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Testing sensitivity of student enrollment with respect to tuition at an institution of higher education.

Abstract

This study was conducted to measure the impact of H-University's (HU's) tuition increases on enrollment. Based on an internal survey, this study attempts to explain the sensitivity of student enrollment to tuition variations. In addition, this paper develops an aggregate enrollment model and uses the common economic variables such as tuition, income, wage rates, financial aids, and unemployment rates to explain the sensitivity of demand. The most significant finding of this study is that tuition consideration seems to have a relatively small effect on students' decisions. Actually, enrollment at HU (a private institution) have increased despite higher tuition rate. Possible justifications could be proposed, such as the necessity of higher education and the fact that higher education is a continued investment in human capital, in which the more relevant decision factor is the corresponding expected rate of return and not just the cost of investment. (JEL D11, C13)

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Introduction

The study of tuition changes and the corresponding enrollment at different institutions of higher education is always beneficial to their financial planning. This would attract even more attention when, in absence of sufficient state and federal funds at times of economic recession and budget crunch, institutions of higher education may consider resorting to higher tuition. Although the findings should concern both public and private schools, private higher education institutions whose main source of funds is tuition may consider this study even more interesting.

This report was conducted to quantify the impact of the tuition increases (at HU, a private institution) on enrollment by randomly surveying applicants who have enrolled or not enrolled in the university. The subjects were students attending the extended campus (EC), a unit of H-University (HU). Results of the study indicate the following: Of those surveyed, 77.5 percent of the undergraduate and 67.1 percent of graduate students said that the major reason that students enrolled at HU was the specialty of aviation. Meanwhile, 70 percent of the non-attending undergraduate and 61.4 percent of graduate applicants indicated that the reason for not enrolling was not the lack of academic majors of their interest. In addition, the time series data for enrollment and its determinants have been examined for all four semesters, including Summer Sessions A and B, within the period of 1990-2000. The analysis and findings of the enrollment variable, which is specified as a function of tuition, income, wage rate, financial aid, and the unemployment rate, will be presented in this paper.

Review of the Literature

Given the phenomenal increases in tuition at both public and private universities during the 1980s and 1990s, a major concern has been whether access to public higher education has been affected [Heller, 1996]. The decision to enroll in a higher education institution may be seen as an investment versus a current consumption decision [Campbell and Siegel, 1967]. Most multivariate analyses examining the relationship between tuition and enrollment fall under two categories: cross-sectional and time-series studies. Cross-sectional studies examine individual student behavior in the face of various post secondary options while time-series studies analyze changes over time in aggregate student enrollment [Heller, 1996].

Campbell and Siegel [1967] attempted to use aggregate enrollment data to explain the movements of demand during the period 1919-64. They found that for a given population, demand for enrollment should be directly proportional to the expected monetary and real yields from education, income, and the consumer price index and inversely proportional to the nominal and real costs of education. The model used was a hybrid investment consumption model in which the results may not be used to separate out the contribution of each of these elements to the demand for higher education. The calculations made in this study exclude both graduate students and those enrolled in two-year institutions. Using enrollment ratio as a measure of the quantity demanded, the income and price elasticities were calculated to be +1.2 and -0.44, respectively. Although they were found to be statistically significant, the small sample size raises questions about the reliability of the elasticity coefficients'est imates.

Through an analysis of data for individual states from 1976-93, Heller [1996] addressed the relationship between tuition, financial aid, and access to public higher education in the U.S., in which financial aid acts as a price discount by lowering the net cost to enrollees. Therefore, its impact on the relationship between tuition and access to higher education is critical. First-time enrollees are found to be more price sensitive because of their lack of investment in a post-secondary education. This study also confirmed two relationships. First, at least among some groups, there was a positive association between levels of grant spending and enrollment rates. Second, the study confirmed a positive relationship between unemployment and enrollment.

Based on the time series data from 1964-91, Hsing and Chang [1996] have examined some of the determinants of enrollment at private colleges and universities. Enrollment is defined as a function of tuition and other costs, income, wage rate, and the unemployment rate. It was observed that higher unemployment rates bring more enrollments while higher wage rates cause enrollment to decline. The elasticities of enrollment with respect to tuition, income, wage rate, and the unemployment rate was estimated to be -0.254, 0.675, 0.577, and 0.041. Rising tuition elasticities were attributed to the rising tuition, along with other related costs such as a fraction of total income and the increasing number (and relatively lower cost) of available substitute services.

Jackson and Weathersby [1975] reviewed seven major empirical studies of student demand and compared their quantitative results. The following results are briefly discussed below. Hight [1970] postulated a four-equation supply and demand model to treat public and private schools separately but was unable to reach statistically significant results for all equations. The income elasticities for the public and private sectors were 0.977 and 1.701, respectively. Galper and Dunn [1969] re-analyzed their data to relate the inductions and discharges from the armed forces with four-year college enrollment and estimated the income elasticity of 0.69. Basing the demand estimates on a lifetime utility-maximization model for an individual, Hoenack [1967] offered separate demand functions for each campus of the University of California (UC). His proposed aggregate demand was a replication of the individual demand estimates. The study was based on Jackson's cross-sectional sample [1975]. Hoenack [1967] reported an average UC price elasticity of -0.85 and an income elasticity of 0.7. Hoenack, Weiler, and Orvis [1973] conducted a similar study for the University of Minnesota based on the longitudinal data from 1948-72. Tuition elasticity coefficients estimated for the four divisions varied from 0.533 to -1.811. They found that depending on the college, a $100 increase in tuition would reduce the enrollment by 2.62 to 0.12 percentage points.

In their study of student demand based on national and Massachusetts data, Corrazzini, Dugan, and Grabowski [1972] formulated an enrollment model for higher education with demand being subject to non-price rationing by academic admission standards. They found college attendance and socioeconomic status to have a strong structural relationship. The total enrollment rate was most responsive to tuition charges at four-year public institutions. A $100 cut in tuition appeared to lead to a 2.65 percent increase in the nation's enrollment.

