The Price and Cost of College Are Different Things

As someone who spends a lot of time thinking about some of the wonkier issues of higher education finance, there are some common statements that just drive me nuts. For example, people who refer to the U.S. Department of Education as the “DOE” (it’s “ED” and the Department of Energy is “DOE”) or pronounce the FAFSA as “FASFA” might as well be screeching their fingernails on a chalkboard. But, as much as those things annoy me, they’re examples of inside baseball at their finest—they don’t affect students, but they’re still deviations from the norm. So I’ll try to hide my grimaces in those situations going forward.

However, I will say something every time someone erroneously refers to the cost of college when they truly mean the price of college, as these are two distinctly different concepts. Here are the definitions of the two terms:

Price: This represents how much money a student and/or their family has to pay for college.

Cost: This represents how much money it takes to provide an education.

With the presence of federal, state, and institutional financial aid as well as direct state appropriations to colleges, the price that many students pay can be far below the true cost of providing the education. On the other hand, due to the tangled web of subsidies present in the “awkward economics” of higher education, some students (such as full-freight international students and master’s students as well as those enrolled in large lecture classes) may be paying far more than it costs to provide their education.

From a policymaker’s perspective, it if far easier to propose bringing down the price of college than the cost of college—even though these proposals have large price tags and finding funding can be difficult. (An exception is so-called “last dollar” programs at community colleges, which often leverage other grant aid sources instead of using much of their own money.) Bending the cost curve is a far more difficult endeavor, as technology generally hasn’t done much to reduce costs (a promising master’s degree program at Georgia Tech notwithstanding) and other options such as increasing class sizes or spending less on facilities frequently run into opposition.

Efforts to bring down the price of college have become increasingly popular over the last several years, but they must be accompanied with a willingness to reduce costs in order for these programs to be financially feasible in the long run. To this point, cost control has remained a distant goal for most policymakers—a perfectly reasonable position given the shorter time horizons of most politicians. Bringing down prices today gets attention, while the crucial step of bringing down costs in the future is nowhere near as exciting.

Why is College So Expensive? (Nearly) Everyone is to Blame

“Why is college so expensive?” “Why does college cost so much?” If I had a dollar for every time I’ve been asked that type of question, I could probably pay the roughly $15,000 it takes to provide a year of college for the typical student at a four-year regional public university. This is the true cost of college—how much the college spends on a given student each year. The public is often more concerned with the price (what students and their families pay), but barring additional massive public spending on higher education, the cost of providing a college education must be brought under control in order for students to see lower price tags.

Any piece written by a member of the higher education community for the general public about college costs is likely to reach a large audience due to deep public concerns about college affordability. A recent piece in the Washington Post by Steven Pearlstein, former journalist and current professor at George Mason University, offers four potential solutions to bending the college cost curve. Below, I discuss each of his four ideas and whether they are feasible. (Note that because the focus is on reducing the cost of educating a student, state funding and additional financial aid aren’t relevant here—although they would reduce the price faced by students.)

Proposal #1: Cap administrative costs. This one seems like a no-brainer; if the goal is to educate students, more money should be spent on instruction compared to various “deanlets” and other administrators. But there are legitimate reasons for additional administrators. First, as Pearlstein notes, increasingly complex government regulations, such as for how financial aid is disbursed, do need specialized individuals. As the college-going population has become more diverse, at least some additional student services are required to serve a student body with different academic and social needs than decades ago.

However, the blame for rising administrative costs can also be shared among students and faculty in addition to administrators and regulators. Some students’ preferences for intercollegiate athletics and recreation facilities (such the infamous climbing walls and lazy rivers) also require a number of additional staff members and administrators to run these endeavors. Additionally, as Andrew Kelly of the American Enterprise Institute noted last week, even student protesters’ demands for additional services at places such as the University of Missouri and Yale could increase total costs. Faculty are also to blame—each time we give up a former part of our jobs (such as advising students, making admissions decisions, or even making copies), someone else does it.

