Friday, February 23, 2007
Ask the Administrator: Different Prices for Different Majors
A new correspondent writes:
The Faculty Senate here has gone on record as opposing a proposal to base student tuition and fees on the academic program under which they (students) seek their degree.
The Senate gives 4 reasons for opposing differential tuition (I paraphrase those reasons here).
1) We don’t want to encourage or force students to choose among academic programs for economic rather than for educational reasons.
2) We don’t want to add the new layer of administrative bureaucracy that would probably accompany differential tuition.
3) We don’t want to add another layer of complexity to students’ academic decisions.
4) We don’t want to quantify the difference among academic programs in dollar terms. This would “demean faculty and students.”
I know you’ve written on similar topics in the past. Any reaction to this set of arguments?
I've addressed the topic before in the context of cc's, back when I was a wet-behind-the-ears blogger. The correspondent was writing from a comprehensive university, though, and included several arguments against differential pricing, so a fresh look seems in order.
First, some background. There is ample precedent for lab fees or materials fees, which add to student costs in some areas and not in others. (Intro to Chemistry usually has a fee; Intro to Sociology usually doesn't.) Textbook costs also vary by discipline – typically, the physical sciences get badly hosed, but the folks taking “intro to the novel” get off light. Financial aid is based on demonstrated need, so students with more need can (ideally) get more aid. And it's absolutely true that different majors cost the college different amounts, depending on such variables as class size, facilities, liability, materials, and the going rate for instructors. “Chalk and talk” classes are usually profit centers, which are used to offset the losses taken on, say, Nursing clinicals.
It's also true that employability varies considerably by major, though not often as predictably as students think. (A few years ago, CIS grads could write their own tickets. Now, those tickets had better be to Bangalore.)
To address the Senate's arguments, in order, as presented here:
Students already make program choices based on perceived economics. Only now, the economics are largely prospective – what will get me the best job? To assume that passionate intellectual curiosity is the dominant guiding factor for most students is to live in a dream world.
“Administrative complexity.” Phooey. This is easier than lab fees. Any college that can handle lab fees can handle this.
“Layer of complexity.” Huh? I'll assume this is a restated version of reason 1.
“It's demeaning.” I think this is the real objection for which the others are mostly face-savers.
A while back, when I wrote about the U of Florida's plan (since scuttled) to reduce its number of graduate students in English (a plan I supported), several commenters responded that yes, they should take fewer students, but they shouldn't cut the budget, since budgets are symbolic and that would send a negative message.
The objection was so breathtakingly stupid that I didn't even bother responding to it. Budgets are more than symbolic. They buy stuff. If you need less stuff, your budget should be cut, so areas that need more can buy more. If that wounds your fragile ego, you need a thicker skin.
Colleges and universities currently go to great lengths to hide different costs of different programs through a series of behind-the-scenes cross-subsidies. (If you think that doesn't involve administrative costs, I want what you're smoking.) The problem, of course, is that there's never quite enough money to go around. The 'cash cow' departments know the score, and frequently become hotbeds of discontent and union leadership. The 'fiscal sinkhole' departments also know the score, but argue – with some justification – that the costs of doing business are the costs of doing business.
In most other industries, prices usually bear some relation to the cost of production, at least on the low end. If the producer can't get a price that makes production worthwhile, it stops producing. (If they can go way higher, of course, they do.) Colleges and universities generally don't operate by that logic. We run programs on which we know we'll lose money, out of a sense of mission. Then we scurry behind the scenes to minimize the damage.
I'd like to see what would happen if a college set different prices by major, to reflect (broadly) their actual costs. (Since tuition doesn't cover the full budget of most institutions, it would have to be done on a percentage basis. Let tuition cover, say, 50 percent of the cost of instruction of any given major.) My guess is that students would sort somewhat differently than they do now, but I'm not sure just how. (The social scientist in me sees it as a nifty experiment.) It may be that the areas that are currently objecting on the grounds of feeling devalued would actually experience enrollment booms, since students who just need a degree – and don't much care what it's in – would presumably take the cheaper majors. Econ 101 teaches us that anything underpriced will be overused, so it may be that adjusting prices to reflect costs would actually be a boon for the liberal arts and a bane for the boutique majors.
In fact, the most reasonable objection I could see to this rests on a recognition that some of the majors most likely to lose enrollment would be the ones that the country needs the most. Raising tuition for Nursing would only exacerbate the shortage of nurses, for example. But that strikes me as an argument for a more robust financial aid system (and/or more robust philanthropy), rather than an argument for continuing to milk the liberal arts cash cow. We have a better shot at getting the funding right if we can get the costs right, which involves getting the prices right. I say, give it a shot.
Wise and worldly readers – your thoughts?
Have a question? Ask the Administrator at ccdean (at) myway (dot) com.
