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CHAIR m The Effects of Education Financing on Generalist Nurse Supply Annual admissions to basic nursing education programs grew rapidly during the 1970s, increasing by almost 37 percent between academic years 1970-1971 and 1979-1980.1~2 Although the rate of growth has declined in recent years, the output ot basic nursing education programs is projected to be sufficient to meet aggregate national demand during the period of the 1980s (Chapter II). These aggregate projections, however, do not reveal the complex decision making that ultimately determines the size and composition of the future supply of registered nurses (RNs) and licensed practical nurses (LPNs). Potential students have choices among educational programs, each with its own set of attributes, including propinquity, cost, availability of financing, and future career opportunities. State and local governments face competing claims on public funds, of which postsecondary education is only one. Educational institutions must allocate the funds available to them from the state, private sources, and the federal government among nursing and other educational programs and, within nursing, among associate and baccalaureate degree programs leading to licensure as a RN, as well as LPN programs. Hospitals, too, must decide whether to continue to offer diploma nursing programs and whether to subsidize nursing education in other ways. At every level of decision making, a variety of personal, social, political, and economic factors come into play. As Congress recognized in its charge for this study, one of the major factors influencing student, government, and institutional decisions is the cost of undertaking or providing nursing education and the extent to which funds are available to meet the cost. Thus, the comparative costs of various educational pathways to nursing and the system of financing nursing education have a great deal to do with the number and characteristics of students who choose such education and with the capacity of the various types of programs. This study has attempted to answer the congressional questions on comparative educational costs and on sources of financing to the extent that data could be found or developed. Estimates of student and institutional costs for various nurse education programs, however, require caution in their application. Comparisions among programs and conclusions as to the societal utility or professional value of one type or another should not be made on cost consideration alone. 89

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Do This chapter discusses the financing of nursing education as it affects both individual and institutional decision making. (It does not deal with graduate education, which is treated in Chapter V; it covers only education to prepare generalist RNs, except when LPNs are specifically noted.) Here, federal policies and programs are viewed as exogenous factors that play a role in these decisions. Dollars expended for federal student aid programs and the conditions under which they are awarded, as well as federal laws and regulations governing expenditures under Medicare and Medicaid, exercise their own set of influences on individual and institutional behavior by providing direct incentives and disincentives and also by indicating national priorities. Student Decision Making Potential nursing students contemplating a basic nursing education program are faced with difficult choices that have long-term implications. They have to consider the extent to which their abilities and interests match the requirements of the education program and the responsibilities of positions typically held by program graduates. In addition, some very practical issues have to be faced. One of these is the availability of education programs within the student's geographic range. Another is the magnitude of the investment of time and money required to complete the program and the availability of funds to cover the costs. Finally, the student must consider the prospects for future employment, potential earnings, and probable job satisfaction. For women students who foresee combining childrearing with work, the compatibility of different occupations with parenthood may be a consideration, as is discussed in other sections of this report. Obviously, potential students' choices are not limited to the three types of basic nursing education programs; presumably they also can consider many other kinds of postsecondary education programs. Thus, not only do nursing education programs compete with each other for students, they also compete with programs in such fields as biology, allied health, the social sciences, engineering, premedicine, and prelaw. Essentially, the choice to enter a basic nursing education program is a choice of occupation. While the choice may not be for life--certainly, people do change careers--it nonetheless carries with it a substantial investment of time and money and thus is not a choice that many people make more than once. As economists have suggested, the potential student's decision may be viewed as a long-term investment decision.3 This is not to disregard the immediate satisfaction derived from education itself, but rather to underscore the fact that educational decisions carry relatively long-term consequences. Students' Education Costs A student must meet certain out-of-pocket costs if she or he is to undertake an education program in nursing or in any other field.

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91 There are tuition and fees charged by the educational institution and other educational expenses, such as books and supplies. Living expenses, including rent, food, clothing, and transportation, must be met for the duration of the education program. In addition to these out-of-pocket expenses, students have to face the prospect of forgone earnings as they spend time in education that otherwise might have been spent working. Tuition and Fees According to data from the National League for Nursing (NLN), annual tuition and fees vary widely among the different types of nursing education programs and between public and private programs of each type. Median tuition and fees for 1981-1982 are shown in Table 19. Tuition and fees also vary greatly within each type of education. For public associate degree programs they ranged from under $500 to over $5,500 in 1981-1982, although almost one-third of programs had tuition and fees less than $500 and only one program exceeded $5,500, according to unpublished data from NLN. Among private associate degree programs, only two reported tuition and fees under $500. Only one public baccalaureate program reported tuition and fees exceeding $3,000, but 10 percent of private baccalaureate programs charged more than $5,500. These programs have the highest tuition and fees; the median in 1981-1982 was approximately $3,900. For the current (1982-1983) academic year a few baccalaureate programs in private institutions report tuition close to $8,000.4 - Other Out-of-Pocket Education Expenses Specific data on nursing students' other out-of-pocket education expenditures are not available, but they may be approximated from the expenses for all students in TABLE 19 Median Annual Tuition and Fees for Basic Nursing Education Programs, by Type of Program and Public-Private Control, 1981-1982 (dollars) Type of Control Type of ProgramPublic Private Associate degree$ 684 $3,196 Diploma1,083 1,572 Baccalaureate996 3,880 SOURCE: NLN nursing data book 1982, Tables 14, 15, and 16 (see Reference 2 for complete citation) .