Proposal #2: Use a year-round teaching schedule, five days per week. It’s really hard to argue that college facilities are being used in an efficient manner. Fridays tend to be ghost towns at many colleges, although many less-selective colleges do hold quite a few evening and weekend classes. But residential students tend not to like Friday classes, and faculty with demanding travel schedules also prefer to keep Fridays free for travel. I teach Monday and Wednesday evenings, and I’ll use about half of the Fridays in a given semester to go to meetings and conferences. Technology has the ability to help solve this problem through the use of hybrid classes. Faculty can teach online a few weeks each semester while they are traveling, something which I do on occasion as well as when the weather is bad.

Moving to a year-round teaching schedule, however, is likely to have significant budgetary implications. Most faculty with teaching obligations are on a 9-month or 10-month contract, meaning that they are not expected to work with students during the summer period—let alone teach. Asking faculty to teach in the summer would likely result in contracts needing to be 11 or 12 months per year, which would probably mean increased salaries. After all, if teaching is added to a professor’s schedule in the summer, she probably won’t work for free.

Proposal #3: Teach more and research less. Pearlstein notes that much research is never cited by any other academics, as well as noting that the incentive structure often favors research (which is far easier to quantify than teaching). The blame for the focus on research can be placed on both administrators and faculty, as both groups often prefer research over teaching and may both have input into the tenure and promotion process.

However, Pearlstein’s mention of research showing that “teaching loads at research universities have declined almost 50 percent in the past 30 years” is incorrect. That study, which used the National Study of Postsecondary Faculty, was rescinded in 2013 due to concerns about the wording of faculty workload questions changing during the length of the study. While it’s probably the case that faculty teaching loads at more selective institutions have declined somewhat, Pearlstein shouldn’t have used a study that was rescinded a month after it was released.

Proposal #4: Cheaper, better general education. In this section, Pearlstein pushes for more online and hybrid courses to better engage students in the material. This sounds good, but it is far from a certainty that online courses are actually less expensive than in-person courses. (Research on this is nascent and inconclusive.) Additionally, Pearlstein cites government data stating that “more than three-quarters of students at four-year colleges and universities have never taken an online or hybrid course.” As Russ Poulin at WCET notes, 27% of students took a distance education course in 2013 alone, meaning that the percentage of students with some online experience at some point in college is likely far larger than 25%. I’ll be the first to admit that general education is not my strong point as a member of the graduate faculty, but there are lots of good people working on issues of general education.

As the discussion above suggests, nearly everyone (except woefully underpaid adjuncts) is to blame for the rising costs—and prices—of a college education. The challenge is that any solution is likely to be fairly complex and involve negotiations among faculty, administrators, students, and taxpayers. This is why college costs tend to get lip service from the higher education community until revenue sources dry up. But the financial struggles of many small private colleges (let alone many cash-strapped public colleges) make cost-cutting measures necessary, and hopefully the rest of the higher education community can learn from their experiences.

Examining Trends in Living Allowances for College

The National Center for Education Statistics released a new report and data on trends in the cost of attendance for different types of colleges, including data from the 2012-13 to 2014-15 academic years. The report shows that, among colleges operating on a traditional academic year basis (excluding most vocationally-oriented colleges), tuition and fees generally increased at a rate faster than inflation among public and private nonprofit colleges over the last two years. However, tuition failed to keep up with inflation in the for-profit sector and allowances for other living expenses (such as transportation and laundry) declined over the past two years after taking inflation into account.

I dug deeper into the data, looking at the percentage of colleges by sector that increased, decreased, or held constant each of the cost of attendance components (tuition/fees, room and board, books and supplies, and other living expenses) between 2013-14 and 2014-15—without adjusting for inflation. I focused on students living off-campus without their family, as colleges have the ability to determine the room and board allowance but do not directly receive any housing revenue for off-campus students. (My blog post on the topic last year ended up connecting me to Braden Hosch at Stony Brook and Sara Goldrick-Rab at Wisconsin-Madison, and we’ve dug deeper into the accuracy and consistency of these estimates in a working paper.)

