Tuition: the cost that has the ability to severely limit student’s learning capabilities while also providing students with ample learning opportunities. Recently, there has been an ongoing trend of prioritizing higher education, but with the increased emphasis comes more selectivity and differences in attainability regarding one’s financial stability. Because of the contradicting effects of tuition, it is logical for there to be a direct relationship between tuition and college enrollment. In fact, studies show that for every $100 increase in tuition, a 0.7% participation drop of 18 to 24 year old participation in college should be expected (Heller, 1997). Tuition continues to be a deterrent for higher education and thus social mobility as a whole, which directly contributes to the inequity present within education and opportunities to join the workforce. The effect of tuition on college enrollment rates can be predicted by tuition elasticity in relation to financially fulfilling majors, financial aid satisfaction, and higher enrollment status.
A student’s enrollment status is a vital factor in determining one’s tuition elasticity and tuition. As hypothesized, “newly enrolled students respond differently to tuition changes than currently enrolled students” (Shin & Milton, 2007). For example, a first-time student might weigh their options by comparing tuition of colleges in which they aren’t enrolled, whereas a returning student might simply accept the tuition level at their college to stick with their college. This means that arriving students are more vulnerable to competing school rates and tuition variations while returning students are more elastic to tuition increases within their college. Speaking of competing colleges, research indicates that “the tuition levels at competing colleges might affect a college’s enrollment (cross-price effects) as much or more than the absolute tuition level at the college itself” (Shin & Milton, 2007). This evidence shows that first-year students are bound to stay at the college they are enrolled in, even if the college increases its tuition, if the tuition is still lower than that of competing colleges. In conclusion, the more seniority a student has within a college, the more the student is willing to pay tuition, despite variations, and maintain enrollment.
While enrollment status is influential to a student’s flexibility and retention in higher education, a student’s academic major also plays a crucial role. Overall, studies conclude that “disciplines expected to result in high rates of return might be less sensitive to tuition level or tuition increase” (Shin & Milton, 2007). This is because students involved in these successful majors expect sufficient monetary returns for their investment in college and are therefore likely to pay more in college. Researchers report that “Engineering graduates received the highest hourly wage, followed by Business, Science, Liberal Arts, and Education” (Shin & Milton, 2007). A study was conducted on a public college between 2002 and 2004 where the tuition was increase $934 each year, and a census was gathered on the enrollments of each major. The Engineering major had the highest amount of enrollments, taking up around 17.9% of all students enrolled in the year 2004, despite the tuition increases (Shin & Milton, 2007). This evidence portrays that even though the tuition of this college was significantly increased per year, the students in majors with substantial financial returns are less likely to be affected by tuition modifications and are more likely to remain enrolled, displayed by their tremendous enrollment rate.
Contrasting to enrollment status and academic major, financial aid has the opposite effect on tuition elasticity and tuition, as it significantly reduces students’ educational finances. Financial aid decreases tuition which then increases enrollment rates–the inverse of the relationship analyzed so far. Students from lower-income families depend on financial aid to have the ability to attend college, which subsequently increases enrollment. In fact, “20% to 40% of the enrollment of lower-income students was due to the existence of grants, and 13% of middle-income student enrollments were due to grants” (Heller, 1997). This statistic portrays how financial aid assists students to attend college by relieving them of their financial responsibilities, therefore increasing enrollment. However, it is also important to note that schools with a typically higher tuition fee have a different application pool. For example, students who have the financial capacity to pay higher tuition are more likely to Early Decision to a school, rather than a student who isn’t as financially stable. Early Decision applicants typically have a higher acceptance rate, thus, financial aid doesn’t always have substantial effects on a student’s decision to apply to an expensive school earlier in the application process.
All in all, the effect of tuition on college retention rates can be predicted by a student’s tuition flexibility which is determined by increasing enrollment status, financially promising majors, and financial aid fulfillment. As a solution to these inequalities, colleges should determine the appropriate tuition by creating a pricing model based on a student’s tuition elasticity which could be “useful in predicting the retention rate of current students at increasing tuition rates” (Bryan & Whipple, 1995). Additionally, universities should utilize Tuition Elasticity and Net Earnings Projections models to evaluate the effects of various tuition rates on enrollment and predict profits from hypothetical scenarios (Bryan & Whipple, 1995). Financial inequity currently has a substantial effect on a student’s decision to apply and/or commit to a college institution or even consider higher education as a whole. This effect should be further mitigated to offer students more mobility regarding their future socioeconomic statuses, and allow their past to not have as much of a lasting effect. By including a cost policy that encompasses enrollment status, academic major, and financial aid while adjusting tuition accordingly, colleges can create a profitable system that not only bolsters enrollment rates, but also creates an accessible learning environment for all.
References
Bryan, G. A., & Whipple, T. W. (1995, September 1). Tuition elasticity of the demand for higher education among current students: a pricing model. Journal of Higher Education (Vol. 66, Issue 5). Retrieved September 26, 2019, from https://go.gale.com/ps/retrieve.do?
tabID=T002&resultListType=RESULT_LIST&searchResultsType=SingleTab&searchType=BasicSearchForm¤tPosition=3&docId=GALE|A17611207&docType=Article&sort=Relevance&contentSegment=ZEDU-MOD1&prodId=PROF&contentSet=GALE|A17611207&searchId=R1&userGroupName=west63149&inPS=true
Heller, D. E. (1997). Student price response in higher education. Journal of Higher Education, 68(6), 624+. Retrieved from https://link.gale.com/apps/doc/A20424145
/PROF?u=west63149&sid=PROF&xid=0bf4c319
Shin, J. C., & Milton, S. (2008). Student response to tuition increase by academic majors: empirical grounds for a cost-related tuition policy. Higher Education, 55(6), 719+. Retrieved from https://link.gale.com/apps/doc/A384440967/PROF?u=west63149&
sid=PROF&xid=5496baf8