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92 public and private 2-year and 4-year colleges (Table 20). The range of these expenses is very small. Although no data are available for diploma students, we assume their expenses for books and supplies to be halfway between the lowest and highest figures, or $250 in 1981-1982. By assuring that average annual expenses for associate degree (AD) nursing students are similar to all students in 2-year colleges and that expenses for baccalaureate nursing students are similar to all students in 4-year colleges, it is possible to estimate the total out-of-pocket educational expenses for students undertaking AD (2-year), diploma (3¢ear), and baccalaureate (4-year) programs (Table 21~. For a student entering in 1981-1982, the first year Is total expenses would average $920 for an AD program in a public institution and $1,250 for a baccalaureate program in a public institution. In private institutions, these expenditures would average $3,440 and $4,140, respectively. A student starting in 1981-1982 could complete an AD program in a public institution for an average outlay of under $2,000; to complete a public diploma or baccalaureate program would require an average outlay of approximately $4,300 or $6,740, respectively. To complete a private baccalaureate program would require average outlays of almost $18,500. Living Expenses In addition to tuition and fees, books, and other educational supplies, students must pay living expenses during their education program: housing and food; personal expenses such as clothing, laundry, and medical insurance; and transportation expenses. Annual living expenses in 1981-1982 for those in categories as defined by the College Board are shown in Table 22. Self-supporting, or independent, students have the highest living expenses. Surr~nary of Education and Living Expenses In order to complete an education program leading to RN licensure, a student must be prepared to meet substantial out-of-pocket expenses. These vary a great deal depending on the type of program, on whether the program is located in a public or private educational institution, and on the living c irc~nstances of the student. A student living with parents and attending a public 2-year AD program beginning in 1981-1982 will incur an estimated $1,900 for tuition and fees, plus books and educational supplies. If living costs are assumed to increase by 6 percent between the 1981-1982 and 1982-1983 academic years, that student also will have to bear (for the 2-year program) living expenses of approximately $4,460, for total out-of~pocket expenses of $6,300. A self-supporting student in the same educational program will, on average, face total out-of~ocket expenses of $11,300; a resident student's total expenses will be approximately $7,100- ~ rim . ~ _~_ program requires much greater average outlays. Again Tc, comet r. to the 4-veer baccalaureate average outlays. Again if living expenses are assigned to increase by 6 percent annually, a resident student enrolled in a public baccalaureate program will face total out-of~ocket expenses of $18,800; if that student attends a private baccalaureate program, the total will be $31,200. The range of average total outlays is estimated to be from roughly $6,400 for a corr~nuter student attending a public AD program to almost $31,000 for a resident student who attends a private baccalaureate

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93 TABLE 20 Average Annual Student Expense s f or Books and Education Supplies by Type of Institution and Public-Private Control, Academic Year 1981-1982 (dollars) Institution Type/Control Average Student Expenses Four-year colleges Public Private Two-year colleges Public Private $251 263 235 241 SOURCE: College Entrance Examination Board. College cost book 1981-1982 (see Reference 49 for complete-citation). TABLE 21 Estimated Total Out-of-Pocket Education Expenses for Full-Time Students in Basic Nurse Educat ion Programs, Ac ademic Year 1981-1982, and Est imated Total Expenses to Complete Each Type of Program for a Student Entering in 1981-1982 (dollars ~ Associate Degree Diploma Baccalaureate Period of Expenses Public Private Public Private Public Private 1981-1982 academic $ 920 $3,440 y eara Total programs 1,900 7,250 $1,330 $1,800 $1,250 $ 4,140 4,300 5,900 6,740 18,450 between the lowest and highest ~ Annual figures for 1981-1982 are computed by adding median tuition and fees for nursing students (Table 19) to mean expenses for books and supplies for all college students (Table 20~. For diploma students. their latter expenses were assumed to be $250, halfway ~ figures reported by the College Board. DTotal out-of-pocket expenses to complete the program for a student entering in 1981-1982. Tuition and fees are inflated at an annual rate equal to the average annual increase for the period 1977-1978 to 1980-1981. Books and supplies are inflated at the same rate as the Consumer Price Index for nondurable commodities (less food) between 1977 and 1980. The estimates assume that associate degree programs require 2 years, diploma programs 3 years, and baccalaureate programs 4 years. SOURCES: NLN nursing data book 1982, Tables 14, 15, 16 (see Reference 2 for complete citation); College Entrance Examination Board. The college cost book. 1981-1982 (see Reference 49 for complete citation); NLN nursing data book 1979 (see Reference 50 for complete citation); U.~. Bureau of the Census. Statistical abstract of the United States: 1980 (101st ed.), Table 808, p. 487 (see Reference 51 for complete citation).

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94 TABLE 22 Estimated Annual Living Expenses for Resident, Commuter, and Self-Supporting Students, by Type of Education Institution, 1981-1982 Academic Year . Two-Year Institution Four-Year Institution Type of Expense Public Private Public Private . Total - Resident studentsa$2,526$2,731$2,803$2,913 Commuter studentsb2~1251,8442,0802~027 Self-supporting studentsC4,5553,8654,3334,262 Room and board Resident students$1,615$1,926$1,846$2,043 Commuter students931881915988 Self-supporting students2, 9172, 6282, 7 562, 827 Personal expensesd Resident students583529667557 Commuter students608525626575 Self-supporting students9257501, 002896 Transportation Resident students328276290313 Corr~nuter students586438539464 Self-supporting students 713 487 575 S39 Dependent students living on campus (or adjacent to campus) in a campus owned, operated, or authorized building. Dependent students living at home with parent or guardian and attending local campus. CStudents who are considered independent of parental support, wherever they reside. Expenses for clothing, laundry, recreation, medical insurance, etc. SOURCE: College Entrance Examination Board. The college cost book 1981-1982 (see Reference 49 for complete citation). program. A student attending one of the private baccalaureate programs with annual tuition in the $7,000-38,000 range would face total outlays of roughly $40,000, if the student lives on campus. A self-supporting student in such a program would have to meet expenses of over $50,000. Nursing students' out-of-pocket expenses may be somewhat understated by the average figures for all college students used in these calculations, because they have expenses such as the purchase of

