Establishing tuition rates at institutions of higher learning is always of fundamental strategic importance to college administrators who are suffering adverse financial effects from reduced allocations from external sources and increased educational and facility costs.
Innovative reactions to these environmental conditions are needed to avoid institutional decline (1). Government cuts to core-operational funding have led university administrators to lessen their reliance on public funding and to raise tuition fees. Over the last ten years the average undergraduate arts tuition in U.S. rose 127.6%, going from $1,785 in 1991 to $4,062 in 2001.
Undergraduate tuition fees have climbed more than one-third since 1996/97 in New York; 38.4%. Some program’s tuition fees have risen as much as 60% over the last five years. Graduate programs, and even certain undergraduate programs, have even been deregulated by the provincial government. By deregulating the programs, the U.S.
government has taken the cap off tuition costs and universities are able to charge as much as the market will bear. But, what the effects of rising the university tuitions? In this essay I try to show the influence of increasing college attendance to the rise of student tuitions. There is growing evidence that the continuing failure of the federal and provincial government to adequately fund post-secondary education is reducing accessibility and jeopardizing the social equality at post-secondary institutions.(2) One of the most alarming consequences of the increasing reliance of universities and colleges on private fees is that it is widening the gap in participation rates by socio-economic status. The incredulous rise in tuition fees over the last 15 years has left some people falling in the low or mid socio-economic groups unable to afford a university education.
While the overall university enrolment rate in U.S. universities is rising, “In comparing the university participation rates for young people aged 18-21 years by family socio-economic background in 1986, rates for young people from low to middle backgrounds were almost identical. “Demand cause supply” or in other words the increasing number of college students will cause the raise in college tuitions or in opening new universities and colleges. However, the labor market can only accept certain number of students and thus in new universities and colleges would be open it can cause the overload in the labor market. It would be very hard to find a job for college graduates.
Also the quality of education can be lost because of the low professor skills. The only logical reaction to the increasing number of college students is raising the tuitions to colleges and universities. High tuitions will help to maintain the quality and reputation of university education in the same way will help graduates to find a dissent job after college. Increasing the tuition rate is one among many revenue enhancing options. However, this tactic raises the question of how current students will respond to a higher tuition rate if there is not an equal increase in their financial aid. Although several studies have been conducted on student responses to tuition increases and according to St.
John, “institutional enrollment planning models generally have not had the opportunity to use recent research on student price response” (2 p. 166). When tuition is increased, three of the possible scenarios for the current student population are: (1) high retention and a major tuition revenue increase; (2) moderate retention and a net increase in tuition revenues; or (3) low retention and a severe tuition revenue decrease. Besides tuition price, student aid and competitors’ tuition rates affect current students’ financial considerations College administrators should estimate the effects on net earnings resulting from price increases so they can select the tuition rate to avoid scenario three. They are faced with a classic pricing problem that depends upon current students’ tuition price elasticity of demand for education.
(2) Variety of pricing models, based upon current students, that institutions of higher learning can be used in determining an appropriate tuition rate. Although the models makes several simplifying assumptions, it is useful in predicting the retention rate of current students at increasing tuition rates. A computer-based model that quantifies the relationship between tuition elasticity and projected net earnings is applied to determine an appropriate tuition rate for a small, private, liberal arts college. …