Office of Institutional Research, Planning & Effectiveness The False Promise of Net Price as an...

Office of Institutional Research, Planning & Effectiveness

The False Promise of Net Price as an Affordability Metric

Braden J. Hosch, Ph.D.Asst. Vice President for Institutional Research, Planning & Effectiveness

North East Association for Institutional Research Annual MeetingPhiladelphia, PANovember 11, 2014


Except for institutions with very few commuters, net price is not a valid measure of affordability because cost of living budgets are determined without sufficient standards and consistency

Research partners:

Robert Kelchen, Seton Hall University

Sara Goldrick-Rab, Univ. of Wisconsin-Madison

OVERVIEW


* based on living arrangements

NET PRICE AND COST OF ATTENDANCE CALCULATIONS

Cost of Attendance- Grant Aid

Net Price

TuitionRequired Fees

BooksRoom & Board*

+ Other CostsCost of Attendance


• Set in a manner “defined by the institution” (HEA)• Sparse guidance in FSA Handbook:• periodic surveys of your student population,• assessing local housing costs or other pertinent data• otherwise reasonable methods

• NASFAA Monograph

HOW LIVING COSTS ARE DETERMINED


LIVING COSTS AS SHARE OF COA

4-year or above 2-year Less-than 2-year0

20

40

60

80

100

59.170.5

58.8

35.6

49.3 50.243.5 45.4 47.3

Reported Living Costs as Share of Cost of Attendance

Public Private not-for-profit Private for-profit

Institutional Level

Pe

rce

nt


Grant aid is generally applied• First to offset direct costs (tuition and req. fees)• Then to offset books, supplies, living expenses

Residual net price after application of aid weights cost of living components even more as share of total COA

APPLICATION OF GRANT AID TO COSTS


Federal Uses:

HEOA Watch Lists College NavigatorWhite House Score Card Rating System (?)

Selected Ranking Publications:

Washington MonthlyU.S. News Best Value CollegesKiplinger’s Best Value Colleges

NET PRICE USES


Generate county-level estimates of cost-of-living

Compare campus-reported costs for living expenses off-campus, not with family to county-level estimates

Results analyzed by sector and geospatially

METHODOLOGY


• Model approach on the MIT Living Wage Calculator (Glasmeier & Arete, 2014), using data available when 2013-14 COA numbers were developed

• Adjusted for regional differences using 2013 County Cost of Living Index when needed

• Room and board:• Housing: HUD median rents by county for efficiency

apartment without roommates (FY 2012)• Food: USDA low-cost food plan (June 2012)

REGIONAL ADJUSTMENT APPROACH (1)


“Other expenses”:• Transportation: BLS Consumer Expenditure Survey for

individuals under 25 years old (2012)• Health care: Average premium by state from the Kaiser

Family Foundation—national average used if missing data (2010)

• Miscellaneous: BLS Consumer Expenditure Survey for individuals under 25 years old (2012)

REGIONAL ADJUSTMENT APPROACH (2)


Primary source: IPEDS IC 2013-14

Selection criteria:• Values reported both for • Room & board, off-campus not with family• Other expenses, off-campus not with family

Reporting status differences• Academic year reporter values treated a 9 months• Program reporters normalized to 9 months

Excluded institutions from U.S. Territories

INSTITUTIONAL DATA


Costs are not uniform within counties• Urban areas: Gasoline/rent costs vary within

small areas• Rural areas: Transportation costs vary by

distance to college

Does not reflect variation in needs within students that can be captured by professional judgments

LIMITATIONS


• Higher cost estimates in urban/rural counties• Half of institutions in most expensive quartile of

counties• Huge institutional variation at county level:• 56.4% of institutions within $3,000 of estimate• 10.8% of institutions $3,000+ above estimate• 32.8% of institutions $3,000+ below estimate

OVERARCHING FINDINGS


COUNTY-LEVEL ESTIMATES, 9 MONTHS

Room & Board Costs Other Costs

Total Housing Food Total Transp.Health

Care Misc. TotalMin 2,862 1,665 4,572 2,061 1,224 621 4,077 9,12625th pctile 3,969 1,872 5,877 2,331 1,809 702 4,860 10,86350th pctile 4,662 1,944 6,606 2,421 1,890 729 5,040 11,67875th pctile 5,623 2,068 7,711 2,565 2,025 774 5,371 12,940Max 12,051 3,690 15,489 4,590 3,933 1,386 9,189 24,426

Mean 5,040 2,003 7,039 2,490 1,990 753 5,233 12,272SD 1,572 214 1,719 266 457 80 682 2,213

Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 3.