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95 uniforms and transportation to and from facilities where clinical education takes place. Forgone Earnings The largest education "cost" is not a cash expense but rather the opportunity cost of the student's time, usually measured by potential earnings forgone during the education program. In the case of a student entering nursing education immediately after high school and not working during the education program, forgone earnings may be estimated as equivalent to the average earnings of a full-time year-round worker who has completed high school. For 1980 the Census Bureau estimated such earnings to be approximately $11,000 for women and $18,300 for men.5 If a student works half time, forgone earnings are less, but the student requires more calendar time to complete the program than students who do not work; therefore educational expenses could be greater. Forgone earnings would be considerably higher for potential students who have education beyond high school, such as RNs seeking a baccalaureate degree. Their earnings would depend on their length and type of experience, but on average would be approximately $17,000, according to data from the National Sample Survey of Registered Nurses, November 1980.6 Such students are likely to have family responsibilities and relatively fixed financial obligations, making it more difficult for them to meet their expenses while attending school. On the other hand, RNs can earn more from part-time work than can other nursing students. Although forgone earnings compose a large element of the cost for a student undertaking a nursing education program, they have not been added into total costs for several reasons. There is wide variation in what nursing students could earn depending on their education, experience, and ability. Anecdotal evidence suggests that many students work part time while they are enrolled in nursing education programs, and thus actual earnings should properly be deducted from potential earnings in estimating earnings forgone. Even though they are not included in an estimate of total education costs, the study group recognizes that the loss of potential earnings associated with partial or total withdrawal from the labor force and the concomitant demands of trying to meet substantial out-of-pocket education and living expenses can present a significant barrier to potential entrants to nursing education. Sources of Variation in Students' Costs The most important factor contributing to variation in costs of nursing education is the time required to complete the program. The longer the program, the higher the education expenses, the greater the living costs, and the larger the forgone earnings. Another major factor is the choice of a public or a private program. Private education institutions depend on student payments--tuition and fees--to cover a greater proportion of education costs than do publicly supported institutions. As has been shown in Table 19, median annual tuition charges by private AD and baccalaureate programs are several times the charges by public programs. Even among public programs, tuition charges can vary a

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96 great deal, depending on state and local goverrenent policies on education subsidies from tax dollars. States such as Texas and California traditionally have set tuition charges very low; other states, where state appropriations per student are relatively low such as New Hampshire and Vermont, have set tuition charges much higher.7 A third factor influencing students' education costs is their living expenses. Traditional student budgets for living expenses are based on assumptions of living in a college dormitory (resident) or with parents (commuter). For adult students with established households, however, it may be necessary to continue meeting mortgage, utilities, and maintenance expenses on a residence while they are in school. The fourth major factor is students' opportunity costs, which, as noted above, depend on the amount of educat ion they have previously obtained, as well as their work experience. A traditional student who attends college Mediately a_ opportunity costs; students who education past high school have after high school has the lowest have worked or who have obtained higher opportunity costs. These students also may earn more from part-time employment; however, their elapsed time to complete the education program may increase if they are unable to carry a full course load. Trends in Education Expenses Students' education costs have risen rapidly over the past few years and are projected to continue on a steep increase. In public 4-year colleges, average tuition and fees rose approximately 33 percent in the 4-year period between 1976-1977 and 1980-1981; the American Council on Education projects that they will rise an additional 36 percent by 1984-1985. Average tuition and fees for private 4-year colleges rose by 29 percent between 1976-1977 and 1980-1981 and the Council projects that they will rise by another 22 percent by 1984-1985.8 The College Scholarship Service reports that average tuition and fees for public 4-year institutions are 20 percent higher in the fall of 1982-1983 than in the previous fall; in private 4-year institutions they have increased by 13 percent.9 These increases can be attributed both to increases in the operating expenses of educational institutions and in the proportion of the costs of education charged to students (discussed at greater length below). Living expenses, which have risen at double digit rates for the past few years, have now declined to a rate of approximately 6 percent. Nursing students come largely from families of modest means. The annual survey of first-time, full-t~me freshman conducted annually by the Cooperative Institutional Research Program (CHIP) of the University of California at Los Angeles and the American Council on Education gives an indication of the family income distribution of nursing students in relation to all college freshmen in the fall of 1981

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97 (Table 23) .* Although 44 percent of all first-l ime, full-time college freshmen were from families with annual incomes of $25,000 or above, the percentage for nursing freshmen was 32 percent. In addition, a larger proportion of nursing students were independent of parental support and therefore responsible for financing their own education. Nurses cannot look forward to substantial earnings in return for their educational investments. According to data from the NLN's annual survey of newly licensed nurses, in 1980 the median annual salary for nurses 6 to 8 months after graduation was $14, 100.1° Tithe CIRP survey includes data from a stratified sample of approximately 400 higher education institutions drawn from the population of approximately 2,700 institutions listed in the U.S. Office of Education (now Department of Education) Education Directory. Student responses are based on a sample of approximately 200,000 first-time, full-time freshmen in the sample institutions. TABLE 23 Estimated Family Income Distribution of First-Time, Full-Time Freshmen, Fall 1981 Family Income Nursing Students All Students Estimated Estimated Estimated Estimated Number Percent Number Percent All 67,758100.01,729,985100.0 Under $5,999 4,7046.974,0934.3 $6,000-9,999 4,0976.083,3364.8 $10,000-14,999 7,51711.1169,8909.8 $15,000-24,999 14,39821.2375,86021.7 $25,000-29,999 5,5828.2168,2489.7 Over $30,000 16,00223.6580,40633.5 Income unknown 10,45715.4221,89312.8 Independent studentsb 5,001 7.1 56,263 3.2 Freshmen students enrolled in a nursing education program or indicating nursing as a career choice. bStudents who are independent of parental support and therefore not required to report family income. These students also are referred to as "self-supporting." SOURCE: Study analysis of unpublished data from the 1981 Cooperative Institutional Research Program Survey conducted by the American Council on Education and the University of California at Los Angeles, provided by the National Center for Education Statistics.