The results (below) show that for-profit colleges were far more likely to lower tuition and fees than public or private nonprofit colleges. While 75% of public colleges and 85% of private nonprofits increased tuition, just 42% of for-profit colleges did so. For-profits were also more likely to lower books/supplies and other living expense allowances, although the typical allowance was still higher than for nonprofit colleges. A majority of colleges across sectors increased room and board, while most colleges did not change their allowances for books and supplies.

 

Table 1: Changes in COA components by sector, 2013-14 to 2014-15.
Private nonprofit
Characteristic (2014-15) Public For-profit
Cost of attendance, students living off-campus without family
  Median ($) 18,328 37,900 28,796
  Increased from 2013-14 (pct) 77.8 84.9 56.3
  No change from 2013-14 (pct) 7.2 5.8 8.2
  Decreased from 2013-14 (pct) 15.0 9.3 35.5
Tuition and fees
  Median ($) 4,200 24,670 14,040
  Increased from 2013-14 (pct) 74.9 84.6 42.3
  No change from 2013-14 (pct) 19.5 11.0 38.5
  Decreased from 2013-14 (pct) 5.7 4.4 19.2
Room and board
  Median ($) 8,280 9,000 7,574
  Increased from 2013-14 (pct) 55.1 56.4 59.2
  No change from 2013-14 (pct) 34.6 34.5 28.2
  Decreased from 2013-14 (pct) 10.4 9.2 12.5
Books and supplies
  Median ($) 1,265 1,200 1,380
  Increased from 2013-14 (pct) 37.8 23.1 25.7
  No change from 2013-14 (pct) 54.4 69.3 59.1
  Decreased from 2013-14 (pct) 7.8 7.6 15.2
Other living expenses
  Median ($) 3,742 3,150 5,000
  Increased from 2013-14 (pct) 42.0 35.1 35.5
  No change from 2013-14 (pct) 36.8 48.9 27.4
  Decreased from 2013-14 (pct) 21.2 16.0 37.1
Number of colleges 1,573 1,233 719
SOURCE: Integrated Postsecondary Education Data System.
Note: Limited to colleges reporting costs on an academic year basis.

Yet as was noted in last year’s blog post on this topic, some colleges set room and board allowances that are unreasonably low by any standard. This year, I focused on the 27 colleges that reduced their room and board allowance for off-campus students by at least $3,000 between 2013-14 and 2014-15. Some of the changes may be reasonable, such as Thomas University’s drop from $15,200 to $10,530 for nine months of room and board. But many others are unlikely to meet any standard of reasonableness. For example, Emory & Henry College in Virginia reduced its allowance from $11,800 for nine months to just $3,000, while the College of DuPage in Illinois cut its allowance from $8,257 to $2,462. Good luck trying to rent an apartment and eating ramen on that budget!

