Iowa private schools rose tuition by 25% last year, study finds

Iowa's new education savings account (ESA) program is influencing private schools to raise tuition rates, according to a new working paper published by Brown University.

Why it matters: The program aims to make private schools more affordable for families, but researchers warn that it could be ineffective if they raise tuition anyway.

Context: Last year, Iowa lawmakers passed a new law allowing parents to use over $7,600 annually per pupil towards private school education.

What's happening: Princeton researchers Jason Fontana and Jennifer Jennings examined Iowa private school tuition rates and compared them with neighboring Nebraska.

Context: While both states passed ESA programs in 2023, Iowa implemented them immediately for the 2023-24 school year, while Nebraska is waiting for 2024-25.

• Fontana and Jennings also studied private school tuition rates for Iowa's pre-K students. While all K-12 students were eligible for the ESA program, preschool students were not.

The results: Across Iowa private schools, Fontana and Jennings estimated a 25% tuition rate increase when ESAs were implemented after examining rates between 2021-22 and 2023-24.

• That's around $1,300 for kindergarten and $830 for first through 12th grades.

The intrigue: There were no noticeable increases for pre-K, Fontana tells Axios.

Zoom in: When examining kindergarten, they found a 3-5% tuition increase at private schools between 2021-22 and 2022-23 — a typical inflation amount.

• However, when ESA was implemented in 2023-24, it jumped to a 21-24% tuition increase for kindergarten, which experienced the largest jump, Fontana says.

Between the lines: The study does not analyze if the tuition increases outpace funding provided by the ESA program, "but it is certainly a tuition increase that is above and beyond what we might anticipate in a typical year by a significant margin," Fontana says.

The other side: Tuition prices are a product of supply and demand and it's unfair to judge the program this early, says Alan Ostergren, president of The Kirkwood Institute, a conservative public interest law firm.

• Because of the ESA program, more families are considering private school, resulting in higher demand and a "short-term" tuition rise, Ostergren says. Meanwhile, Nebraska's program has yet to start and experience the market.
• Ostergren points to a study from The Heritage Foundation , a conservative public policy organization, that notes states with similar ESA programs delayed tuition increases over 10 years compared to states without the programs.