Differential Pricing in Higher Education

The New York Times of March 30 reported that a California junior college planned to set two levels of tuition for some of its classes.  Many colleges set differential tuition based on in-state residence, level of class, or type of course.  But this plan would have explicitly set tuition differentially in order to fund additional offerings that would not otherwise be provided.  Essentially, the college was trying to move up the supply curve of courses, recognizing that demand far exceeds supply at the current (very low) tuition level.  The plan generated an outcry among people bothered by the pricing of education and was “indefinitely postpone[d].” But higher education requires resources; and if taxpayers refuse to pay taxes but insist on services, this seems like a perfectly reasonable way of meeting demand.  I expect that, as in so many areas, California will once again lead the nation, this time into an expansion of additional differential pricing of course offerings in higher education.

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COMMENTS: 11


  1. Dave says:

    This line cracked me up: ‘I expect that, as in so many areas, California will once again lead the nation’

    They lead in State Debt, pointless laws (side note: those ‘spill-proof’ gas cans irk me to no end. I’ve spilled more gas and wasted more time waiting on their slow-flow nozzles to transfer gas than I care to think about), and what else?

    Well-loved. Like or Dislike: Thumb up 15 Thumb down 9
  2. Khary says:

    I think it is necessary as long as it is not discriminatory. California needs cut costs in its bloated public system and find more ways to generate revenue. Additionally, if California did more to encourage businesses and investment here there would be significant more tax revenue from job creation.

    California’s economic model is unsustainable and new ways to fund education without raising taxes is needed.

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  3. James says:

    It isn’t just California. The College of Engineering at UNR is going to differential tuition. Of course it has effectively had it for some time, with “lab fees” for courses that didn’t have labs.

    It does seem reasonable, considering the starting salary differential for graduates.

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  4. Milton Recht says:

    Of course, if you are going to use differential pricing because demand exceeds supply, you should really use a market based pricing system and not an administratively set price. It would probably be easy to set up an auction system where students get $X credit for their tuition payments to use in an auction bidding system for their semester courses.

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  5. Iluvmint says:

    American parents will fix the problem of paying for coolege through imagination and innovation

    Here’s an example. I just had twins and am taking advantage of it by creating babybets.com.

    At babybets.com people can wager on which of their twins will a milestone first.

    Odds and payouts are determined by the likelihood of one child meeting
    that milestone before another.

    For example, this is a bet that likely will pay out even money;
    betting which identical twin will lose a baby tooth first. Since the
    twins are about equally likely to be first to loose a tooth, the pay
    out on a correct bet would be 1:1. You bet $100 and win $100.

    Bets would pay out big time, though, by placing a wager on a twin
    who’s unlikely to reach the milestone first. Here’s an example.
    Fraternal twins are born, a boy and girl.

    Betting that the girl will be first to pee in a urinal would pay out huge. I can’t even calculate
    the odds of that happening.

    Parents of twins make money because a small percent of all wagers,
    maybe 2%,.

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    • James says:

      “…betting which identical twin will lose a baby tooth first…”

      Impractical, because it would be so easy to cheat. Unless you tattoo their names on their foreheads, how could anyone ever know for sure which identical twin it was?

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      • Iluvmint says:

        The parents may not bet. They make money by getting a small percent of all bets placed.

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      • James says:

        Sure. And you want us to believe that, if the odds on twin A are much higher than on B, the parents wouldn’t get a friend to place a bet on A, then swap twins accordingly?

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  6. Jack says:

    It seems like a reasonable idea – at least if the cost of the expensive courses are set at a level that can subsidize the other classes [or make it possible to offer more classes than otherwise]

    The students paying more will not be competing for the regular priced courses, opening more seats for those who cannot afford [or are unwilling] to pay more.

    The real question is if the plan will result in more opportunities or just more revenue for the same number of seats. It can be argued that neither outcome is bad, just that one is better from a social viewpoint.

    Lastly, if people are willing to pay more, and the institution already has more demand than it can meet, doesn’t classic economics predict a natural rise in price? Especially when funding from other sources has dropped precipitously?

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  7. Sam says:

    It’s not exactly clear to me that differential pricing of this sort actually furthers the aims of a state community college system. Yes, I’m sure you can balance supply and demand at a higher price point and end up with a more comfortable budget, but I’m not sure that that’s what a community college really is.

    The state has a clear interest in educating reasonably smart people from poor families – both because you’re likely to get a nice bump in productivity from that smart person, and because it’s generally god for society to have plenty of examples of people from poor backgrounds doing well. It is far from clear, however, that the low-ability community college student actually derives much benefit from the college education.

    So maybe one should do differential pricing by ability. Smart, able people get to go cheaply, wealthy idiots can pay their way, and poor idiots probably do no worse by getting a job.

    So then say the state can afford to subsidize $x million worth of education in its community colleges. Perhaps one ranks students by SAT score and subsidizes as many of the top students as one can afford. Perhaps everyone gets their first course or two subsidized, and then only those in the top half of GPAs get subsidized further.

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  8. Travis Idol says:

    I think most commenters are missing a couple of key points here.
    1. The courses that will cost more are not inherently more expensive, such as lab courses. In fact, these high-demand and high-enrollment courses actually more than pay for themselves and probably subsidize other courses.
    2. These courses are also required for graduation either at the CC or a 4-year university, so there’s no reasonable alternative. It doesn’t really seem fair to then charge more to enroll in them.
    At our institution of higher ed, there’s something called Outreach College. It offers all kinds of courses-credit and non-credit-during the regular semesters and the summer. These courses have to “pay for themselves”, i.e. have sufficient enrollment so that the tuition covers the instructor’s salary plus the college’s admin fee. Why not just hire lecturers on an as-needed basis to cover these extra courses?

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