What Sticker Price Doesn’t Mean: Nonprofit Higher Education, Expenditures, and General Subsidies
by Christopher C. Morphew & Barrett J. Taylor - December 10, 2013
Background: Nonprofit colleges and universities have traditionally provided students with an education that costs more to provide than students pay. There is extreme variance and growing stratification in the amount of general subsidy among colleges and universities. Historically, colleges and universities with higher sticker prices have been those that offered the most resource-intensive programs and spent the most on educational costs. There is evidence that this trend has changed and tuition price is not necessarily indicative of educational spending.
Study purpose: The study examines whether sticker price is related to educational spending and general subsidies at some of the highest priced (and best known) private colleges and universities in the US.
Research design: The study utilizes data collected by the Integrated Postsecondary Educational Data Service (IPEDS) and standardized by the Delta Project (2011). Descriptive statistics, including Gini coefficients and scatterplots, are used to illustrate the relationship between educational spending and net tuition at 123 colleges and universities with tuition and required fees greater than $50,000 in 2011.
Conclusions: The study demonstrates that some colleges and universities in this elite group provide nominal or negative general subsidies to their students. This finding demonstrates that tuition price has taken on a signaling role in higher education and challenges traditional assumptions about what tuition price means and how it can be used by higher education researchers.
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