Lack of understanding persists on complex higher education pricing

The cost of college education in the US is a complex issue, yet students fail to understand that price is only one factor in the equation. Their sole focus on price and opinion about what they view as the rising cost of education causes them to ignore top ranked institutions in favour of 'safer' in-state public establishments. However, whilst there have been steep rises in the published costs of college education, the actual 'net cost' has remained at a flat level. These conclusions feature in a report conducted by Eduventures, who surveyed 15,000 prospective students looking to apply to four-year, not-for-profit private institutions or in-state public institutions.

Research

Perceived Rise in College Tuition Hits 'Access' Students Disproportionately

Choosing a college has become much like buying a car. The sticker price is only the beginning of negotiations. Yet with college, many students don't realize that, and their anxiety about the "high sticker price" of tuition and fees often prevents them from even considering highly selective institutions over "safer" choices, such as in-state public institutions. The irony is that while the published price of college has seen "steep increases" over the past couple of decades, the "net cost" has remained fairly flat.

Those are some of the findings offered in a new report from Eduventures, which based its results on a survey of 15,000 traditional-aged students likely to attend four-year not-for-profit private or public institutions. Eduventures is a consultancy that advises higher education executives.

The goal of the report, "High Sticker Price: Is the Chilling Effect Real or Imagined," was to explore questions related to whether prospective college students can look beyond the sticker price "to understand the complexity of college pricing" and whether students "shy away" from considering colleges that may appear expensive without discounts that they may or may not receive.

Average tuition and fees for four-year institutions (in 2015 dollars)

Source of data: The College Board, "Trends in College Pricing." Source of chart design: Eduventures.

Principal Analyst Kim Reid, the report's author, defined three levels of academic fit:

Safety is a school that the student is "very sure" he or she will get into based on academic track record;:

Match is a school that the student considers to fit into his or her "sweet spot" for academic ability; and

Stretch is a school that the student would consider difficult to get into based on academic record.

"Generally, students are more willing to apply to a school that feels like an academic match than either a stretch or a safety school," Reid wrote.

She also defined three segments of price sensitivity among students:

Price-only students are those who are "almost entirely influenced by price";

Price and comfort students, while concerned about price, are more "positively influenced" in deciding to apply based on whether the school is a match or a safety school; and

Price and quality students are also concerned about price, but the likelihood that they'll apply is positively influenced if the school is a stretch or a match.

Reid found that more than half of the respondents who intend to enroll at an in-state public institution fall into the price-only category, compared to 38 percent of students intending to enroll at a private institution.

Overall, Reid reported, "students are more willing to apply to a school that feels like an academic match than either a stretch or a safety school." As a result, she noted, "Undistinguished private safety schools are viewed almost entirely as a commodity," turning increasingly to "unsustainable discount rates, putting more money on the table to get fewer enrollments." Her advice to those institutions is to "focus on quality and fit."

The report pointed out that "changes in sticker price" influence the demographic profile of inquirers. As an example, first-generation students, particularly, are "far and away the most price-sensitive group of students." A solid 55 percent fall into the price-only category. Large tuition and fee increases drive more of those students to "fall out of the top of the funnel" than other students.

The findings are similar for low-income and underrepresented minority students. As Reid stated, "These students are more prevalent in the price-only sensitivity group and are more leery of applying to high-priced institutions."

The challenge institutions face, she added, is that as these students represent an ever-growing proportion of the traditional undergraduate population, "we will have to come to terms with the perils of the high-price-high-discount model." The current pricing model, she added, "stops many of these prospective students from even considering high-priced institutions as an option, unintentionally depriving them of a choice other students take for granted."

In a future report, Eduventures will examine more "transparent pricing structures" that reduce the amount of anxiety "access" populations feel as they go through college selection.

The current report is available to Eduventures' subscribers.