Table 2: Colleges with large declines in off-campus room and board allowances, 2013-14 to 2014-15.
Name State 2013-14 2014-15 Change
Emory & Henry College VA 11,800 3,000 -8,800
Atlanta Metropolitan State College GA 10,753 3,160 -7,593
Mount Carmel College of Nursing OH 13,392 6,380 -7,012
Vanguard University of Southern California CA 11,286 4,600 -6,686
Louisiana Delta Community College LA 15,322 8,789 -6,533
Trinity College of Nursing & Health Sciences IL 12,346 5,858 -6,488
Arkansas Northeastern College AR 11,969 6,102 -5,867
College of DuPage IL 8,257 2,462 -5,795
College of the Mainland TX 11,330 5,665 -5,665
Randolph-Macon College VA 9,200 3,650 -5,550
The University of Texas at Brownsville TX 11,495 6,250 -5,245
SAE Institute of Technology-Nashville TN 15,000 10,000 -5,000
Bon Secours Memorial College of Nursing VA 15,000 10,000 -5,000
Thomas University GA 15,200 10,530 -4,670
Davenport University MI 8,692 4,340 -4,352
Southwestern Illinois College IL 8,516 4,280 -4,236
Lee University TN 11,650 7,520 -4,130
Grace School of Theology TX 12,684 8,584 -4,100
Prairie View A & M University TX 11,289 7,197 -4,092
NY Methodist Hospital Center for Allied Health Education NY 17,568 13,496 -4,072
College of Business and Technology-Flagler FL 12,000 8,320 -3,680
College of Business and Technology-Miami Gardens FL 12,000 8,320 -3,680
Anoka Technical College MN 10,356 6,994 -3,362
Central Penn College PA 6,855 3,500 -3,355
St Margaret School of Nursing PA 9,960 6,640 -3,320
Fortis Institute-Port Saint Lucie FL 12,732 9,495 -3,237
Southern California Seminary CA 14,616 11,493 -3,123
SOURCE: Integrated Postsecondary Education Data System.
Note: Limited to colleges reporting costs on an academic year basis.

Why do some colleges feel pressures to cut back living allowances? It’s all about accountability. The amount of loan dollars students can borrow is limited by the cost of attendance, meaning that reducing living allowances (and hence the cost of attendance) reduces borrowing—and potentially the risk of a college facing sanctions for high student loan default rates. The cost of attendance also determines the net price (the COA after grants are applied), an important accountability metric. Since colleges don’t directly benefit financially from a higher off-campus living allowance, they have an incentive to reduce the living allowance while continuing to increase tuition.

Should Colleges Be Able to Determine Costs of Living?

I was reading through the newest National Center for Education Statistics report with just-released federal data on the cost of college and found some interesting numbers. (The underlying data are available under the “preliminary release” tab of the IPEDS Data Center.) Table 2 of the report shows the change in inflation-adjusted costs for tuition and fees, books and supplies, room and board, and other expenses included in the cost of attendance figure between 2011-12 and 2013-14.

Tuition and fees rose between three and five percent above inflation in public and private nonprofit two-year and four-year colleges between 2011-12 and 2013-14 while slightly dipping at for-profit colleges (perhaps a response to declining enrollment in that sector). Room and board for students living on campus at four-year colleges also went up about three percent faster than inflation, which seems reasonable given the increasing quality of amenities. But the other results struck me as a little odd:

This tweet got picked up by The Chronicle of Higher Education, and led to a nice piece by Jonah Newman talking to me and a financial aid official about what could be explaining these results. In my view, there are three potential reasons why other costs included in the costs of attendance measure could be falling:

(1) Students could be under such financial stress that they’re doing everything possible to cut back on costs at least partially within their control. Given the rising cost of college, this could potentially explain part of the drop.

(2) Colleges could be trying to keep the total cost of attendance—and thus the net price of attendance, which is the cost of attendance less all grant aid received—low for accountability and public shaming purposes. In my work as methodologist for the Washington Monthly college rankings, a college’s net price factors into its score on the social mobility portion of the rankings and its position on our list of America’s Best Bang for the Buck” Colleges. A higher net price could also hurt colleges in the Obama Administration’s proposed college ratings, a draft of which is due to be released later this fall.