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98 Starting salaries have risen sharply since 1978; however, nurses' earnings increase very little with experience. An analysis of the National Sample Survey of Registered Nurses, November 1980, indicates very small increments in monthly earnings for each additional year of work experience (see Chapter VII). Thus, potential earnings over the entire working life have not been very large and, barring changes in the nurse salary structure, cannot be expected to increase very much in the future. Sources of Education Financing for Nursing Students Nursing students finance their educational outlays and living costs from a combination of sources, including general federal programs of financial aid for postsecondary students, Nurse Training Act scholarship and loan programs (limited specifically to nursing students), state and collegiate grant programs, earnings, savings, and family support. Unfortunately, only extremely outdated information is available on the proportions of support from the various sources and how those proportions vary among students in the different types of basic nursing education programs. A survey of nursing student finances was undertaken under the sponsorship of the DHHS, Division of Nursing in 1969-1970, but current comprehensive information is unavailable. This situation is in constrast to that in most of the health profes- sions, for which there are relatively frequent periodic surveys of education financing.12 The limited available evidence suggests that nursing students depend substantially on general federal student aid programs. According to 1981 data from the Cooperative Institutional Research Program (CIRP) survey, an estimated 61 percent of first-time, full-time freshmen who were enrolled in nursing education programs or indicated nursing as their intended career expected to receive same amount of federal financing for their first year of study (Table 24~. (Because of the wording of the question on sources of financing, this percentage refers only to general federal financial aid programs, available to all postsecondary students. It does not include Nurse Training Act scholarship and loan funds.) For all freshmen, the survey estimated that 53 percent were receiving federal support. Approximately 40 percent of first-time, full-time nursing students receive loan funds, with 26 percent receiving federal guaranteed student loans. Sixty-five percent of them expected to finance a portion of their first year's expenses through work in the summer or during the academic year. State scholarship funds were received by 16 percent of these students in 1981. General Federal Financial Aid The major programs of general federal financial aid to postsecondary students are Pell Grants, Supplemental Educational Opportunity Grants (SEOG), Guaranteed Student Loans (GSL), National Direct Student Loans (NDSL), and the College Work-Study Program. Whereas other programs are aimed at specific entitlement groups (for example, GI Bill education benefits for

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99 TABLE 24 Sources of Financial Support for Nursing Students Who Were First-Time, Full-Time Freshmen in 1981 Type of Support Estimated Percent of Nursing Freshmen Receiving Supporta Estimated Average Amount Received Per Recipient All grants 54$1,291 Pell Grantsb 35855 Supplementary Educational 7668 Opportunity Grantsb State grants 16683 College grants 11826 All loans 39 . _ Guaranteed Student LoansD 26 National Direct Student Loansb ~ 1~698 1,731 1,139 All work65999 College work-studyb13689 Part-time work27504 Full-time work3940 Summer work43608 Parents701,143 Savings19656 All federal aids611,756 NOTE: "Nursing students" refers to respondents enrolled in nursing education programs or indicating nursing as their career preference. aPercentages are not additive because students may receive support from multiple sources. The survey population consists of 2-year colleges, 4-year colleges, and universities, and therefore these figures do not apply to first-year students in diploma programs. The study sample included 6,075, representing a population of over 67,000 nursing students. barograms of general federal financial aid for postsecondary students. Cowing to survey def initions . this category represents general reaera' r~nanc~a~ ala programs only and does not include Nurse Training Act programs. ~ , . ~ . . ~ . SOURCE: Study analysis from the 1981 Cooperative Institutional Research Program Survey, conducted by the American Council on Education and the University of California at Los Angeles, provided by the National Center for Education Statistics.

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105 o oo o~ a C C~ ~n · - a, C) o CO o . - · - o CO o ·rl u u e~ o U' ^ ~: O 1 U a') o S~ cn C~ U. C~ O . U ~n E~ ~ a c. a a' ('c -~: U a ~ a' _ .- :~- ~ 1 C 0 ~ (; r ~ _ ~r 0 C 0 C~ a) .,' _ ~_ P ~ a a ~_ 'c c.: s" a o~c a _ ·r r" ~ 0 _ C 0 . C; :^ r~ ·,1 r~ "o _ ~_ P ~ - c - c cn, oo r~ 00 ~ ·- oo r~0 oo ~ 0 ~r~ _` _ ~oo ~ _ ~C)-'S ·_ C~ ~CO 0 - _ ~_ ~ ~4~ CN oo ^ r_ ;~ - o . a~ C~ _ - c~ a~ _ - U~ 0 1- C~ o~ C~ ~0 _ 0~o ^ 0 -~ ~0 ~ C~ oo _ ~ ___' . r" _ <: u) ~ a, c a C 0 ~ C oc 0 0 ~ ._4 .. ·,1 ~ tt ~C~ ~ u) : C o ~r/ 4~ _ ~ > ~ ~o c o ·,/ 4J ~a ~r/ o s~ P~ - o _ - ~C~ 0~°~O 0~o _ ,,,_ ·oo . U~ _ r" _% ~_ ~ C~r-l ~_ a: ~,_ C~J b~°-D~O -~O- _ · ~- V~ C ~ O _ _ ~ ~_ ~ CN ~ ^ _ 00 ~~0 0~ 0~0. 00 ~ ;t _ · _ - ~O ~ ~r~ 00 r" o~° ~ ~0 _ ~_ r_ r~ · \O . ~0 ~ _ ' ~C~ - ) 00 C~ JJ 4~ C, ~ c ~a 0 ~ ~_ S~ ~ 00 C ~ O C _ CJ ~a C ~ . a) ,, CO ;t 0~ ~C ~0 ,_1 o~O _ ~-O0 · 00 00 0 _ ~r~ C~ _ _~ U) ~a ~_ c a' r~( 0 c Ct C7 c C~ ~n c oo oo ^ _ ~ - Lr, _' - _ ~D ~ _ ~ ~ I_ _ _ 0 ~1 D~ _ CN _ CN· ~ . _ ~ _' _ ~_ t_ _ U) a' ~ ~r/ 0 ~ C) ~ U, c ,/ ~a' ~ ·,1 0C V cn C s~ ~ ~ ~C 0 a) ca oc ~ 00 3 ~ ~CO L O h 5 Q,) < ~ cn ,- cn 0