Spies [1973] developed a different linear demand model for highly competitive colleges to describe the decisions to apply for admission to any school, for financial aid, and the decision to enroll once admitted. The most significant result was that financial considerations seemed to have a very limited effect on the student decisions. The primary determinants of college choice were academic ability and quality of the school.

Jackson and Weathersby [1975] reviewed several choice theory studies. The contention was that students' decision rules are not fixed but vary with their available options. Radner and Miller [1970] designed a statistical model to relate the relative frequencies of choices to the characteristics of the individual student and his or her alternatives. They used SCOPE (School to College: Opportunities for Post Secondary Education) as a data source for their survey and a maximum likelihood estimation technique. They concluded that family income, costs of alternative postsecondary options, academic ability of the student, and the alternative institutions' qualities for which the candidate was eligible, were the major factors affecting post-secondary choice of high school graduates.

In order to facilitate comparison of the demand studies described above, Jackson and Weathersby [1975] considered a typical individual with a $12,000 income and a college cost of $2,000 per year. They calculated the change in enrollment as predicted by the studies discussed above in response to a $100 increase in the college costs. In addition, 26.2 percent of the eligible population were hypothesized to be enrolled in some form of post secondary education. The cost to the student was a statistically significant variable. However, the magnitude of the price effect on the enrollment variation was relatively small, ranging from -0.6 to -1.9 percentage points for every $100 raise in the cost. Also, all the reviewed studies indicated that the absolute magnitude of price responsiveness decreases with increasing income.

Heller [1997] examined approximately 20 of the student demand studies as an update to a previous review of the literature on the relationship between price and enrollment conducted by Leslie and Brinkman [1987]. Leslie and Brinkman had examined 25 different studies published between 1967-82 on the relationship between price and college enrollment and calculated a student price response coefficient (SPRC) in an effort to standardize and compare the results of the studies. SPRC is defined as the change in the college participation rate of 18-24 year old for every $100 increase in tuition (in 1982-83 dollars). They found that the mean price response is about 0.7 percentage points and noted that U.S. enrollments would decline by about 2.1 percent for each $100 price increase, as the national higher education participation rate was about 0.33 in 1982. Heller's examination of student demand studies mainly addresses the relationship between price and college enrollment, the relationship between financial aid and college enrollment, and the effect of tuition and financial aid on students with different incomes, races, and college sectors.

In summary, Heller [1997] found that higher college prices would reduce the probability of enrollment. The following key observations were made in this review. In response to every $100 increase in tuition, a drop of 0.50 to 1 percent in enrollments might be seen across all types of institutions. Enrollments are more sensitive to grant awards than to work study or loans. In comparison to middle and high-income families, low-income students were more sensitive to tuition and financial aid. Similarly, black students were more sensitive to tuition and aid than were white students. Finally, community college students show more sensitivity to tuition and aid in comparison to students of four-year public colleges and universities.

The Framework Analysis

Price determination is a complicated process. University administrations should seek and establish tuition levels that would facilitate the achievement of institutions' long-term strategic objectives, attract new students, and provide adequate revenues to cover their expenditures. The calculations in this research include both graduate and undergraduate students at both campuses of a selected private institution (referred to as H-University). Based on the demand theory and the previous studies reviewed here, enrollment at private colleges and universities can be expressed as:

[E.sub.j,i,t] = f([T.sub.j,i,t], [U.sub.t], [Y.sub.t], F[A.sub.j,i,t]), (1)

which can be expressed into a nonlinear Cobb-Douglas functional form as:

[E.sub.j,i.t] = [A.sub.j.i.sup.0] [T.sub.j,i,t.sup.[a.sup.1]j,i] [U.sub.t.sup.[a.sup.2]j,i] [Y.sub.t.sup.[a.sup.3]j,t] F [A.sub.j,i,t.sup.[a.sup.4]j,i], (2)

where:

[E.sub.j,i,t] = the student enrollment at campus j, program level i, period t; j =1,2

j =1 D-Campus (main campus)

j =2 Extended Campus (EC)

i =1,2

i =1 undergraduate program

i =2 graduate program

[T.sub.j,i,t] = tuition per credit hour at campus j, program level i, and period t

[Y.sub.t] = per capita disposable personal income

[U.sub.t] = the civilian unemployment rate at period t

t = time period measured in Fall, Spring, Summer A, and Summer B semesters from 1990-2000 (more specifically 1990:01-2000:03 is Fall Semester 1990-Summer Semester A 2000)

F [A.sub.j,i,t] = amount of annual financial aid at campus j, program level i, period t

Taking the widely used log-linear functional form of equation (2), in which the coefficients represent the elasticity estimates, the following equation will appear:

Ln[E.sub.j,i,t] = [a.sub.j,i.sup.0] + [a.sub.j,i.sup.1] Ln[T.sub.j,i,t] + [a.sub.j,i.sup.2]Ln[U.sub.t] + [a.sub.j,i.sup.3]Ln[Y.sub.t] + [a.sub.j,i.sup.4]LnF[A.sub.j,i,t] + [[member of].sub.j,i]. (3)

In order to find the best results, this paper estimates the model using ordinary least squares (OLS). The estimated equations revealed very low Durbin-Watson statistics. A solution to the problem was attempted by estimating the auto-correlation coefficient, [rho] = 1 - [DW/2], and transforming the original observations to remove the auto-regressive scheme from the variables. Table 1 presents the estimated coefficients for the four groups of students. Equations 1-8 are estimated using time series data for the period of 1990:01--2000:03 (that is, Fall Semester 1990--Summer Semester A 2000).