(3) Colleges could be trying to keep the cost of attendance low in order to limit student borrowing because students cannot borrow more than the total cost of attendance. Colleges may think that limiting student loan debt will result in lower default rates (a key accountability measure), and there is some evidence that the for-profit sector may be doing this even if it cuts off students’ access to funds needed to pay for living expenses:

Looking at each of the individual components beyond tuition, fees, and room and board, book and supplies costs staying level with inflation or slightly falling in the nonprofit sector could be reasonable. Pushes to make textbook costs more transparent could be having an impact, as could the ability of students to rent books or access online course material at a lower price than conventional material:

While room and board for students living on campus increased 3-4 percentage points faster than inflation over the last two years, the cost of living off campus (not with family) was estimated to stay constant. However, as Ben Miller at the New America Foundation pointed out to me, some colleges cut their off-campus living expenses to implausibly low values:

The “other expenses” category (such as transportation, travel costs, and some entertainment) dropped between one and five percentage points. These drops could be a function of colleges not accurately capturing what it costs to live modestly because surveying students is an expensive and time-consuming proposition for understaffed financial aid offices. But it could also be a result of pressure from administrators or trustees who want to keep the total cost (on paper) lower.

A potential solution would be to take the room and board estimates for off-campus students and the “other expenses” category out of the hands of colleges and instead use a regionally-adjusted measure of living expenses. The Department of Education could survey students at a selected number of representative colleges to get an idea of their expenses and whether they are what students need in order to be successful in college. They could use this survey to develop estimates that apply to all colleges. There is some precedent for doing this, as the cost of attendance estimates for Federal Work-Study and Supplemental Educational Opportunity Grant campus funding add a $9,975 living cost allowance and a $600 books and supplies allowance for all students. This should be adjusted for regional cost of living (and what costs actually are), but it’s something to consider going forward.

Do States and Colleges Affect Student Fees?

I am presenting a paper, “A Longitudinal Analysis of Student Fees: The Roles of States and Institutions,” at the Association for Education Finance and Policy’s annual conference today.  Here is the abstract:

Student fees are used to finance a growing number of services and programs at colleges and universities, including core academic functions, and make up 20% of the total cost of tuition and fees at the typical four-year public college. Yet little research has been conducted to examine state-level and institutional-level factors that may affect student fee charges. In this paper, I use state-level data on tuition and fee policy, the role of state governments and higher education systems, and partisan political balance combined with institutional-level data on athletics programs and selectivity to create a panel from the 1999-2000 to 2011-12 academic years. I find that some state-level factors that would be expected to reduce student fees, such as fee caps, do reduce fees at four-year public colleges, but giving the legislature authority to set fees results in higher fees. Additional state grant aid and higher-level athletics programs are also associated with higher fees in my primary model.

And here are the slides from my presentation, summarizing the study (which is still a work in progress). Any comments are greatly appreciated!

Burning Money on the Quad? Why Rankings May Increase College Costs

Regardless of whether President Obama’s proposed rating system for colleges based on affordability and performance becomes reality (I expect ratings to appear in 2015, but not have a great deal of meaning), his announcement has affected the higher education community. My article listing “bang for the buck” colleges in Washington Monthly ran the same day he announced his plan, a few days ahead of our initial timeline. We were well-positioned with respect to the President’s plan, which led to much more media attention than we would have expected.

A few weeks after the President’s media blitz, U.S. News & World Report unveiled their annual rankings to the great interest of many students, their families, and higher education professionals as well as to the typical criticism of their methodology. But they also faced a new set of critiques based on their perceived focus on prestige and selectivity instead of affordability and social mobility. Bob Morse, U.S. News’s methodologist, answered some of those critiques in a recent blog post. Most of what Morse said isn’t terribly surprising, especially his noting that U.S. News has much different goals than the President’s goals. He also hopes to take advantage of any additional data the federal government collects for its ratings, and I certainly share that interest. However, I strongly disagree with one particular part of his post.

When asked whether U.S. News rewards colleges for raising costs and spending more money, Morse said no. He reminded readers that the methodology only counts spending on the broadly defined category of educational expenditures, implying that additional spending on instruction, student services, research, and academic support always benefits students. (Spending on items such as recreation, housing, and food service does not count.)

I contend that rewarding colleges for spending more in the broad area of educational expenditures is definitely a way to increase the cost of college, particularly since this category makes up 10% of the rankings. Morse and the U.S. News team desire to have their rankings based on academic quality, which can be enhanced by additional spending—I think this is the point they are trying to make. But the critique is mechanically true, as more spending on “good” expenditures still would raise the cost of college. Additionally, this additional spending need not be on factors that benefit undergraduate students and may not be cost-effective. I discuss both of these two points below.

