Automatic textbooks billing: an offer students can’t refuse?

New report says deals with publishers could make college textbooks more expensive

U.S. PIRG Education Fund

Attending college in America is one of the largest expenses someone will ever have in their lifetime. 

For more than 30 years, textbook publishers have added to that financial burden by using their power in the market to drive up textbook costs through a variety of tactics. Three companies — Pearson, Cengage, and McGraw-Hill — control 80 percent of the college textbook market. These publishers have historically driven up prices by issuing new editions with limited changes and taking advantage of a captive market of students who cannot choose an alternative to the assigned textbook. The result is clear: the rapidly increasing cost of textbooks has students now spending over $3 billion of financial aid dollars each year on course materials. 

In the internet age, students have found new ways to work around high textbook costs. The past decade has seen the creation of a thriving online marketplace that facilitates trading, renting, and selling of books. And, a growing movement of openly licensed textbooks that are free or can be printed at low cost are creating real competition for traditional publishers — and saving students hundreds of millions.

Requiring students to purchase access codes for a proprietary publisher platform to submit homework or other course materials is crucial for publishers to stay relevant in this shifting marketplace. These codes lock students into high cost textbooks without significantly increasing educational value. Instead, students continue to struggle to afford critical educational material and often lose access to the materials at a later date. This is a continuation of the broken textbook market, not a radical solution. Rather than making changes that are more consumer-friendly, access codes are a last-ditch attempt from the publishing industry to maintain —  and even strengthen — their monopoly.

To increase use of access codes, publishers have sought out partnerships with institutions to steer faculty into these products and automatically bill students for these materials. Variously known as inclusive access, innovative pricing, or other names specific to the publisher, contracts between publishers and institutions set in place the conditions and discounts under which students are automatically charged on their tuition bill via an opt-out charge for each assigned class material.

Under federal law, these materials must be sold to students below market price if they are to be automatically billed, and students must be able to opt out of such charges. However, are these programs worth the trade-offs on transparency and choice to students, faculty, and institutions? Are discounts significant? Do they last? Do students have real decision making power in opting out? What other conditions exist?  

U.S. PIRG Education Fund undertook a first of its kind review of automatic billing contracts across the country at public institutions big and small to help answer these questions, shed light on these programs, create a framework for evaluating such programs and recommend alternatives. The review covered 52 contracts between 31 colleges that represent a cross-section of the nation’s higher education institutions, and affect more than 700,000 undergraduate students. The review found five major problems:

  1. Nearly half of automatic billing contracts we reviewed fail to fully disclose their discount structure. Students and faculty will struggle to tell how significant a discount they are getting. When contracts disclosed the discount, it was undercut by the use of a national automatic billing book list that could be hard for members of the campus community to access.

  2. 42 percent of institutions signed at least one contract that put limitations on publicity around these partnerships, which could potentially allow the publisher to veto any campus marketing materials that would inform students and faculty about program value or how to opt-out.

  3. 68 percent of publisher contracts include a clause where the discount would be eliminated, reduced, or the contract cancelled for a missed quota of students enrolled in the automatic billing program, which could be as high as 90 percent% of the course.

  4. Only one institution in our study capped price increases. 33 percent of publisher contracts had the potential for annual uncapped price increases, and 21 percent had the potential for twice-annual price increases.

  5. One fifth of automatic billing contracts limited the number of students who could purchase print versions of their materials, typically capped at 15 percent of the course.

In addition to reviewing legal contracts signed by the institution and the course materials provider, we analyze how implementation of automatic billing programs failed to provide students or faculty a chance for input, prevented students from opting out, or otherwise impacted such efforts.

The solution is simple: rather than using automatic billing in college classrooms, colleges should switch to options that preserve faculty and institutional control, and enhance student choice. We urge campus leaders to say no to automatic billing proposals on their campus, and if one is already in place, fight for these changes to improve student and faculty choice:

  1. Have a clearly marked pricing structure publically available that shows the original price of the assigned material, the discount off the national list price, and multiple format options.

  2. Reject attempts to restrict marketing materials that can be issued by the institution to educate students on their course materials purchasing options. 

  3. Eliminate quotas. The discounts alone ought to be enough to get students to participate at a high enough level to make the program worthwhile.

  4. Cap annual price increases to no more than the rate of inflation, which is currently at 2.3 percent annually.

  5. End any restrictions on the number of students who can obtain print copies.

  6. Have the billing mechanism be opt-in, and listed as one of many methods of payment alongside credit cards, cash, etc. that students can use at the bookstore. There is nothing wrong with institutions seeking to negotiate bulk discounts for students, but students should be able to choose whether to take advantage of it and how they pay.

We lay out further recommendations and next steps for various stakeholders to engage on the issue of automatic billing, and provide appedices with guiding questions and examples to support their efforts.