Is Higher Tuition What the Public Wants? And Who Cares?

In a blog over at the Washington Post today, Daniel de Vise raises an interesting question: Does the public want lower (or higher) tuition? He engages with this issue mainly in the context of private institutions, discussing anecdotal evidence from a recent meeting with college presidents.

In a nutshell, here are the highlights of his findings:

1. There is some evidence that the public wants a deep discount on a more expensive product. In other words, families are happier when they get a lot of merit-based financial aid at a high-priced college. Some colleges have found that when they cut tuition, applications drop too, and families complain they aren't getting much aid.

2. There is also some evidence that the public embraces -- even demands-- lower tuition, even thought it means getting less aid. At Sewanee, The University of South, which de Vise highlights, cut its (very high) tuition by 10% and focused efforts on need-based aid, resulting in an increase in applications. de Vise also notes that Sewanee took a key step, first done by George Washington University, freezing tuition for returning students. This prevents surprising hikes in cost from year to year, something that my own research (forthcoming) suggests can alarm students and even induce some to drop out of college.

So what's going on here? How can college presidents say that they must raise tuition because that's what the public wants, while others work to lower tuition, because it's what the public wants?

The answer is quite simple, actually. The "public" doesn't exist. It's an averaged American, comprised of heterogeneous individuals.

Some people equate the price of college with quality. Those are likely the same people who will buy a Lexus, thinking they're getting a better car, even though Lexus and Toyota use the same components. They're thrilled with a discounted Lexus, and have the cultural capital to know that if they go to a dealer and haggle, they might get one.

Other people have negative connotations associated with high prices. They see expensive things as "elitist", "snobby" and most importantly out-of-reach. They don't want to haggle for an affordable price, since they know that when people like them (who don't wear Banana Republic, look white, or speak formal English) walk into a dealership or admissions office, they aren't likely to get a deal. They want the price low, period. Discounting doesn't work for them.

Both types-- and there are nuanced versions of each-- are now part of higher education. But the pricing model, advocated by so many college presidents and backed by evidence produced by economists, is built for the first group-- the We Like Deep Discounts on Expensive Things group. Why? Because it suits the needs of institutions, who want to have more cash on hand, it seems "realistic" given budget cuts from governments and declining endowments, and it's said to be more efficient.

Ok. Let's say that's true (and I worry about the evidence, since much of it is based on studies of students from the 70's and 80s, before tuition went through the roof and disadvantaged students became a large part of enrollments). It doesn't necessarily make it effective policy. The relative effectiveness of the two strategies depends on who's in higher education (who dominates enrollment), what goals are sought, and whose outcomes are more affected by the pricing strategy. If first-generation students are in the I Want It Cheap camp, and they begin to comprise a sizable fraction of enrollment, if the primary outcomes measured are college graduation rates of at-risk students, and if first-generation students are most price-sensitive, then I'm sorry but hiking prices and discounting simply isn't effective.

Thus, the question we ought to be asking is not the one de Vise posed -- Is higher tuition what the public wants?-- but rather, Is higher tuition going to achieve the goals America has set for higher education? If we want to make progress, that's the one we have to get focused on answering.