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106 supported 4-year colleges and universities, where half the nation' 8 baccalaureate level programs and one-fourth of the AD programs are based have state appropriations as their largest source. Public 2-year colleges receive half their funding from this source. Student tuition and fees represent about 12 percent of the revenues of public 4-year colleges and universities and about 15 percent of the revenues of public 2-year colleges. This revenue source includes financial aid; thus, not all of tuition and fees are actually paid by students and their families. Private institutions depend more heavily on tuition and fees, which represent 27 percent of revenues for universities and 43 percent for private 4-year colleges. Almost 60 percent of private 2-year college revenues are from this source. Private educational institutions also receive a substantial portion of their revenues from endowment income and private donors. As related in Chapter I, approximately 80 percent of nursing education programs and enrolled nursing students are based in higher education institutions. In the aggregate, states represent the largest funding source for the nation's higher education system, contributing 30 percent of the current fund revenues of all colleges and universities combined in 1980.33 State appropriations for higher education were estimated to be $19 billion that year.34* In addition to state appropriations and tuition revenues, educational institutions have other funding sources, among them federal grants and contracts, which together represent the second largest funding source for United States higher education institutions (Table 27~. The federal role in financing these institutions is greatest in the research area but also includes relatively small amounts under special programs, such as the NTA, that support education. Institutional support under the NTA has taken the form of formula or capitation grants (no longer authorized), special project grants, construction grants (no longer authorized), institutional grants for advanced nurse training, grants for nurse practitioner education, and research fellowships and grants (Chapter V). In 1980, appropriations for institutional support totaled $176.3 million; by 1982 they had declined to $84.3 million (Appendix 2~. The 300 diploma nursing education programs, representing approximately 20 percent of the total enrollment in basic nursing education, are based in hospitals rather than in higher education institutions. Funding for these programs comes primarily from . estate appropriations include student aid as well as institutional support. A survey of states by the National Association of State Scholarship and Grants Programs indicated total student aid of $963 million in academic year 1981-1982.35

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107 hospitals' patient care revenues, 90 percent of which are third-party payments from private insurers and the government Medicare and Medicaid programs. The other two principal funding sources for diploma programs are student tuition and fees and federal institutional grants under NTA. The Medicare program estimates that participating hospitals incurred approximately $350 million of "allowable nursing education costs" in 1979.35 This figure, based on the amounts reported under "nursing education" on the Medicare cost report, can be assumed to represent expenses for diploma nursing programs. However, for a number of reasons, it should be viewed as a minimal estimate of nursing education costs in hospitals. First, all the costs associated with the education programs may not be included; administrative salaries, for example, may be reported under administrative costs rather than under nursing education. Second, the costs of clinical education are usually included in clinical department costs rather than in nursing education. Third, many hospitals jointly provide diploma programs with colleges; the college's portion of the costs ordinarily would not appear in the hospital's cost report. In addition, hospitals bear other education costs in addition to those related to formal diploma programs. They provide orientation and staff development programs to their employees, offer tuition reimbursement as a fringe benefit, and contract with colleges to provide educational opportunities for their employees. Very little is known about the extent of these forms of support for nursing education, which generally are not included in the nursing education cost center, and thus would not be included in the Health Care Financing Administration's $350 million estimate. Eighty-two percent of hospitals responding to a recent nursing personnel survey by the American Hospital Association reported that they provide tuition as a fringe benefit.37 As the largest funding source, state support of higher education is an important lever in influencing institutional resource allocation. Hospital decision makers also are heavily influenced by the availability of funding from third-party payers and the conditions placed upon payments from these sources. Thus, the future nurse supply is very much dependent on the flow of revenues from the major sources. The financing outlook for higher education, including nursing, is for more constrained resources than in the past. Aggregate state higher education appropriations increased by about $2 billion between 1981 an 1982 and are expected to increase by about $1 billion in 1983.38,39 However, in constant dollars, state support of higher education is predicted to remain level over the next few years.40 In some states, fiscal stringencies can be expected to result in an absolute decline in higher education appropriations. Reductions already have occurred in some states. Institutional support for nursing education under NTA has declined substantially since 1980, as noted above. Federal, state, and private concern for rising hospital costs may lead to restrictions on