Separate equations were estimated for the D-Campus (main campus) and the Extended Campus (EC) for the graduate and undergraduate programs. Estimates of equations 1-8 are presented in Table 1 and 2. The most surprising finding of this study is that tuition consideration seems to have relatively no effect on students' decisions. As Table 2, equation 6 shows, a 1 percent increase in tuition leads to a 0.22 percent drop in graduate-level enrollment at the main campus. The income elasticity coefficients (of demand) are positive and significant only in equations 1, 2, 7, and 8 as listed in Table 1 and 2.

Despite the tuition increase adopted in the past 10 years, there has actually been an upward trend in enrollment at both campuses. Without testing all the reasons, among possible justifications, this could be attributed to several factors such as improvement in HU reputation, significant growth in aviation and aerospace industry, relatively lower tuition rates at HU as compared to other institutions of higher education, and improvements in infrastructures and residential campuses. Hence, that upward trend can be theoretically explained through rightward shifts in the short-run demand functions.

Survey Procedure and Analysis:

In this section, student cohorts are divided into four mutually exclusive and exhaustive groups. The division is based on the stage of education (undergraduate and graduate students) and status (enrolled and non-enrolled). The survey was conducted in Fall 2001 at HU to determine which factors were important in the college-selection decision of Extended Campus enrollees and non-enrollees (applicants or inquirers who had not enrolled at the time of the survey). This survey was designed in two different forms--one tailored for enrollees and one for nonenrollees. For a complete consideration of the survey questions, refer to Appendix A.

The survey consisted of six questions for each group of non-enrollees and enrollees which helped to determine enrollment status, specific college-selection decision within university system (if enrolled), and whether financial considerations played a role in the decision to attend or not attend HU. The fifth question in each set was broken into 9 sections. Altogether, each set included a total of 14 questions.

Moreover, to estimate regression, a selected pool of data were determined randomly from the Extended Campus Informational Database. This selection was made by the Extended Campus Personnel Office and was provided to the Institutional Strategic Planning Committee. The database categorizes the total pool into four classifications: graduate enrollees, undergraduate enrollees, graduate non-enrollees, and undergraduate non-enrollees.

The survey, as shown in Appendix A, was conducted solely in an on-line format. All individuals in the pool were contacted through the use of e-mail addresses on file with the Extended Campus. The total pool of enrollees for both graduate and undergraduate was randomly split into three groups. To minimize the inaccuracy and biases in the responses, each group was surveyed separately based on three versions of question 4 on a hypothetical tuition raise of 10 percent (for group 1), 20 percent (for group 2), and 30 percent (for group 3). Otherwise, one's response would most likely tend to be biased toward the lowest raise. However, all other questions were identical for all the enrollees. Also, the pool for both graduate and undergraduate non-enrollees was randomly split into two groups, with each surveyed separately, based on two versions of question 4 on a hypothetical tuition reduction of 10 percent (for group 1) and 20 percent (for group 2). Again, all other questions were identical for both groups. E-mail messages were then sent out to each of the five cohorts requesting their participation in the electronically attached survey. Several follow-up reminding messages were sent to each cohort at some later times. The corresponding summary is as follows:
Total Delivered                   Total Responded

Enrolled Undergraduate      2302  197 (28 non-responsive to sensitivity
                                  question)
Enrolled Graduate:          1055  112 (27 non-responsive to sensitivity
                                  question)
Nonenrolled Undergraduate:  2102  142 (8 non-responsive to sensitivity
                                  question)
Non-enrolled Graduate:      2582  70 (5 non-responsive to sensitivity
                                  question)

Notes: *69 respondents did not specify their Graduate/Undergraduate
status


Statistical Analysis of the Survey's Results

The following questions which were surveyed on all four groups are analyzed here: Question 1: What are the tuition per credit hour (excluding any financial aid) at HU and at the top three other college choices?

The responses to this question are summarized in Table 3. Of the 168 Enrolled Undergraduates (EUG) who responded to this question, only 60 provided correct answers for tuition rate at HU; 24 responses were below the actual rate, 34 responses were above the actual tuition rate, while 50 did not answer this question. The undergraduate tuition at HU is $145 per credit hour. However, the average tuition at HU according to the enrolled undergraduates who were surveyed was $198 with the standard deviation of $120, ranging from $38 to $600. Despite the difference in the responses, Non-enrolled Undergraduates (NUG) also perceived higher tuitions at HU (and at other top three colleges) than the actual tuition figures. This indicates a lack of understanding of the actual tuition rates.

The overall graduates' responses, both enrolled and non-enrolled, were similar to those of the surveyed undergraduates in misperceiving the prevailing tuition figures. The modal responses in both cases were close to the average of the actual distance learning and classroom learning rates.

According to the responses of the surveyed Enrolled Undergraduates, the average tuition at the top three other institutional choices were $134.10, $82.74, and $65.25. These responses were highly dispersed (Table 3). The responses of the Enrolled Graduates also display a similar misperception (Table 3). These figures show that the tuition rates at the top three other college choices are perceived to be lower than those at HU. The fact that the students chose to enroll at HU despite the perceived higher tuition indicates that the tuition rate was not a key factor in their decision to enroll at HU.

Another worthwhile revelation on tuition factor is that the responses of both Non-enrolled Undergraduates and Non-enrolled Graduates show that the tuition rates at the students' alternative top three colleges are perceived to be higher than those at HU (Table 3). Again, the fact that the respondents chose not to enroll at HU despite its seemingly lower tuition indicates that they are rather insensitive to the tuition rates. The estimation results in Table 1 confirms this assertion, where tuition actually has a positive impact on enrollment.

Question 2: What amount of financial aid was offered for the first term in dollars, and Question 3: What amount of the tuition per year or per credit hour did your employer reimburse?

The descriptive statistics for this question are summarized in Table 4. The responses of the undergraduate cohorts to the question on dollar amount of financial aid varied from dollar amounts to percentage figures to credit hours, which may suggest a lack of understanding of the question.