1. Additional spending on “educational expenditures” may not benefit undergraduate students. A good example of this is spending on research, which runs in the tens or even hundreds of millions of dollars per year at many larger universities. Raising tuition to pay for research would increase educational expenditures—and hence an institution’s spot in the U.S. News rankings—but primarily would benefit faculty, graduate students, and postdoctoral scholars. This sort of spending may very well benefit the public through increased research productivity, but it is very unlikely to benefit first-year and second-year undergraduates.

[Lest this be seen solely as a critique of the U.S. News rankings, the Washington Monthly rankings (for which I’m the methodologist) can also be criticized for potentially contributing to the increase in college costs. Our rankings also reward colleges for research expenditures, so the same critiques apply.]

2. Additional spending may fail a cost-effectiveness test. As I previously noted, any spending on the broad area of “educational expenditures” would be a positive. But there is no requirement that the money be used in an efficient way, or even an effective one. I am reminded of a quote by John Duffy, formerly on the faculty of George Washington University’s law school. He famously said in a 2011 New York Times article: “I once joked with my dean that there is a certain amount of money that we could drag into the middle of the school’s quadrangle and burn, and when the flames died down, we’d be a Top 10 school as long as the point of the bonfire was to teach our students.” On a more serious note, additional spending could be used for legitimate programs that fail to move the needle on student achievement, perhaps due to diminishing returns.

I have a great deal of respect for Bob Morse and the U.S. News team, but they are incorrect to claim that their rankings do not have the potential to increase the cost of college. I urge them to reconsider that statement, instead focusing on why the additional spending for primarily educational purposes could benefit students.

Policy Options for Pell Reform: The CBO’s Analysis

The federal Pell Grant program has grown dramatically over the past decade, due to both the effects of the Great Recession and changes to the program that made it more generous to students from low- to middle-income families. As spending has more than doubled since 2006 (although it slightly fell in the most recent year for which data is available), some in Congress have grown concerned about the sustainability of the program. This led Senator Jeff Sessions (R-AL), ranking member of the Senate Budget Committee, to request a review of Pell spending and information about the likely costs of various reform options going forward.

The Congressional Budget Office, the nonpartisan agency charged with “scoring” fiscal proposals, released a report yesterday summarizing the estimated fiscal effects of a host of changes to the Pell program. (Inside Higher Ed has a nice summary of the report.) While the goal of the requesting Senator may have been to find ways to lower spending on the program by better targeting awards, the CBO also looked at proposals to make the Pell program more generous and to simplify Pell eligibility.

While I’m glad that the CBO looked at the fiscal effects of various changes to restrict or expand eligibility, I think that Congress will make those decisions on a year-to-year basis (pending the availability of funds) instead of thinking forward over a ten-year window. However, it is notable that the proposal to restrict Pell Grants to students with an expected family contribution of zero—by far the students with the greatest need—would only cut expenditures by $10 billion per year, or just over one-fourth of the program cost. I am more interested in the CBO’s cost estimates for simplifying eligibility criteria. They propose two possible reforms, which are discussed in more detail on pages 24 and 25 of the report.

Proposal 1: Simplify the FAFSA by only requiring students and their families to provide income data from tax returns instead of pulling in asset and income data from other sources. This would slightly affect targeting, as some resources would be unknown to the government, but research has shown that basic income data predicts Pell awards well for most students. The CBO estimates that about two percent more students would receive the Pell Grant and that about one in five students would see an increase of approximately $350. This is estimated to increase program costs by $1 billion per year, or less than 3% of the annual program cost.