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108 third-party payments to hospitals. Reimbursement for nursing education programs and other hospital-based education programs for physicians and allied health students could be reduced as a cost containment measure. The appropriateness of educational programs that are being supported by patient care dollars has been a matter of debate since the inception of the Medicare program in 1965. Constraints on funding from state appropriations (and third-party payments, in the case of hospital education programs) create pressure on institutional decision makers to raise tuition levels in order to maintain the flow of funds to the institution. Proponents of greater economic efficiency in higher education argue that tuition generally should be set to cover a substantial portion of the cost of education, with financial aid serving to reduce inequities in educational opportunities among students from different income groups. At the institutional level, pressures to raise tuition are greatest for more expensive programs. In the interests of greater fiscal responsibility and accountability, institutional policy may be to charge differential tuition for different educational programs according to differences in their costs, rather than charging the same tuition to everyone. If differential tuition were to become more common than it is at present, nursing students would tend to face higher than average tuition Levels, because nursing education programs tend to be more costly than the average because of relatively low student-faculty ratios required for clinical teaching. In the current circumstance of constrained resources and economic recession, higher education institutions are finding it necessary to make difficult decisions as to the allocation of available funds. Nursing education programs compete with other programs in the same institution for the available resources and may in some cases be adversely affected. They may be pressed to maintain current class size at existing budget levels, reduce class size, discontinue programs, or cancel plans for program expansion. The decision-making process that has as its ultimate outcome the amount of state and, in turn, institutional funds going to nursing education programs is complex, pluralistic, and differs from state to state. The process, given an overall level of funding for the institution, is influenced by a number of considerations: · the relative cost of providing nursing education programs in comparison with the cost of other education programs · demand by students for educational opportunities · the need for specific kinds of manpower to meet demands by employers. These considerations influence an institutional planning and budgeting process that also is subject to cross pressures created by educational policies not directly related to nursing, other institutional imperatives, the legacy of past decisions, and the interplay among the individuals involved in the process. Nonetheless, the considerations cited above are significant elements that enter the decision making of the resources allocated legacy ved in the process ~ ~~icant element most universities and colleges in determining to nursing education.

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109 Relative Costs of Nursing Education Programs In looking for ways in which to deal with reduced resources, institutional decision makers usually turn their attention to high-cost programs. Nursing programs are widely perceived to be relatively high in cost, and this perception is borne out by the limited evidence available. At the University of Maryland, for example, the average cost per full-time equivalent (FTE) student in nursing has been estimated at approximately $3,900 in 1982; the average cost per FTE for all undergraduates is $2,150.41 The Colorado Commission on Higher Education estimated that in 1976 the average annual cost for a FTE undergraduate in nursing was $1,739, compared with $1,175 for an FTE student in education.42 Data from the community college system in Florida indicate that in the 1980-1981 academic year the cost per credit hour for students in nursing and allied health fields was $47.18, whereas the overall average cost was $23.59.43 Of course, basic nursing education programs vary in their cost. Annual costs per student ranged from $952 to $3,549 for baccalaureate programs and from $855 to $2,871 for AD programs (direct costs only) in Indiana's state-supported institutions in 1978-1979.44 Thus, there are high-cost and low-cost programs within nursing. Why do costs vary so greatly? The reasons are many. As outlined by the study's advisory panel on nursing education cost and financing, they include: · new versus old programs (accreditation, start-up costs for new programs) · the proportion of part-time students (i.e., difficult to plan class enrollments, more advising and bookkeeping for part-time students) · attrition rates (may be higher at schools attempting to achieve certain social values--e."., inner-city schools) · quality of programs (e.g., costs of establishing varied clinical experiences for small groups of students) · program content and organization (the mix of lectures, laboratories, clinical preceptorships, etc.) · the availability of revenues (i.e., if the program has money, it spends it) · costs that are difficult to vary in the short run, e.g., faculty with fixed contracts (may cause unit costs to be high in programs with declining enrollment). Such wide variations in costs are not unique to nursing; they are found in all higher education.* However, they point up the difficulties and pitfalls in looking at average costs of education, which carry little meaning. Costs should be viewed in light of unique *For more detailed discussion, see S. Yoder, The institutional cost of nursing education. Background paper of the Study of Nursing and Nursing Education. Available from Publication-on-Demand Program, Liational Academy Press, Washington, D.C., 1983.

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110 program characteristics, types of students attracted, and work patterns of graduates. Student Demand State higher education systems are influenced by of. citizens' demand for educational opportunities. These demands may be evidenced in a number of ways. Rising applications and enrollments in existing education programs are perhaps the most visible, but these demands make themselves felt in other ways as well. Direct pressure on legislators by state taxpayers assuredly has been responsible for the growth of places in medical education in the past; this pressure can also make itself felt when a program is threatened by closure. Some nursing programs have avoided closure, at least for a time, by such efforts. Demonstration of student demand for places in a nursing education program is an important element in the institutional bargaining process. It is difficult to maintain support for existing programs if entering classes are unfilled or if it is perceived that standards are being lowered to reach enrollment objectives. On the other hand, the case for increasing class size is easier to argue if many well-qualified applicants are denied admission for lack of places. At a time when enrollments from the traditional pool of high school graduates are diminishing, the need for nursing schools to look toward new potential "markets"--the nontraditional students discussed in Chapter IV--is heightened by the growing intra-institutional competition for constrained resources and students. It should also be recognized, however, that student demand for nursing education is influenced by actions of employers with regard to the economic and noneconomic rewards they offer, by the profession, and by others. The pressure for diploma and AD nurses to complete a baccalaureate degree and the willingness of employers to provide tuition benefits is one example of how student demand is generated. On the basis of these developments, nursing educators have been able to make convincing arguments for establishing programs for RNs to complete the requirements for a baccalaureate degree. Employer Demand Educational decision makers are responsive, to some extent, to the demands of employers in the state. In the past, for example, pleas by employers of nurses figured in the institution of support for diploma programs by the state of Illinois.45 Engineering programs have grown enormously over the past few years as a consequence of employer demand. Particularly persuasive to educational institutions and policymakers is a willingness on the part of employers to bear a portion of the education costs by subsidizing tuition, by funding joint research projects, and even by paying faculty salaries, as has occurred in engineering. Rising salary offers to graduates also provide strong evidence of employer demands. Systematic means to obtain accurate periodic readings of employer demands at the state and local levels do not exist. General perceptions of shortage or surplus reported in the media, statements by professional and industry associations, reports by health planning agencies, and informal employment feedback from recent graduates most

