Revenue generation tuition financial aid fees
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Revenue Generation: Tuition, Financial Aid, & Fees. Source: Baum, S., & Payea , K. (2010). Trends in college pricing, 2010 . New York, NY: The College Board. Source: Baum, S., & Payea , K. (2010). Trends in college pricing, 2010 . New York, NY: The College Board. Change in Sources of Grants.

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Revenue Generation: Tuition, Financial Aid, & Fees

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Revenue generation tuition financial aid fees

Revenue Generation:Tuition, Financial Aid, & Fees


Revenue generation tuition financial aid fees

Source: Baum, S., & Payea, K. (2010). Trends in college pricing, 2010. New York, NY: The College Board.


Revenue generation tuition financial aid fees

Source: Baum, S., & Payea, K. (2010). Trends in college pricing, 2010. New York, NY: The College Board.


Change in sources of grants

Change in Sources of Grants

Source: Baum, S., & Payea, K. (2010). Trends in Student Aid, 2010. New York, NY: The College Board.


Revenue generation tuition financial aid fees

Source: Baum, S., & Payea, K. (2010). Trends in Student Aid, 2010. New York, NY: The College Board.


Revenue generation tuition financial aid fees

Source: Baum, S., & Payea, K. (2010). Trends in college pricing, 2010. New York, NY: The College Board.


Revenue generation tuition financial aid fees

Source: Baum, S., & Payea, K. (2010). Trends in college pricing, 2010. New York, NY: The College Board.


Revenue generation tuition financial aid fees

Source: Baum, S., & Payea, K. (2010). Trends in college pricing, 2010. New York, NY: The College Board.


Elasticity

Elasticity

The percentage change in Quantity with respect to a 1% change in Price

  • Inelastic if less than 1

    • Raise revenue with increases in price

  • Elastic if greater than 1

    • Raise revenue by lowering price

      Literature generally finds inelastic demand

  • Needy students more elastic

  • Out-of-state students more elastic


Revenue changes due to changes in price

Revenue Changes Due to Changes in Price

P

A

PA

Lost Revenue

B

PB

Gained Revenue

Q

QB

QA


Determinants of elasticity

Determinants of Elasticity

  • Availability of substitute goods

    • Close substitute -> more elastic

  • Percentage of income

    • Higher the ratio of price/income -> more elastic

  • Necessity

    • Higher importance -> lower elasticity

  • How broadly a good is defined

    • Broader definitions -> more inelastic

  • Brand loyalty

    • More loyalty -> more inelastic

  • Who pays

    • If good is paid by someone else -> more elastic

Link to examples


Price discrimination

Price Discrimination

Willingness to pay example

  • Price Discrimination is the practice of charging different prices to different consumers for the same good or charging different consumers different prices based on the quantity purchased (DesJardins & Bell, 2006, p. 69)

    • Perfect – everyone charged their willingness to pay

    • 2nd degree – Price depends on units purchased

    • 3rd degree – Price depends on characteristics of consumer


Why price discriminate

Why Price Discriminate

  • To maximize net tuition revenue

    • Charge based on willingness to pay

  • Competition for desirable students

    • Target aid to form a well rounded class

  • Average discount rate (WBA, p. 81):

    • Community colleges – 2%

    • Public 4-year – 12%

    • Private 4-year – 28% (error in table)

    • For-profit – 1%


Models of price discrimination

Models of Price Discrimination

  • Needs-blind admission, Needs-based financial aid

    • Practiced by the most elite institutions

    • Only merit is used to assess admissibility

    • Only need is used to assess financial aid awards

    • Institutions meets need of all students with financial aid offers

    • Some institutions can offer different packages of grants, loans, and work-study (on merit)


Models of price discrimination1

Models of Price Discrimination

  • Merit-based financial aid

    • Utilized by less selective private institutions (non-IVY)

    • Financial aid offers are awarded based upon merit and need

    • Increased competitiveness for top students, but offers financial aid to non-needy students

    • Increasing use in flagship public institutions


Discussion

Discussion

  • Do you think that our mission as a land grant institution corresponds with either a LL or HH institutional tuition and aid model?

  • Do you think our mission as the state flagship institution corresponds with either a LL or HH institutional tuition and aid model?


Curs singell 2010

Curs & Singell, 2010

  • Explain to the class the following details:

    • How did prices change across groups

    • What happened to enrollments across groups

    • What happened to overall revenue for the university

  • HH model for instate

  • HH model for out-of-state

  • LL model for instate

  • LL model for out-of-state


Curs singell 20101

Curs & Singell, 2010

  • Do you think the findings in this paper would be transferable to alternative institutional types?

    • What can be learned?

    • What would most likely be different?

  • Elite private university (i.e. Cornell)

  • Public liberal arts university (i.e. Truman State)

  • Elite public university (i.e. Michigan)

  • Community College (i.e. Moberly Area CC)


Case studies

Case Studies

  • Represent your case study through a visual display.

  • Be sure to represent the following items:

    • The tuition/aid policy change

    • What is expected to happen, or what happened from the perspective of:

      • The institution

      • The student body


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