To standardize the responses, the percentages and credit hours have been transformed into dollar figures based on the assumptions that an undergraduate student takes a maximum of 12 credit hours per semester and the tuition per credit hour is $145. On making the above adjustments, Enrolled Undergraduates found that the average financial aid at HU was $670 while the figure was at $2,988 according to Non-enrolled Undergraduates. Both of these observations show very high dispersion.

Due to an insufficient number of responses from the graduate cohorts to the question on financial aid, it would be inappropriate to make any corresponding inference. Hence, no analysis will be offered here.

The amount of tuition reimbursed by the employer was indicated in dollar terms either per year or per credit hour. Responses by graduate cohorts, however, varied between dollar amounts and percentage figures. In order to standardize this data, it is assumed that, on average, an undergraduate student enrolls for 24 credit hours per year at HU. Graduate responses have been transformed into standardized dollar figures based on the assumptions that the maximum credit hours taken by the graduate student in a semester are 9 and the tuition per credit hour is $280, which is the mean of the classroom and distance-learning rates.

The survey results were inconsistent in the case of financial aid offered as well as employer tuition reimbursement at the respondents' top three other college choices. However, because of the lack of accurate knowledge of the tuition rates and the number of credit hours per semester at these other colleges, it was not possible to adjust these inconsistencies and, therefore, they have been excluded from the analysis.

The survey results also showed that many respondents have duplicated their responses for the question on amount of financial aid for the first term with that of the question on amount of tuition reimbursed by the employer. This may lead to some bias in the results. No adjustment for this has been made in the above results.

Tuition Sensitivity

Enrollees:

Question 4: Indicate the likelihood that you would have enrolled at HU if the tuition here were 10 percent higher, 15 percent higher, or 20 percent higher than current tuition. (1)

The responses of both Enrolled Undergraduates (EUG) and Enrolled Graduates (EG) are summarized in Table 5. In this case, each category of question, that is, 10 percent higher, 15 percent higher, and 20 percent higher, was administered to a separate set of respondents and, hence, may be considered as random and independent samples of different population sets. In order to test whether the means of these populations are equal, the Analysis of Variance or ANOVA technique is used.

Now the following opposing hypotheses are tested:

[H.sub.0]: [[mu].sub.10] = [[mu].sub.15] = [[mu].sub.20] (2)

[H.sub.1]: [[mu].sub.10] [not equal to] [[mu].sub.15] [not equal to] [[mu].sub.20] (3)

Using the statistical results of the Analysis of Variance (ANOVA-though not reported here) as grounds for accepting the null hypothesis, this paper concludes that there are not statistically significant differences among means in all three groups. By using the response scale provided in the question, it can be concluded that if the HU tuition were 10 percent, 15 percent, or 20 percent higher, the students would have continued enrollment at the campus. The percentage of each response in each category, are listed in Table 6.

Non-enrollees:

Question 4: Please indicate the likelihood that you would have enrolled at HU if HU's tuition were 10 percent lower or 20 percent lower than current tuition. (4)

The responses of both Non-enrolled Undergraduates (NUG) and Non-enrolled Graduates (NG) are summarized in Table 7. Again, the categorical questions incorporating hypothetically a 10 percent and a 20 percent lower tuitions were given to two separate groups of respondents and, hence, may be considered as random and independent samples of different populations. The ANOVA technique was again used to test whether the means of these populations was equal. The following opposing hypotheses are tested:

[H.sub.0]: [[mu].sub.10] = [[mu].sub.20] (5)

[H.sub.1]: [[mu].sub.10] [not equal to] [[mu].sub.20] (6)

From the (unlisted) ANOVA table, it is found that for Non-enrolled Undergraduates, the F-value of 0.58 is less than the F-critical value of 3.91. Hence, the null hypothesis cannot be rejected. This means that the population means for all the different categories are the same. To quantify this, the average of the sample means is used, which is 4.59. Using the response scale provided in the question, this translates to the response extremely likely. Hence, on average, enrollment appears to be extremely likely in both cases, when tuition were lower by 10 percent or 20 percent.

However, for Non-enrolled Graduates, the significant F-value of 6.89 allows the strong rejection of the null hypothesis. This means that population mean for the different categories are different. Using individual responses (averages) and the response scale provided in the question, if the tuition were lowered by 10 percent, enrollment would appear to be likely, and if it were reduced by 20 percent, enrollment would be extremely likely.

Table 8 demonstrates the percentages of each response in each category.

Reasons for Enrolling/Not Enrolling

Enrollees:

Question 5: Indicate whether each of the following item was a (3) Major reason, (2) Minor reason, or (1) Not a reason that you chose to enroll at HU. (7)

a) Major of interest was available

b) Convenient location

c) It's an elite college

d) Interested in the aviation field

e) Convenient course schedule

f) Reasonable time to complete degree program

g) Reasonable transfer credit given

h) Reasonable life experience credit given

i) Cost of attendance (after financial aid and tuition reimbursement) was affordable.

The results are detailed in Table 9. Each item was ranked based on the weighted-average figures of the responses to compare the relative importance of each item. The weights given are 1, 2, and 3 to not a reason, minor reason, and major reason. Therefore, the numbers in Table 9 are the weighted-average figures for all items.

Based on the statistical results among the Enrolled Undergraduates, it can be seen that the convenient location with a weighted-average of 2.76, is the most important reason for enrolling at HU. Interest in the aviation field ranked second with an average of 2.71. It is interesting to note that the cost of attendance is the least important reason with a weighted average of 2.18.

Among Enrolled Graduates, the most important reason for enrolling at HU is the major of interest being available with a weighted average of 3.43. Convenient location ranks second with an average of 2.69. Again, it is interesting to note that the cost of attendance is the least important reason with a weighted average of 1.69.