As for describing cutting budgets as a symbolic gesture being a "stupid" response because budgets are "real," well, I'm one of those people who sees the way that my discipline - not a particularly expensive one - is often the subject of cuts, and I see that as symbolic more than based on any kind of a bottom line. It's marketing - it's about branding the university in a certain way - and it doesn't have to do with FTE generated or with the fact that other programs are more viable. My discipline doesn't cost students very much, my discipline doesn't require lab space, my discipline doesn't require loads of t-t faculty (because, of course, most of the courses in my discipline can be taught for $2000 a pop by adjuncts) - hell, my discipline doesn't even require a classroom to be upgraded to "smart" status because we don't rely on power point in the way that a social sciences class might. I'm not saying that money should never be cut from my discipline, but I think to say that other disciplines "make more money" for the university - when they cost a heck of a lot more than mine, so the money that they make only goes to cover the costs of what they do - is, in your words "stupid." Yes, a budget is a real thing that goes to pay for things with real money. It's not only symbolic. But when we act like some disciplines that don't generate tons of revenue with grant money, etc., are money-losers, that's just plain not true in all cases. (Sorry if this last part was a hijack)
Dr. Crazy raises several issues. The 'underclass' issue strikes me as overstated, given the vast disparities in cost and prestige between different institutions. The most expensive major at a cc would still be wildly cheaper than the cheapest major at Snooty U. As long as financial aid is geared to the actual costs to the student, I don't see anybody being shut out.
The 'underclass' issue also ignores the very real cost pressures on cc's and public colleges, which right now play out in enrollment caps. For example, we have a waiting list for the Nursing program, simply because we can't afford to lose any more money on it than we already are. If we didn't lose (as much), we could open up more seats. Cost to an institution can restrict access as much as cost to a student can. More so, actually, since students can borrow and we can't.
I don't know Crazy's institution, but it sounds like her administration is making the 'symbolism' mistake. I'm constantly frustrated at how many otherwise-brilliant people can't grasp the simple concept of 'profit centers.' 'Chalk and talk' disciplines are profit centers. To gut those and expand the capital-intensive areas may make sense on other grounds, but it's economically self-defeating. (I would also suggest that it's one of the drivers of the high rate of tuition increase.)
In other words, I agree with Crazy that her area is being unfairly (or at least unwisely) targeted. If a college wants to shift emphases, of course, it can, but it shouldn't harbor any illusions that it will save money in the process.
Perhaps that would resonate better if Dr C's department could argue that, while they have minimal students, they have a significant overhead to maintain. Large classrooms, expensive labs, intensive interactive learning computer labs. But no. Dr C actually goes on to argue that their department really has little if any overhead besides labor costs.
To quote Dr C:
My discipline doesn't cost students very much, my discipline doesn't require lab space, my discipline doesn't require loads of t-t faculty (because, of course, most of the courses in my discipline can be taught for $2000 a pop by adjuncts) - hell, my discipline doesn't even require a classroom to be upgraded to "smart" status because we don't rely on power point in the way that a social sciences class might.
Last time I checked, those departments that don't need large amounts of money to operate should not receive large amounts of money. To remove money from a budget that has no significant need for it is not symbolic--and actually does drive directly to the bottom line!
Ahhh... wait... I get it now. Their "large" budget WAS symbolic since they had no "tangible" use for the funds it was intended simply to show "love." Thus, when taken away for practical reasons it appears to them that love has been taken away.
Luckily, I have at least raised my children to realize that love isn't shown by what you are given, and love isn't taken away that way either.
The economist in me wants to point out that market-based prices are not based solely, if at all, on the average cost of producing something. We (economists) think that sellers look at their marginal costs--the cost of producing an additional unit. So the question is "What's the additional cost of having an additional physics major?" It might be very close to the additional cost of having an additional English major. (One problem is that while we may think we know what those costs are, most university accounting systems do a crappy job of actually, you know, measuring those costs.)
The other factor that the economist in we wants to raise is the question of demand. In general, we (again, that's the economists) think that if the demand for a product is greater, the price will be higher. So, if the market rewards for majoring in nursing (for example) increase, we'd expect more nursing majors (if nothing else changed); if education were provided solely by for-profit producers, we'd expect to see this reflected in higher tuition for nursing courses.
We generally see no problem with these pricing considerations for, say cars. But we do in higher education precisely because the costs of producing education are not all reflected in prices, and because the benefits from higher education are not all reflected in the incomes earned by graduates. So we tweak around the edges.
I'm a strong fan of lab fees, and would conceive of them broadly. (At my institution, we have a lab fee which we call a "student technology fee," which supports our computer labs--whether you sue them or not--and other technologies that directly benefit students.) Use of lab fees does allow us to focus directly on costs, and they are generally considered "fair."
The one thing the economist in me does like to argue (playfully) for is higher tuition rates for second-semester seniors--what are they going to do, transfer? (It's a joke, but with some bite to it.)
My department in the social sciences is on a downswing right now in terms of majors, and one of the only slightly tongue-in-cheek proposals to fix that has been to revamp our curriculum to have fewer credits required. Apparently in the past this has attracted more majors, albeit ones who really don't care about the subject matter and just want a major with the fewest course requirements possible. Disengaged students make for bad teaching evaluations and a poor rep for the department, and I don't see how differential tuition would be any different.
