge. 

Markets work by balancing supply and demand. When demand exceeds supply, prices tend to rise; when supply exceeds demand, prices tend to fall. Tuition mitigation distorts that process by using taxpayer dollars to keep demand artificially high, reducing the incentive for institutions to contain costs. 

Beyond economics, the policy also raises a fundamental question of fairness. As of 2024, only 32.1% of South Carolinians age 25 and older held a bachelor's degree or higher. Yet tuition mitigation requires all taxpayers to subsidize the cost of higher education, including the nearly two-thirds of adults who did not earn a four-year degree. Over time, that approach contributes to larger state budgets while shifting the cost of higher education from those who benefit to taxpayers as a whole. 

The extra $453 million from taxpayers may have frozen in-state tuition, but it did not incentivize universities to rein in spending that continues driving up college attendance costs. Tuition mitigation and policies like it are never going to solve the problem of skyrocketing tuition prices because they are antithetical to the free market. 

Taxpayers are expected to foot the bill again this year. The General Assembly would be wise to abandon these faulty economics.