Non-enrollees:

Question 5: Indicate whether each item was a Major reason, Minor reason, or Not a reason that you chose not to enroll or have not yet enrolled at HU.

a) Major of interest was available

b) Convenient location

c) It's an elite college

d) Interested in the aviation field

e) Convenient course schedule

f) Reasonable time to complete degree program

g) Reasonable transfer credit given

h) Reasonable life experience credit given

i) Cost of attendance (after financial aid and tuition reimbursement) was affordable.

The results are summarized in Table 10. In order to compare the relative importance of each item, they are ranked based on the weighted-average value of the responses for each item. As before, the weights given are 1, 2, and 3, to not a reason, minor reason, and major reason respectively. Table 10 also lists the ranks and the weighted averages of each item.

Based on the results, among Non-enrolled Undergraduates, the cost of attendance, with a weighted-average value of 1.98, is the most important reason for not enrolling at HU. Not enough credit given to life experience ranks second with an average of 1.90. Convenient location is the least important reason with a weighted-average value of 1.50.

Among Non-enrolled Graduates (Table 10), cost of attendance, with a weighted-average value of 1.88, turned out to be the most important reason among the respondents for not enrolling at HU. Convenient location ranked second (1.66), while the elite college image was the least important reason with a weighted-average value of 1.13.

All 4 Groups

Question 6: Approximate 2000 family income (before taxes): (8)

The surveyed respondents selected figures of their family incomes from the specified ranges. The results are ranked and summarized in Table 11.

Conclusion and Summary

Price determination is a complicated process and of fundamental strategic importance to higher education institutions. The optimum tuition rates need to be estimated so that new students are attracted and adequate revenues to cover expenses besides working toward long-term objectives would be provided. The results of this study indicate that HU is not pricing at a level to maximize its net earnings. In addition, based on this study, we may say that financial considerations seem to have a very limited effect on the students' decisions.

Actually, enrollments in the past 10 years at HU have increased despite higher tuition rate. Several reasons could possibly justify that, such as emergence of HU as an elite institute of higher education and significant growth in aviation and aviation-linked industries. Other colleges, such as Franklin and Marshall College, have implemented tuition increases in double-digit-percent growth rates to maintain services within a balanced budget.

This research details a study conducted at H-University (HU) in Fall 2000, which aimed at measuring the impact of tuition increases and other factors on enrollment. The study was based on an internal survey conducted to determine the factors important in the college decision of enrollees and non-enrollees at the Extended Campus, a unit of HU. Some of the institutional historical records (of actual tuitions, registration, etc.) were used for a regression estimation as presented in the earlier part of the paper.

The most important finding of this study was that tuition considerations seem to have very little impact on students' enrollment decisions. In the statistical analysis of the tuition rates for all four categories of respondents, it is evident that tuition rates do not play an important role in the enrollment decisions of students. The following main set of findings, as a whole, would re-enforce this conclusion.

The undergraduate tuition at HU is $145 per credit hour. However, the average tuition at the top three college choices of enrolled undergraduates were lower than those at HU, which highlights the relative insignificance of tuition rates in the enrollment decision of students. However, the authors recognize and respect a possible argument that despite their enrollment at other more expensive institutions, more of those who did not enroll at HU, due to its tuition increases, could have enrolled at HU otherwise. That is, enrolling at other even more expensive institutions does not necessarily imply that higher tuition at HU did not matter to them. Their decisions could have been justified by other factors perceived to be more attractive at rival institutions than at HU.

Similarly, the average tuition at the top three other college choices of non-enrolled undergraduates were perceived to be higher than those at HU. This is the converse scenario of the previous observation and again, indicates that tuition rates are insignificant. Similar observations may be made in the case of graduate cohorts.

Furthermore, for both undergraduate and graduate enrollees, the cost of attendance was the least important reason for enrolling at HU. Convenient location was the most important reason among the undergraduates and the second most important reason among graduates for enrolling at HU.

The sensitivity analysis also reveals that the enrolled undergraduates were likely to enroll at HU even if the tuition rates were 10 percent, 15 percent, or even 20 percent higher than existing tuition rates. Enrolled graduates were likely to enroll at HU even if the tuition rates were 10 or 15 percent higher than the current levels, but unlikely if the tuition rates were 20 percent higher than the existing rate.

The framework analysis presented in this report also shows that the demand is inelastic and that a one-percent increase in tuition leads to a 0.22 percent drop in the enrollment.

APPENDIX A
Enrolled Undergraduates:

EU1.   Tuition per credit hour at HU and at the top three other college
       choices
EU2    Amount of financial aid offered for the first term in dollars
EU3.   Amount of tuition reimbursed by employer per year or per credit
       hour
EU4*.  Indicate the likelihood that you would have enrolled at HU if
       tuition were 10 percent higher, 15 percent higher, 20 percent
       higher than current tuition.
EU5.   Indicate whether each of the following items was a (3) Major
       reason, (2) Minor reason, or (1) Not a reason that you chose to
       enroll at HU:
       a) Major of interest was available
       b) Convenient location
       c) It's an elite college
       d) Interested in the aviation field
       e) Convenient course schedule
       f) Reasonable time to complete degree program
       g) Reasonable transfer credit given
       h) Reasonable life experience credit given
       i) Cost of attendance (after financial aid and tuition
          reimbursement) was affordable
EU6.   Approximate 2000 family income (before taxes): Less than $25,000
       (1), $25,000 to $49,999 (2), $50,000 to $79,999 (3), $80,000 or
       higher (4).

Notes: *Three different sets of surveys were administered to Extended
Campus enrolles. The surveys were identical with the exception of this
question. The three surveys are distinguished by the codes E7 (10
percent higher), E8 (15 percent higher), and E9 (20 percent higher).
Hence, each respondent received only one of the three candidates of
increase.