Proposal 2: Tie Pell eligibility to federal poverty guidelines instead of EFCs. I am quite interested in this idea, as it would greatly streamline the financial aid eligibility process—but I’m not sure whether I think it is the best idea out there. Basically, the federal poverty guidelines are calculated based on income, household size, and state of residency, and could be used to calculate Pell eligibility. This is indirectly done right now through means-tested benefit programs; for example, eligibility for the free/reduced price lunch program is based on the poverty line (130% for free, 185% for reduced). Since students who have a family member receiving FRL can qualify for a simpler FAFSA already, this may not be such a leap. The CBO estimates that about one in ten students would have their Pell status affected by their model option and that costs would fall by $1.4 billion per year, but the percent of poverty used (up to 250%) would likely be changed in the legislative process.

In the alternatives section of the report (page 26), the CBO discusses committing Pell funds to students in middle and high school—noting that such a program could increase academic and financial preparation for postsecondary. This sounds very similar to a paper that Sara Goldrick-Rab and I wrote on a possible early commitment Pell program (a citation would have been nice!), but they don’t provide any estimates of the costs of that program. We estimate in our paper that the program will cost about $1.5 billion per year, with the federal government likely to at least break even in the long run via increased tax payments (something not discussed in any of the policy options in the brief).

I’m glad to see this report on possible options to Pell reform and I hope that they will continue to get requests to score and examine innovative ideas to improve and reform the delivery of financial aid.

The 2013 Net Price Madness Tournament

Millions and millions of Americans will be sitting on the couch over the next several weeks watching the NCAA college basketball tournaments—and I’ll be keeping an eye on my Wisconsin Badgers as the men’s team makes its way through the tournament. Those of us in the higher education community have made a variety of brackets highlighting different aspects of the participating institutions (see Inside Higher Ed’s looks at the men’s and women’s tournaments, using the academic performance rate for student-athletes, and one from The Awl based on tuition, with higher tuition resulting in advancement).

I take a different look at advancing colleges through the tournament—based on having the lowest net price of attendance. Net price is calculated as the total cost of attendance (tuition and fees, room and board, books, and a living allowance) less any grant aid received—among students receiving any grant aid. I use IPEDS data from 2010-11 for this analysis, and also show results if the analysis is limited to students with family income below $30,000 per year (most of whom will have an expected family contribution of zero). Data for the 2013 Net Price Madness Tournament is below:

midwest_2013

west_2013

south_2013east_2013

SOURCE: IPEDS.

Overall Net Price

Round of 16

Midwest: North Carolina A&T ($6,147) vs. New Mexico State ($8,492), Middle Tennessee State ($9,148) vs. Albany ($12,697)

West: Wichita State ($8,079) vs. Ole Miss ($12,516), New Mexico ($10,272) vs. Iowa State ($13,554)

South: North Carolina ($11,028) vs. South Dakota State ($12,815), Northwestern State ($7,939) vs. San Diego State ($8,527)

East: North Carolina State ($9,847) vs. UNLV ($9,943), Davidson ($23,623) vs. Illinois ($15,610)

Final Four

North Carolina A&T ($6,147) vs. Wichita State ($8,079)

Northwestern State ($7,939) vs. North Carolina State ($9,847)

WINNER: North Carolina A&T (59% Pell, 41% grad rate)

Net Price (household income below $30k)

Round of 16

Midwest: North Carolina A&T ($4,774) vs. New Mexico State ($5,966), Michigan State ($5,569) vs. Duke ($8,049)

West: Southern University ($8,752) vs. Wisconsin ($6,363), Harvard ($1,297) vs. Iowa State ($8,636)

South: North Carolina ($4,101) vs. Michigan ($4,778), Florida ($3,778) vs. San Diego State ($3,454)

East: Indiana ($3,919) vs. UNLV ($6,412), Davidson ($7,165) vs. Illinois ($7,432)

Final Four

North Carolina A&T ($4,774) vs. Harvard ($1,297)

San Diego State ($3,454) vs. Indiana ($3,919)

WINNER: Harvard (11% Pell, 97% graduation rate)

Depending on which version of net price is used, the results do change substantially. Some colleges dramatically lower their net price of attendance for the neediest students, while others keep theirs more constant in spite of Pell Grant funds being available. Harvard’s victory on the lowest-income measure does ring somewhat hollow, as its percentage of students receiving Pell Grants (11%) tied with Villanova for the lowest in the tournament.