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111 often suffice as means of assessing market signals. The extent to which those signals are incorporated into the planning or budgeting process varies from case to case. Educational planners are aware of the limitations of forecasting techniques; they have witnessed unpredicted dramatic shifts in the employment outlook for other occupations. Whether employer demand will play a larger role in educational decision making in the future will depend on how well those demands are articulated. Close affiliation between health care providers and educational institutions is perhaps one of the better ways of assuring proper feedback on the need not only for numbers, but also for types of nurses. Federal and State Influence on Institutional Decision Making Because the federal government does not operate nursing schools, nor is it even the major source of financing, its influence on the nursing supply is limited to the monetary incentives it can offer universities and colleges and to the indirect effects of its employment policies in its programs of direct medical services. Whether educational institutions respond to such incentives depends, at least in part, on their ability to find other sources of financing (e.g., state appropriations, endowments, students, etc.) to maintain the increased educational capacity or to support the initiatives the federal program mandates. Recent efforts have been made to determine the impact federal programs have had on institutional decisions to increase the supply of nurses of different types. Because institutional decision making is complex and federal input is indirect, it is very difficult to assess the federal influence on nursing education programs. A recent study funded by the DHHS concluded that between 1969 and 1979, federal funds expended under NTA caused an increase of approximately 33,000 to 42,000 graduations from basic programs over and above the numbers that would have occurred in the absence of their programs.46 On the other hand, some researchers have found no significant effects.47 Methodological differences among these studies may account for their conflicting findings, including different outcome measures, units of observation, and statistical methods. None of the studies was based on a model of both student and institutional decision making, the demand and supply components of the education market. Finally, as with any evaluation research, data limitations hamper efforts to measure certain key variables. States are one level closer than the federal government to influencing the supply of nurses. Unlike the federal government, states provide the bulk of operational support for many basic nursing programs within senior colleges and universities as well as community colleges. State authorities also often exercise the power to approve new programs and to eliminate existing programse Despite their powers, however, states usually do not interfere extensively or directly in the traditional prerogatives of educational institutions. Many states, however, attempt to control the rate of growth of higher

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112 education appropriations through coordinating boards, which attempt to guide institutional choices in the context of a master plan for the distribution of educational resources. Again, there is variability in the impact of these coordinating Dcards from state to state.48 Conclusion The future supply of generalist RNs--and their educational distribution by type of basic education--is significantly affected by the decisions educational institutions make with regard to the numbers, types, and sizes of nursing education programs offered. These decisions are based in large part on the general availability of resources for higher education and on the degree of success with which basic nursing programs compete for available funds. Four major sources of financial support for basic nursing education have been identified. State tax dollars appropriated for higher education represent the largest source. Local governments, through their support of community colleges, represent a second major source. Hospitals provide support to nursing education by offering diploma programs in nursing and staff development programs, by providing educational fringe benefits to their nurse employees, and by subsidizing nurse employees who are advancing their level of education in college-based programs in return for service commitments. Costs incurred by hospitals are financed principally through third-party reimbursements. Finally, private donors provide a substantial portion of financing for programs in private educational institutions. The amount of resources available for nursing education programs depends largely on how successfully they compete with other programs in the same institution. Institutional decision makers take into account the costs of all education programs as well as student demand for education and the demands of employers. Because basic nursing education is more costly than many education programs, student and employer demand are especially important. Fiscal pressures on the educational budgets of state and local governments, as well as cost containment efforts aimed at hospitals, threaten to reduce funds available for nursing education from these sources. RECOMMENDATION 4 Institutional and student financial support should be maintained by state and local governments, higher education institutions, hospitals, and third-party payers to assure that generalist nursing education programs have capacity and enrollments sufficient to graduate the numbers and kinds of nurses commensurate with state and local goals for the nurse supply.

