Differential Pricing of College Education:
Charging more for certain majors
29 Jul 2007 in Regulatory Economics
It is an anomaly of the higher education market that there are widespread differences in price both across and within colleges and universities, but historically a student's choice of major has not been a pricing criterion. Universities are beginning to experiment with differential pricing, though apparently with considerable apprehension.
The incremental differences cited by Glater appear to be small in relation to the total cost of college. The $500 per semester charge for business majors at the University of Wisconsin (Madison) is 15% of in-state tuition ($3,365) and just 5% of non-resident tuition ($10,365 except Minnesota). The $40 per credit hour charged to engineering students at the University of Nebraska is about 25% of the normal fee per credit hour ($169.50), 19% once mandatory fees are included. But course fees above tuition are a small fraction of the out-of-pocket cost of attending a public university once room and board and other costs are included.
Glater also cites the University of Kansas but doesn't give figures, so we looked. Tuition at KU is $3,494.55 per semester for in-state residents ($8,564.95 out-of-state). For the most expensive undergraduate major -- business -- 16 units of course fees drive up the cost of college by $1, 376 per semester, or 36% for Kansas residents (15% for out-of-state residents). And KU's new provost is unhappy about it:
At the University of Kansas, which started charging different prices in the early 1990s, there are signs that the higher cost of majoring in certain subjects is affecting the choices of poorer students.Of course, anecdotes do not qualify as data and ascertaining distributional effects is impossible without accurate data on students' economic status, data that only college financial aid officers (and not provosts) would (or should) have. His biographical sketch and curriculum vitae show he holds a B.A. in the history of religions from the University of Iowa and a Ph.D. in Sanskrit from the University of Pennsylvania, and is works privately as an expert in Indian law.
“We are seeing at this point purely anecdotal evidence,” said Richard W. Lariviere, provost and executive vice chancellor at the university. “The price sensitivity of poor students is causing them to forgo majoring, for example, in business or engineering, and rather sticking with something like history.
Moreover, it's not obvious that students inclined to major in (say) engineering are so price-sensitive that they would respond to differential pricing by switching to (say) history, as Lariviere suggests. Nor is it obvious that engineering students would find history that interesting. Yet on financial grounds alone Lariviere's concerns seem unfounded. The National Association of Colleges and Employers sponsors an annual survey of starting salaries for newly minted college graduates, disaggregated by major, geography, and college. Figures for 2007 show that average starting salaries for students with history degrees are about half as great as starting salaries for those with engineering degrees. A low-income student with engineering aptitude could borrow against his future income to pay the higher cost of an engineering degree and break even less than a year after graduation.
Whatever the incentive effects, they are surely greater for students paying in-state tuition. For them, differential course fees represent a higher fraction of total cost. So the first place to look for effects is to see whether the proportion of in-state students in pricey majors has declined. Even the provost has access to that kind of data, so estimates of effects don't have to be founded on anecdotes.
| AVERAGE STARTING SALARIES FOR NEW COLLEGE GRADUATES Selected Majors |
|||
| Major | Offer | Index | % Change Since 2006 |
| Chemical Engineering | $59,361 | 100 | +5.4% |
| Computer Engineering | $56,201 | 95 | +4.8% |
| Electrical Engineering |
$55,292 | 93 | +3.2% |
| Mechanical Engineering | $54,128 | 91 | +4.6% |
| Computer Science | $53,396 | 90 | +4.1% |
| Civil Engineering | $48,509 | 82 | +5.4% |
| Economics | $48,483 | 82 | n/a |
| Management of Information Systems | $47,648 | 80 | +4.2% |
| Finance | $47,239 | 80 | n/a |
| Accounting | $46,718 | 79 | +2.3% |
| Business Admin/Mgmt | $43,701 | 74 | +3.9% |
| Marketing | $40,161 | 68 | +6.1% |
| Political Science/Government | $34,590 | 58 | +5.9% |
| History | $33,768 | 57 | +3.3% |
| English | $32,553 | 55 | +5.3% |
| Sociology | $32,033 | 54 | +3.5% |
| Psychology | $31,631 | 53 | +4.7% |
| Source: CNNMoney, from National Association of Colleges and Employers, Summer 2007 Survey. NACE charges $225 for an annual subscription to obtain the complete report. |
|||
|
Course Fees (per credit hour)
|
||||
|---|---|---|---|---|
| 2007-08 | 2008-09 | 2009-10 | 2010-11 | |
| Architecture | $17.90 | $19.00 | $20.15 | $21.35 |
| Business | $86.00 | $91.15 | $96.60 | $102.40 |
| Business Masters | $70.80 | $75.05 | $79.55 | $84.30 |
| Education | $17.15 | $18.20 | $19.30 | $20.45 |
| Edwards Campus | $34.45 | $36.50 | $38.70 | $41.00 |
| Engineering | $34.45 | $36.50 | $38.70 | $41.00 |
| Engineering Edwards Campus | $38.60 | $40.90 | $43.35 | $45.95 |
| Fine Arts | $17.15 | $18.20 | $19.30 | $20.45 |
| Journalism | $13.80 | $14.65 | $15.55 | $16.50 |
| Law (includes additional $25 in FY2008 & FY2009 | $154.00 | $188.00 | $199.30 | $211.25 |
| Pharmacy | $132.30 | $140.25 | $148.65 | $157.55 |
|
Course Fees are charged by specific schools in addition to the flat tuition or standard tuition rates. As the chart indicates, the amount of the Course Fee depends on the school/courses in which the student enrolls. With student support, Course Fees can be increased beyond the rates listed. The College of Liberal Arts and Sciences and the School of Social Welfare currently do not assess Course Fees. |
||||
