Last year, we did a podcast on college tuition which discussed the growing gap between a college’s “sticker price” and the actual tuition paid by low- and middle-income working families. In order to demystify this gap — and help low-income families understand that many expensive private colleges are actually well within their reach — Wellesley College has just released a “Quick College Cost Estimator” calculator.
“The conversation that takes place around college costs is largely misguided,” Phillip B. Levine, an economics professor at Wellesley, told David Leonhardt of the Times. “People focus only on the sticker price. The sticker price is a meaningful statistic for roughly 40 percent of our students. The majority of our students are receiving financial aid, and for them the sticker price is an irrelevant number.” While The College Board and Harvard have similar calculators, Leonhardt likes the simplicity of Wellesley’s version. “The larger point is that Wellesley’s calculator is a significant step in the growing effort to spread accurate information about college costs,” writes Leonhardt. “As Mr. Levine says, the widespread misunderstanding of tuition ‘clos
It has become increasingly common for colleges and universities to charge different tuition for different undergraduate majors. Do those prices actually influence degree production? In a new working paper (abstract; PDF), Kevin M. Stange argues that the answer is yes:
In the face of declining state support, many universities have introduced differential pricing by undergraduate program as an alternative to across-the-board tuition increases. This practice aligns price more closely with instructional costs and students’ ability to pay post-graduation. Exploiting the staggered adoption of these policies across universities, this paper finds that differential pricing does alter the allocation of students to majors, though heterogeneity across fields may suggest a greater supply response in particularly oversubscribed fields such as nursing. There is some evidence that student groups already underrepresented in certain fields are particularly affected by the new pricing policies. Price does appear to be a policy lever through which state governments can alter the field composition of the workforce they are training with the public higher education system.
We’ve made periodic attempts to explain the massive spike in college tuition in recent decades. There are many viable explanations: rising labor costs (more non-faculty staff and professors who cannot be cloned), shrinking federal and state funding, increased demand, etc.
On that last point — the demand side — we should especially consider “consumption amenities,” as Brian Jacob, Brian McCall, and Kevin M. Stange label them in a new working paper called “College as Country Club: Do Colleges Cater to Students’ Preferences for Consumption?” (abstract; pdf). I find the passage that I’ve bolded, below, to be especially fascinating:
This paper investigates whether demand-side market pressure explains colleges’ decisions to provide consumption amenities to their students. We estimate a discrete choice model of college demand using micro data from the high school classes of 1992 and 2004, matched to extensive information on all four-year colleges in the U.S. We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract. We estimate that the elasticities implied by our demand model can account for 16 percent of the total variation across colleges in the ratio of amenity to academic spending, and including them on top of key observable characteristics (sector, state, size, selectivity) increases the explained variation by twenty percent.
It would be great news if this meant that high-achieving students craving high academic quality will be rewarded with cheaper tuition in the future, but somehow I don’t see that happening. Do you?
A Florida state task force on education has just released a recommendation to adjust tuition, by major.
“Tuition would be lower for students pursuing degrees most needed for Florida’s job market, including ones in science, technology, engineering and math, collectively known as the STEM fields,” writes Scott Travis of the South Florida Sun-Sentinel. Students in other majors — psychology and the performing arts, for example — would pay more. “The purpose would not be to exterminate programs or keep students from pursuing them. There will always be a need for them,” Dale Brill, the task force chair, told Travis. “But you better really want to do it, because you may have to pay more.”
Notwithstanding the ongoing controversy over rising college tuition costs, there’s one group of people who think that college is worth the cost: people who haven’t gone. Catherine Rampell of Economix blogs about a new survey of recent high school graduates:
Seven in 10 of these recent graduates said they would need more education if they were to have a successful career. Despite their belief in the value of post-secondary education, though, only 38 per cent definitely planned to attend college to get more education in the next five years. Barriers included skyrocketing tuitions and family obligations.
Many of the respondents felt differently at the start of high school — 35 per cent thought they would “definitely” go to college and 28 percent believed they would “probably” go. Minority students were even more optimistic at the start of high school:
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It’s just a matter of time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it.
And it can’t happen fast enough.
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.
We’ve blogged in the past about the college tuition inflation. Now some students think they may have a solution. FixUC, a student organization based at UC Riverside, wants the university to stop charging tuition and instead take 5 percent of students’ yearly salaries for the 20 years after graduation. “Charging students when they don’t have money doesn’t make sense,” says Chris LoCascio, the group’s leader. “In 20 years, our plan would double the amount of money coming into the UC system.” Read More »