Non-enrolled Undergraduates:

NU1.    Tuition per credit hour at HU and at the top three other college
        choices
NU2     Amount of financial aid offered for the first term in dollars
NU3.    Amount of tuition reimbursed by employer per year or per credit
        hour
NU4.**  Indicate the likelihood that you would have enrolled at HU if
        tuition here were 10 percent or 20 percent lower than current
        tuition.
NU5.    Indicate whether each of the following items were a Major, Minor
        or Not a reason that you chose not to enroll or have not
        enrolled at HU:
        a) Major of interest not available
        b) Location not Convenient
        c) Wanted to attend a more elite college
        d) Wasn't interested in the aviation field
        e) Course schedule inconvenient
        f) Would take too long to complete degree program
        g) Not enough transfer credit given
        h) Not enough life experience credit given
        i) Cost of attendance (after financial aid and tuition
           reimbursement) was too high.
NU6.    Approximate 2000 family income (before taxes): Less than $25,000
        (1), $25,000 to $49,999 (2), $50,000 to $79,999 (3), $80,000 or
        higher (4)

Notes: **Two different sets of surveys were administered to the Extended
Campus non-enrolles cohorts. The surveys were identical with the
exception of this question. The two surveys are distinguished by the
codes B5 (10 percent lower) and B6 (20 percent lower).

Enrolled Graduates:

EG1.  Tuition per credit hour at HU and at the top three other college
      choices
EG2   Amount of financial aid offered for the first term in dollars
EG3.  Amount of tuition reimbursed by employer per year or per credit
      hour
EG4.  Indicate the likelihood that you would have enrolled at HU if the
      tuition were 10 percent lower, 20 percent lower than current
      tuition. Responses were based on the following scale: (1)
      Definitely would not; (2) Extremely Unlikely; (3) Unlikely, (4)
      Likely; (5) Extremely Likely; (6) Definitely would
EG5.  Indicate whether each of the following items were a Major, Minor
      or Not a reason that you chose not to enroll / have not enrolled
      at HU:
      a) Major of interest not available
      b) Location not Convenient
      c) Wanted to attend a more elite college
      d) Wasn't interested in the aviation field
      e) Course schedule inconvenient
      f) Would take too long to complete degree program
      g) Not enough transfer credit given
      h) Not enough life experience credit given
EG6.  Approximate 2000 family income (before taxes): Less than $25,000
      (1), $25,000 to $49,999 (2), $50,000 to $79,999 (3), $80,000 or
      higher (4)

Non-enrolled Graduates

NG1.  Tuition per credit hour at HU and at the top three other college
      choices
NG2   Amount of financial aid offered for the first term in dollars
NG3.  Amount of tuition reimbursed by employer per year or per credit
      hour
NG4.  Please indicate the likelihood that you would have enrolled at HU
      if HU's tuition was 10 percent or 20 percent lower than current
      tuition. Reponses were based on the following scale: (1)
      Definitely would not; (2) Extremely Unlikely; (3) Unlikely; (4)
      Likely; (5) Extremely Likely; (6) Definitely would
NG5.  Indicate whether each of the following items were a Major, Minor
      or Not a reason that you chose not to enroll / have not yet
      enrolled at HU:
      a) Major of interest not available
      b) Location not Convenient
      c) Wanted to attend a more elite college
      d) Wasn't interested in the aviation field
      e) Course schedule inconvenient
      f) Would take too long to complete degree program
      g) Not enough transfer credit given
      h) Not enough life experience credit given
NG6.  Approximate 2000 family income (before taxes): (1) Less than
      $25,000; (2) $25,000 to $49,999; (3) $50,000 to $79,999; (4)
      $80,000 or higher

TABLE 1 Estimates of the Demand Equations for Undergraduate Programs
Across Campuses

Eq                      Constant  [T.sub.j,1]     F A           Y

1      [E.sub.1,1]       -23.31     0.436         0.920        1.625
                         (-5.33)    (1.52)        (20.26)      (4.25)
2*     [E.sub.1,1](AR)   -20.06     0.373         0.948        1.239
                         (-4.23)    (1.45)        (27.99)      (2.57)
3      [E.sub.2,1]        20.95     0.296        -0.006       -1.620
                          (29.20)   (5.48)       (-1.04)      (0.058)
4*     [E.sub.2,1](AR)    22.41     0.070        -0.006       -1.73
                          19.37     (2.63)       (1.69)       -15.9

Eq                         U       [R.sup.2]   D.W.

1      [E.sub.1,1]       0.009      0.97       0.71
                         (4.26)
2*     [E.sub.1,1](AR)   0.004      0.98       1.87
                         (0.15)
3      [E.sub.2,1]       0.011      0.99       0.68
                         (-0.157)
4*     [E.sub.2,1](AR)   0.002      0.995      2.10
                         0.436

Notes: t-values are in parentheses. * Adjusted for auto-regression

TABLE 2 Estimates of the Demand Equations for Graduate Programs across
Campuses

Eq                      Constant  [T.sub.j,1]   F A       Y        U

5      [E.sub.1,2]       17.22     -0.241       0.028    -1.32    0.037
                         (6.08)    (2.2)        (1.09)   (-5.38)  (1.52)
6*     [E.sub.1,2](AR)   17.64     -0.22        0.03     -1.38    0.01
                         (6.41)    (-1.82)      (1.89)   (-4.83)  (0.84)
7      [E.sub.2,2]       -7.02      0.525      -0.007     1.437   0.007
                         (-3.91)    (3.56)     (-0.59)    (10.97) (0.32)

8*     [E.sub.2,2](AR)   -1.93      0.056      -0.002     1.11    0.001
                         (-0.92)    (0.45)     (-0.39)    (5.38)  (0.14)

Eq                      [R.sup.2]    D.W.

