A master’s degree in teaching costs about $6,400 a semester for a full-time North Carolina resident attending East Carolina University’s College of Education, meaning a four-semester program would cost about $26,000. But, according to the North Carolina state legislature, that doesn’t mean it’s worth anything.

In the most recent state budget passed by the state legislature and signed by the governor last week, North Carolina lawmakers eliminated a provision – which exists in many states – that granted automatic pay raises to public school teachers who completed master’s degrees. It was one of several changes the budget made to teacher compensation and working conditions, including ending teacher tenure, but it is the one likely to have the largest impact on the state’s higher education institutions.

The elimination of the benefit could have a significant effect on enrollment in education schools at North Carolina colleges and universities. And since many of those programs generate net revenues for the institutions, enrollment declines could affect their bottom lines.

“This is absolutely going to negatively impact admissions at the graduate levels,” said Vivian W. Mott, interim associate dean of the College of Education at East Carolina University. “Folks who pursued graduate degrees, many of them do it to further their careers and because of that pay differential. It’s likely not the single motivating factor, but it is a motivating factor.”

North Carolina’s move could also clear the way for other states to take similar steps, particularly as lawmakers look for ways to control spending in the face of increased pension, public safety and health care obligations. And in the past few years, as debates about merit pay for school teachers have come up, major public figures such as Bill Gates and U.S. Secretary of Education Arne Duncan have questioned the wisdom of rewarding teachers for degrees.

“Districts currently pay about $8 billion each year to teachers because they have master's degrees, even though there is little evidence teachers with master's degrees improve student achievement more than other teachers,” Duncan said in a 2010 speech.

The North Carolina lawmakers who pushed for the change argue that the state should be rewarding performance rather than credentials. The state's governor, Pat McCrory, is pushing for $30 million in extra money over the next two years, $10 million of which will be awarded to high-performing teachers as $10,000 stipends. “Teachers are not a class but professionals who should be rewarded based upon their individual value to students and to their school,” McCrory said last week.

North Carolina public school teachers currently receive a 10 percent pay increase when they complete a master's degree.

Mott said ECU has evidence -- including employer surveys and ongoing research -- that shows that teachers who receive master's degrees perform better in the classroom. She and others also argue that a more educated workforce, particularly in classrooms, is something the state should promote.

ECU’s College of Education enrolled about 1,100 students in its various master's programs last year, compared to about 2,000 undergraduate students. While that’s not a huge chunk of the overall enrollment, it is a large revenue source – particularly when many costs are fixed. Mott said that while she’s not sure exactly what kind of financial impact will materialize, she said there will absolutely be one. And that problem is exacerbated, she says, because it comes on the heels of several years of state budget cuts that have made the school more tuition-dependent.

“We’ve already had budget cuts down into the muscle,” she said. “We’re at the bone. There’s no fat left.”

The financial effect could be even more damaging at some of the state’s smaller private colleges with education schools. Those institutions not only do not have any state revenue or research funding to fall back on, but also lack the diversified undergraduate and graduate programming – such as master's of business administration programs – that bring in revenue at larger institutions.

“Any decrease in enrollment at any level at an institution that is enrollment-driven is going to have an impact,” said Dawn Lucas, dean of the division of education at Pfeiffer University, a private college of about 1,400 students.

“When there’s no promise of return on investment, the assumption is that it will cause a decrease in applications,” Lucas said.

Graduate programs in education tend to pull from local markets, so unlike other programs where decreased enrollment in one area could be replaced by increases from another, there might be few other markets for North Carolina universities to tap into.

Lucas said Pfeiffer’s graduate programs in education currently pull all of their students from North Carolina. Once the change goes into effect, she said, the education division will likely try to recruit students from out of state and internationally, as well as create an online-only degree program, but that market is already crowded.

Since many of the programs in question take multiple years to complete, many of the teachers who have already paid for a substantial portion of their programs might be left with debt and no corresponding pay increase.

Paperwork for the pay increases have to be filed by April 2014, so students who graduate in May will not benefit. Both Lucas and Mott said their colleges are working to encourage students to complete their degrees by the end of the calendar year, when the new policy will go into effect.