Thanks for reading this post, and feel free to use these picks if you choose to fill out a bracket for the real tournament. Do keep in mind that low net prices and basketball prowess may not exactly be correlated!

An Incomplete Comparison of College Costs and Expenditures

A recent piece by Derek Thompson of The Atlantic shows a provocative chart that suggests that students from the lowest-income families pay much more out-of-pocket to attend college than that college actually spends on their education:

thompson_graph

(From The Atlantic)

This chart comes from data reported in a recent NBER working paper by Caroline Hoxby and Christopher Avery (Table 1). While the premise of the NBER paper is otherwise strong (noting that lower-income, high-achieving students from rural areas are very unlikely to attend highly selective colleges), I do have some concerns about this table and how the broader media are interpreting it. My biggest concern is the following:

The total out-of-pocket cost of attendance is compared to instructional expenses, an incomplete look at how much a college spends on a particular student.

I don’t have a problem with the measure used of the total out-of-pocket cost of attendance—the net price posted for someone at the 20th percentile of family income. But instructional expenses are but a portion of per-student expenditures. The cost of providing room and board to on-campus students is an important part of the expenditure equation, but one can certainly argue that it isn’t directly tied to education. So I will focus on a broader category of educational expenditures, which include expenditures for academic support and student services as well as instruction.

Instructional expenditures (which Hoxby and Avery report and Thompson uses in his chart) include the costs of teaching courses, but do not include the costs of closely related enterprises that enhance the classroom experience and even make it possible. In the 2009-10 academic year, the average four-year university in the Washington Monthly college rankings spent $8,728 per full-time equivalent student.

Academic support expenditures help to keep the university operating and include essential functions such as advising, course development, and libraries, as well as some administrative costs. The average academic support expenditure per student was $6,832 per FTE—nearly as much as direct instructional expenses.

Student service expenditures include financial aid, admissions, and social development in addition to some spending on athletics and transportation. Average expenditures in this category were $2,981 per FTE in 2009-10, although truly necessary expenses may be somewhat lower.

Combining these three categories, the average educational expenditure per full-time equivalent student was $18,542 in 2009-10, more than twice the cost of instructional expenditures and very similar to the out-of-pocket cost for students from lower-income families. In that light (and after accounting for the cost of room and board), these students are receiving at least a modest subsidy.

Hoxby and Avery should add as a caveat that there are other factors that go into educational expenditures besides the cost of teaching classes. This would help the education press not leap to such hasty conclusions that do not pass a smell test.

My College is a Better Value than Yours

It is not surprising that college officials are proud of their institution. But a recent survey released by the Association of Governing Boards, a body representing trustees of four-year colleges and universities, takes this pride a little too far. Trustees were asked several questions about their own institution as well as about higher education in general, and in each case more trustees rated their own college much more favorably.

A prime example of this (irrational?) pride is shown in a question asking whether trustees view the cost of attending their college (relative to the value) as being too high, too low, or just about right. While 62% of trustees thought their college cost the right amount and only 17% thought it was too expensive relative to its value, 38% of trustees thought that higher education in general cost the right amount and 55% considered higher education to be too expensive. (Don’t look at my college…the problem is elsewhere!)

The perception that one’s own institution is better than average is not just limited to higher education or Lake Wobegon. National surveys have consistently shown that parents give high marks to their child’s public school, while giving much dimmer reviews to other schools in their district or K-12 education in general. Perhaps Americans should consider that the great unknown as probably not as bad as they think—and that their own school may not be a paragon of excellence.