5      [E.sub.1,2]        0.880      0.57
6*     [E.sub.1,2](AR)    0.94       1.47
7      [E.sub.2,2]        0.89       0.31
8*     [E.sub.2,2](AR)    0.860      1.13

Notes: t-values are in parentheses. * Adjusted for auto-regression.

TABLE 3 Tuition Per Credit Hour: HU and the Top Three Other College
Choices

Type of Respondent  Institution  Mean     Std. Dev.  Max    Min   Mode

EUG                 HU           $198.00  $119.78     $600   $38  $145
                    College 1    $134.10  $119.69     $515   $11  $150
                    College 2     $82.74   $51.20     $180   $13  $100
                    College 3     $65.25   $47.75     $125   $11   N/A
EG                  HU           $375.00  $217.00    $1000  $130  $245
                    College 1    $317.00  $339.00    $1200   $50  $100
                    College 2     $25.00      N/A      $25   $25   N/A
                    College 3        N/A      N/A      N/A   N/A   N/A
NUG                 HU           $236.00   $139.68    $500  $110  $145
                    College 1    $189.83   $228.71   $1200   $10  $150
                    College 2    $287.40   $185.21    $500   $90   N/A
                    College 3        N/A       N/A     N/A   N/A   N/A
NG                  HU           $327.07   $188.47    $775  $141  $300
                    College 1    $320.17   $217.95    $650   $71   N/A
                    College 2    $430.00   $197.95    $725  $300   N/A
                    College 3    $350.00       N/A    $350  $350   N/A

TABLE 4 Financial Aid (FA) Offered for the First Term and Reimbursement
by Employer (RE) Per Credit Hour for HU

Type of
Respondent  Type of Aid    Mean    Std. Dev   Max     Min    Mode

EUG              FA       $670.00   $636.00  $3000   $95.00  $435
                 RE       $160.00    $93.00   $489   $42.00  $109
EG               FA           N/A       N/A    N/A      N/A  N/A
                 RE       $252.63   $160.52   $735   $52.50  $194.44
NUG              FA      $2988.00  $2614.00  $6500  $500.00  N/A
                 RE       $185.21   $136.35   $600   $83.33  $145
NG               FA           N/A       N/A    N/A      N/A  N/A
                 RE       $197.91    $61.25   $290  $111.10  $280

TABLE 5 Enrollment Likelihood

Type of Respondent  Higher By  Mean  Std. Dev.  Mode

                       10%     4.02    1.22      4
EUG                    15%     3.67    1.28      4
                       20%     3.63    1.48      3

                       10%     4.00    1.27      4
EG                     15%     3.93    1.07      4
                       20%     3.43    1.60      3

Note: The six alternative answers to mark were: 1: Definitely would not,
2: Extremely unlikely, 3: Unlikely, 4: Likely, 5: Extremely likely,
6: Definitely would.

TABLE 6 Enrollment Likelihood: Proportions of Responses

Type of     Response
Respondent  Higher By    1      2      3      4      5      6

              10%       3.4%  10.2%   8.5%  50.8%  13.6%  13.6%
EUG           15%       5.2%  12.1%   2.6%  32.8%  15.5%   8.6%
              20%       9.6%   7.7%  36.5%  17.3%  13.5%  15.4%

              10%       5.4%   2.7%  21.6%  43.2%  10.8%  16.2%
EG            15%       3.7%   3.7%  18.5%  51.8%  14.8%   7.4%
              20%      14.3%   9.5%  38.1%   9.5%  14.3%  14.3%

TABLE 7 Circumstantial Enrollment Likelihood

Type of Respondent  Lower by   Mean  Std. Dev.  Mode

NUG                  10%       4.5     1.27      4
                     20%       4.68    1.38      6

NG                   10%       4.07    1.33      4
                     20%       4.86    1.10      6

Note: The six alternative answers to mark were: 1: Definitely would not,
2: Extremely unlikely, 3: Unlikely, 4: Likely, 5: Extremely likely,
6: Definitely would.

TABLE 8 Enrollment Likelihood: Proportions of Responses

Type of     Response
Respondent  Lower By   1     2      3      4      5      6

              10%     4.7%  1.6%   9.4%  32.8%  26.6%  25.0%
NUG           20%     4.4%  2.9%   8.8%  26.4%  19.1%  38.2%

              10%     6.9%  0.0%  24.1%  34.5%  17.2%  17.2%
NG            20%     0.0%  2.8%   8.3%  25.0%  27.8%  36.1%

Note: 1: Definitely would not, 2: Extremely unlikely, 3: Unlikely,
4: Likely, 5: Extremely likely, 6: Definitely would.

TABLE 9 Reasons for Enrolling at HU

Type of              Not a   Minor   Major   Weighted
Respondent     Item  Reason  Reason  Reason  Average   Rank

Enrolled         A     6.5%  20.7%   76.9%    2.66      4
Undergraduate    B     5.3%  13.6%   81.0%    2.76      1
                 C    19.5%  36.1%   44.3%    2.25      8
                 D     6.5%  15.9%   77.5%    2.71      2
                 E     5.9%  18.9%   75.1%    2.69      3
                 F     5.3%  26.6%   68.0%    2.63      5
                 G     9.0%  24.0%   67.0%    2.57      6
                 H    18.3%  28.0%   54.0%    2.35      7
                 I    24.0%  34.0%   42.0%    2.18      9

Enrolled         A     7.1%  16.5%   76.5%    3.43      1
Graduate         B    11.8%   7.1%   81.2%    2.69      2
                 C    37.6%  31.8%   30.6%    2.69      3
                 D    10.6%  22.4%   67.1%    1.93      7
                 E     9.4%  15.3%   75.3%    2.56      6
                 F     8.2%  21.6%   70.6%    2.66      4
                 G    51.2%  21.1%   27.1%    2.62      5
                 H    54.1%  21.2%   24.7%    1.75      8
                 I    24.7%  30.6%   44.7%    1.69      9