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113 REFERENCES AND NOTES 1. National League for Nursing. NLN nursing data book 1981 (Publication No. 19-1882~. New York: National League for Nursing, 1982, Table 21, p. 21. 2. National League for Nursing. NLN nursing data book 1982. In press, 1982, Table 2. 3. Freeman, R. The market for college-trained manpower. Cambridge, Mass.: Harvard University Press, 1981. 4. National League for Nursing. Baccalaureate education in (Publication No. 15-1311). New York: National League for Nursing, 1982. 5. U.S. Bureau of the Census. Money income of families and persons in the United States: 1980 (Publication Series P-60, 132~. Washington, D.C.: U.S. Government Printing Office, 1982, Table 52, pp. 179-180. 6. Department of Health and Human Services, Health Resources Administration. The registered nurse population, an overview. From national sample survey of registered nurses, November 1980 (Report No. 82-5, revised June 1982~. Hyattsville, Md.: Health Resources Administration, 1982. 7. Halstead, D.K. How states compare in financial support of education 1981-1982. Arlington, Va. Service, 1982. 8. 1985 cost projections. Educational Record, Spring 1982, pp. 54-55. 9. Tuition rates up 20 percent at public institutions. Chronicle of Higher Education, 1982, _~23), 1. 10. National League for Nursing. NLN nursing data book 1981, 5)p. cit., p. 131. 11. Saigh, H.R. A study of student finance in nursing education: An analysis of the results of a student survey conducted in 1969-70. Hyattsville, Md.: Health Resources Administration, 1970. 12. Department of Health and Human Services, Health Resources Administration. Study of how health professions students finance - their education, 1976-1977 (DHHS Publication No. HRA-80-52~. . Washington, D.C.: U.S. Government Printing Office, 1980. Congressional Budget Office. Federal student assistance: Issues and options. Washington, D.C.: U.S. Government Printing Office, 1981. 14. Hartman, Rib. Federal options for student aid. In D.W. Breneman and C.E. Finn (Eds.), Public policy and private higher education. Washington, D.C.: The Brookings Institution, 1978. Puma, M., Smith, M., Miller, S., and Cooper, M. Study of program management procedures in the campus based and basic grant programs_(G-129): Final report (Vol. 2: Who gets financial assistance, how much, and why?). Silver Spring, Md.: Applied Management Sciences, Inc., 1980. ERIC Document Reproduction 13.

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114 16. Congressional Budget Office. Federal student assistance: Issues and options, Ok. cit., p. 1 and Table 18, p. 66. 17. Office of Planning, Budget, and Evaluation. Annual evaluation report (Vol. 2: Fiscal year 1981) (Publication No. E-82-47002-11. Washington, D.C.: U.S. Department of Education, 1982, p. 358. 18. Ibid., p. 360. - 19 . Ib id . 20. Ibid., Table 2, p. 363. 21. Ibid., Table 5A, p. 38 22. Ibid., pp. 366-37 3. 23. Ibid., pp. 374-380. 24. Ibid., pp. 384-38 7 . 25. Ibid., pp. 391-395. 26. Ibid., pp. 396-397. 27. Breneman, D.~., and Nelson, S.C. Financing community colleges: An economic perspective. Washington, D.C.: The Brookings Institution, 1981, pp. 128-129. 28. Jackson, G.A., and Weathersby, G.B. Individual demand for higher education: A review and analysis of recent empirical studies. Journal of Higher Education, 1975, 46~6), 623-652. Hearns, J.C. Effects on enrollment of changes in student aid policies and programs. New Directions for Institutional Research, 1980, 25, 1-14. 30. Department of Health and Human Services, Health Resources Administration. Trends in BHPr program statistics: Grants, awards, loans--FY 1957-79 (DHHS Publication No. HRA-81-3~. Washington, D.C.: U.S. Government Printing Office, 1981. 31. Department of Health and Human Services, Office of Inspector General. Review of nurses delinquent in repayment of nursing student loans, Public Health Service (Audit Control No. 12-33144~. Washington, D.C.: Office of Inspector General, 1982. 32. DHHS, HRA. Trends in BHPr program statistics: Grants, awards, loans--FY 1957-79, Op. cit., Table 44, p. 56. _ 33e Higher Education General Information Survey provided by the National Center for Education Statistics. Unpublished data. 34. Chambers, M.M. Appropriations of state tax funds for operating expenses of higher education, 1981-1982. Washington, D.C.: National Association of State Universities and Land-Grant Colleges, 1981. 35. Patasknik, B., Health Care Financing Administration. Personal communication, July 27, 1982. 36. Reeher, K.R., McKelvey, J.L., and Davis, J.S. Thirteenth annual survey, 1981-82 academic year. Deerfield, Ill.: National Association of State Scholarship and Grant Programs, 1982. 37. American Hospital Association. Preliminary data from nursing personnel survey, 1980. Unpublished, 1982. 38. Chambers, M.M., Op. cit., p. 2. 39. Chambers, M.M. Timely data circulated while current. Grapevine, 1982, 292, 1835-1840.

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115 40. Halstead, D.K., National Institute of Education. Personal communication, September 1982. 41. Maryland Governor's Commission on Nursing Issues. Governor's commission on nursing issues. Annapolis, Md.: Governor's Commission on Nursing Issues, 1982. o. 40. 42. Colorado Commission on Higher Education. education programs in Colorado. Denver, Colo.: Report of the A review of nursing Commission on Higher Education, 1979. Florida Department of Education, Division of Community Colleges. Unpublished data. 44. Indiana Commission for Higher Education. Unpublished data. 45. McGill, J.T. State-level policy determination for nursing education: Illinois, an example. In M. Millman (Ed.), Nursing personnel and the changing health care system. Cambridge, Mass.: Ballinger, 1977. 46. Coelen, C.G., and Gaumer, G. Effects of federal support for nursing education on admissions, graduations, and retention rates at schools of nursing (Publication No. AAI-82-5). Cambridge, Mass.: Abt Associates, Inc. 1982. 47. Department of Health and Human Services, Health Resources Administration. The recurrent shortage of registered nurses; A n_w look at the issues (DHHS Publication No. HRA-81-23~. Washington, D.C.: 48. 50. U.S. Government Printing Office, 1981, p. 97. Schmidtlein, F.A., and Glenny, L.A. State budgeting for higher education: Calif.: University of California, 1977. 49. College Entrance Examination Board. College cost book 1981-1982. New York: College Entrance Examination Board, National League for Nursing. NLN nursing data book 1979. York: National League for Nursing, 1979. U.S. Bureau of the Census. ~ ~ States: 1980 (101st ed.~. Printing Office, 1980. The political economy of the process. Berkeley, Center for Research and Development in Higher Education, 1981. New Statistical abstract of the United Washington, D.C.: U.S. Government