COUNTY-LEVEL ESTIMATES, 9 MONTHS



ESTIMATED LIVING COSTS BY REGION


West Midwest South Northeast$0

$5,000

$10,000

$15,000

$20,000

Living Cost Allowances (over 9 months) for Off-Campus Students Not Living with Family, by Region, 2013-14


REPORTED VS. ESTIMATED LIVING COSTS

Public Privatenon-profit

Privatefor-profit


Privatefor-profit


Privatefor-profit

4-year or above 2-year Less-than 2-year

0

10

20

30

40

50

60

70

80

90

100

18.9

36.8 31.3 29.1 31.0 29.645.2 47.0

38.4

71.6

55.4 60.6 63.2 53.1 58.540.8

48.5

45.8

9.5 7.8 8.1 7.715.9 11.9 14.0

4.515.8

Below Estimate By $3,000+ Within $3,000 of Estimate Above Estimate By $3,000+

Pe

rce

nt



Milwaukee County

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Comparison of Living Cost Allowances to Estimated 9 Months Living Costs, Philadelphia County, Pennsylvania

Estimated Living Cost Room & Board Other



LIVING COSTS, 9 MONTHS PHILADELPHIA (DETAIL)

Institutionally reported costs off campus, not with family


Milwaukee County

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0

5000

10000

15000

20000

25000

Comparison of Living Cost Allowances to Estimated Living Costs, Milwaukee County, Wisconsin



LIVING COSTS

MILWAUKEE COUNTY, WISCONSIN


Washington, DC

0

5000

10000

15000

20000

25000

Comparison of Living Cost Allowances to Estimated Living Costs, Washington, DC


* No reported data


LIVING COSTS WASHINGTON, DC


• Net price statistics for institutions with sizeable commuter populations are not necessarily valid across groups

• Net price should not be used for accountability broad groups of institutions without correction for living costs

• Benchmarking activities should examine variation in COA budgets prior to examination of net price

IMPLICATIONS


Manipulation of net price to game accountability

• Subverts transparency agenda

• Artificial lowering of living costs

• Incentives to lower living cost budgets may stress students who qualify for less aid

UNINTENDED CONSEQUENCES


ON-CAMPUS LIVING COSTS BY YEAR

2006 2007 2008 2009 2010 2011 2012 20130

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Public 4-year

Public 2-year

Private nonprofit


OFF-CAMPUS LIVING COSTS BY YEAR

2006 2007 2008 2009 2010 2011 2012 20130

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Public 4-year

Public 2-year

Private nonprofit

For-profit (a-cademic year)

For-profit (program)


1. Determine living costs at federal level with regional (county) adjustments

2. Failing federal determination, authorize ED to establish rigorous methodology for cost of living budgets

3. Do not include net price in ratings system or 3rd party rankings, unless statistically adjusted

RECOMMENDATIONS (1)


4. IR professionals should examine living costs in their area, identify reported costs of local institutions, and assist in budget construction

5. Conduct more research on living expenses at different geographic scales, esp. health care

6. Research community should take more active role in examining reliability and validity of prominent educational statistics

RECOMMENDATIONS (2)


Kelchen, R., Hosch, B., Goldrick-Rab, S. The Costs of College Attendance: Trends, Variation, and Accuracy in Institutional Living Cost Allowances. Association of Public Policy and Management (2014). http://wihopelab.com/publications/.

http://www.stonybrook.edu/commcms/irpe/reports/

[email protected]

RESOURCES & CONTACT INFO

http://wihopelab.com/publications/Kelchen%20Hosch%20Goldrick-Rab%202014.pdf



http://wihopelab.com/publications/

http://wihopelab.com/publications/



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