TABLE 10 Reasons for Not Enrolling at HU

Type of              Not a   Minor   Major   Weighted
Respondent     Item  Reason  Reason  Reason  Average   Rank

Non-enrolled    a     70.0%   10.0%   20.0%   1.50      9
Undergraduate   b     61.4%   16.4%   22.1%   1.61      8
                c     86.7%    8.3%    5.0%   1.18      7
                d     93.3%    5.8%    0.8%   1.08      6
                e     67.5%   17.5%   15.0%   1.48      5
                f     56.6%   23.8%   19.7%   1.63      4
                g     49.6%   17.9%   32.5%   1.83      3
                h     46.2%   17.6%   36.2%   1.90      2
                i     38.3%   25.8%   35.8%   1.98      1

Non-enrolled    a     61.4%   12.3%   26.3%   1.65      3
Graduate        b     58.9%   16.1%   25.0%   1.66      2
                c     87.5%   12.5%    0.0%   1.13      9
                d     89.1%    5.5%    5.5%   1.16      8
                e     60.7%   19.6%   19.6%   1.59      4
                f     66.1%   17.9%   16.1%   1.50      5
                g     67.9%   17.9%   14.3%   1.46      6
                h     69.6%   14.3%   16.1%   1.46      7
                i     43.9%   24.6%   31.6%   1.88      1

TABLE 11 Approximate 2000 Family Income

Type of Respondent      Income Level  Proportion  Rank

Enrolled Undergraduate  <25k          14.8%        3
                         25k-50k      51.9%        1
                         50k-80k      20.4%        2
                        >80k          12.9%        4

Enrolled Graduate       <25k           5.1%        4
                         25k-50k      25.6%        2
                         50k-80k      47.4%        1
                        >80k          21.8%        3

Non-enrolled            <25k          13.7%        4
Undergraduate            25k-50k      34.7%        1
                         50k-80k      23.4%        3
                        >80k          28.2%        2

Non-enrolled            <25k           6.9%        4
Graduate                 25k-50k      27.6%        2
                         50k-80k      25.7%        3
                        >80k          39.7%        1


Footnotes

(1) As explained before, three different sets of surveys were administered to three groups of the Extended Campus enrolles. The surveys were identical with the exception of this question. The three surveys are distinguished by the codes E7 (10% higher), E8 (15% higher), and E9 (20% higher). Hence, each group of respondents was supposed to respond to only one of the three hypothetical increase rates.

(2) The responses for all the groups are the same.

(3) At least one of the population means is different from others.

(4) Two different sets of surveys were administered to Extended Campus non-enrollee cohorts. The surveys were identical with the exception of this question. The two surveys are distinguished by the codes B5 (10 percent lower) and B6 (20 percent lower).

(5) The responses for the two groups are the same.

(6) The responses are not the same.

(7) Not a reason (1), Minor reason (2), Major reason (3)

(8) Less than $25,000 (1), $25,000 to $49,000 (2), $50,000 to $79,999 (3), $80,000 or higher (4).

References

Campbell, R.; Siegel, B. "The Demand for Higher Education in the United States," American Economic Review, 57, June, 1967, pp. 482-94.

Corrazzini, A.; Dugan, D.; Grabowski, H. "Determinants and Distributional Aspects of Enrollment in U.S. Higher Education," Journal of Human Resources, 7, 1, Winter, 1972, pp. 39-50.

Galper, H., Dunn, R. "A Short-Run Demand Function for Higher Education in the United States," Journal of Political Economy, 77, September-October, 1969, pp. 765-77.

Heller, D. "Tuition Prices, Financial Aid, and Access to Public Higher Education: A State-Level Analysis," paper presented at the Annual Meeting of the American Educational Research Association, New York City, April, 1996.

Heller, D. "Student Price Response in Higher Education: An Update to Leslie and Brinkman," Journal of Higher Education, 68, 6, December, 1997, pp. 624-59.

Hight, J. "The Supply and Demand of Higher Education in the U.S.: The Public and Private Institutions Compared," paper presented to the Econometric Society, December, 1970.

Hoenack, S. "Private Demand for Higher Education in California," Mimeo., Office of Analytical Studies, University of California, 1967.

Hoenack, S.; Weiler, W.; Orvis, C. "Cost-Related Tuition Policies and University Enrollments," Mimeo., Management Information Division, University of Minnesota, 1973.

Hsing, Y.; Chang, H. "Testing Increasing Sensitivity of Enrollment at Private Institutions to Tuition and Other Costs," The American Economist, 40, 1, Spring 1996, pp. 40-45.

Jackson, G.; Weathersby, G. "Individual Demand for Higher Education: A Review and Analysis of Recent Empirical Studies," Journal of Higher Education, 46, 6, December, 1975, pp. 623-52.

Leslie, L. L.; Brinkman, P. T. "Student Price Response in Higher Education," Journal of Higher Education, 58, 1987, pp. 181-204.

Radner, R.; Miller, L. "Demand and Supply in U.S. Higher Education: A Progress Report," American Economic Review, 60, May, 1970, pp. 165-73.

Spies, R. The Future of Private Colleges, the Effect of Rising Costs on College Choice, Princeton: Industrial Relations Section, Princeton University, 1973.

BIJAN VASIGH* AND REZA G. HAMZAEE**

*Embry-Riddle Aeroneutical University--U.S.A. and **Missouri Western State College and Walden University--U.S.A. Presented at the International Atlantic Economic Society's Conference, Vienna, Austria, March 2003.
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Comment:Testing sensitivity of student enrollment with respect to tuition at an institution of higher education.
Author:Vasigh, Bijan; Hamzaee, Reza G.
Publication:International Advances in Economic Research
Geographic Code:1USA
Date:May 1, 2004
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