As for the question of how much of a difference it would really make to students in financial terms...many students on my (commuter) campus try hard to take Tues-Thurs classes so they can come to campus only two days a week and thus save a couple of hundred dollars on gas over the quarter. They don't buy the $50 textbook because it's too much. They take over 20 credits a quarter so they can graduate quickly and not have to pay another quarter's worth of fees that rise by 10% or more a year (or because financial aid is only good for so many quarters). Most of them are first-generation college students, most of them went to a CC before coming to my four-year institution, and most have families to support. Every dollar counts. You bet they'd choose their major by cost.
As long as the number of majors is a factor in handing out resources to departments, differential tuition rates will lead to all sorts of perverse incentives. Yes, institutions of higher ed are facing a lot of shortfalls when it comes to budgets right now, but this whole rhetoric of "everything has to pay for itself," that cross-subsidies are bad and that the invisible hand will make everything work out for the best, just creeps me out.
It didn't occur to me that a department would voluntarily go all-adjunct. I'm so accustomed to hearing them argue for more full-timers that I just couldn't imagine them arguing for fewer. It's possible, I guess; I'll just cop to not having thought of it.
Timna's point suggests that my estimation of the effectiveness of financial aid may be overly generous. She may be right. Still, to the extent that's true, that will be true anyway. If we need to revamp financial aid, let's do that. I consider it a separate, if related, issue.
I don't see differential pricing by major. We have nothing to base the price on. We don't budget by majors. There's invidious comparisons between different majors in the same course: Physics, Engineering, Business majors in Calculus, for example. Plus, it's too easy to game. And what do we charge undeclared majors?
There's some British experience with charging foreign students differentially by faculty -- a science degree costs more than an arts degree. It has the merit of allocating overhead differentially: the Dean of each School owns his own buildings.
The likely way (the easy way) differential pricing would be done is by department, rather than major. Allocate overhead evenly per student per course, add to that the department budget divided by (last year's, maybe last semester's) seats. Keep allocating budgets the way you do now. As students move to underpriced courses, adjust department budgets to follow the students.
I don't think anyone's going to come to you and ask for a smaller budget so as to reduce their course cost.
Their students and mine pay the same tuition. Their program student/teacher ratio is about 20/1 -- while I have at least 200 students per semester.... by rights my students are getting 1/200th of a prof when they pay their tuition while the other programs get 1/20th. Doesn't sound fair, huh?
Labs are an odd situation because a big chunk is capital. Our physics lab equipment is very expensive, but upkeep is tiny compared to replacement costs. As long as we don't need a second lab room (and twice as much stuff), adding sections is "only" a manpower problem (but with a real cost due to low student:faculty ratios). It could even be that the capital cost is part of a construction budget rather than operations.
Financial aid is a sticky wicket. For many students, that means a loan. Worse, the biggest cost for our students is just plain living. Room and board for an extra semester is much more than the cost of an extra class, but they spend so much time working to pay for cell phones and apartments (and beer) that they don't have the time to study for that extra class.
Here's an example of what I mean: suppose two departments each have faculty in proportion to their teaching load. After the switch to different prices for different majors, though, suppose that one of the two departments becomes much more expensive relative to the other. Students, as a result, abandon the expensive department for the cheap one. Now the university is faced with a serious short term problem: it needs to hire new faculty for the cheap department in order to cover the increased teaching load, but it still has several (tenured) professors from the expensive department on payroll.
The short term (or long, depending on the age of the professors in question) costs associated with inflexible staffing levels could be a serious obstacle to making this kind of switch.
Well, it is a bit more complicated that that - student tutition is partially subsidised by the government, with the student contribuitions either paid by front or through government loan (HECS and FEE-HELP). Degrees are divided into three tiers: medicine etc in the most expensive tiers, sciences and law etc in the middle, and arts in the least expensive.
What is interesting is that in recent political rhetoric, proposals have been made to shift degrees down a tier where there is a percieved lack of (and strong market need for) graduates. Doubt it will happen now that the system is netrenched, though.
pg mentions something that can be a problem under any circumstances. In the late 70s, when DD was in charge of the sandbox, social science enrollment crashed and business exploded at my Grad U. One college had twice as many faculty as it needed and the other needed to double its faculty while overall enrollments at the Uni were on a gradual decline. The Provost had an impossible task on his table.
That said, for some programs, this would make sense to me, in the same way that lab fees make sense to me. That is, if some programs are fairly self-contained (such as nursing) and cost much more than other programs, then by all means charge more -- after all, which would your students prefer, a higher tuition or not enough slots available to be guaranteed access to the program? A year of one's life spent waiting is far more expensive than a thousand extra dollars of tuition, especially when one has a job waiting for one on the other end of it.
But the overall situation is complicated enough that I don't think a general program of charging differential tuition is a good idea; I'd keep it at lab fees for some areas and save extra tuition only for those areas which are simultaneously separated from the overall, dealing with extremely high demand, and cash-constrained from the college's end.
Surely this impacts real costs and benefits of different disciplines to both students and administrators....