Market Rate Tuition July 27, 2012 Cohen Hardin Pan & Tschirhart Applied Economic Research Group AER A Determination and Analysis for Florida State University

President Barron’s Requested Analysis Compute the market rate tuition Undergraduate, in-state Florida State University academic year Compute the net cost of tuition and fees Before and after tuition change Bright Futures, Prepaid

Background Drastic cuts FSU $65 million No raises for 5 years Capped growth rate Preeminence Bill removes cap Current tuition $5,826

What is a market rate? Price Quantity D1D1 S1S1 P CURRENT P MARKET QDQD QSQS

Determination & Analysis Market Rate Cost to Students Advised Increases

Estimation Methods Solutions Carnegie Classification Hedonic Regression Average similar universities Regression

How do we estimate tuition? Select relevant market Carnegie Classification Hedonic Regression

General Selection Process Carnegie Classification Hedonic Regression

Very High Research (N=108) Public (N=73) Private (N=35) General Market General Selection Process Public (N=73) Carnegie Classification Hedonic Regression

Carnegie Foundation Classifies higher education institutions Characteristics Public, Private Undergraduate population Used to control for institutional differences Hedonic Regression Carnegie Classification

How do we estimate tuition? Select relevant market Select standards for comparison Public Hedonic Regression Carnegie Classification

Carnegie Selection Hedonic Regression Carnegie Classification

How do we estimate tuition? Select relevant market Select standards for comparison Average the tuition Public High Undergrad Balanced Arts & Sciences Full-Time, Selective Hedonic Regression Carnegie Classification

Carnegie Estimates Hedonic Regression Carnegie Classification

Susceptible to outliers Characteristics differ Small sample sizes Concerns with Averaging Carnegie Classification Hedonic Regression

Vector of attributes for a good Contributions to price Used to price housing Bedrooms Square footage Lot Size Carnegie Classification Hedonic Regression

How do we estimate tuition? Select relevant market Select variables for regression Public Carnegie Classification Hedonic Regression

Student-Teacher Interaction Price Quantity D1D1 S1S1 D2D2 S2S2 Q1dQ1d P1P1 P2P2 Q2dQ2d Carnegie Classification Hedonic Regression

Student-Faculty Ratio Carnegie Classification Hedonic Regression

Academic Reputation Price Quantity D1D1 S1S1 D2D2 S2S2 Q1dQ1d P1P1 P2P2 Q2dQ2d Carnegie Classification Hedonic Regression

U.S. News Rankings Carnegie Classification Hedonic Regression

What Affects Tuition? Carnegie Classification Hedonic Regression

How do we estimate tuition? Select relevant market Select variables for regression Run the regression Student Faculty Ratio Room and Board External Funding Rank Student Services Degree Offerings Public Carnegie Classification Hedonic Regression

Regression Model External Sum of all external revenues Rank 1-29, 30-59, 60-89, etc. Undergraduate degrees Balanced arts & sciences Balanced professional + arts & sciences Carnegie Classification Hedonic Regression

VariableParameter EstimatesT-Statistic stufac **-2.44 lnstuserv0.246***3.57 lnrb lnexternal-0.180**-2.28 rank rank *1.93 rank *1.73 rank rank rank as high grad asp high grad pas some grad pas high grad Constant7.781***3.74 *** p<0.01, ** p<0.05, * p< Public Universities R2R

Student-Faculty Drives Tuition NegativePositive Carnegie Classification Hedonic Regression

Estimated Tuition Carnegie Classification Hedonic Regression

Determination & Analysis Market Rate Cost to Students Advised Increases

Declining Tuition Coverage

Bright Futures Prepaid Bright Futures & Prepaid Interaction 4 Year Univ. FAS FMS GSV 4 Year College 2 Year %

Students with Bright Futures & Prepaid

Costs Remain Zero for 34%

Costs Increase by Less Than $2,000

Determination & Analysis Market Rate Cost to Students Advised Increases

Forecasted Recommendations

$0 - $5,501 One-time Increase $7,781 Determination & Analysis Market Rate Cost to Students Advised Increases

Cohen Hardin Pan &Tschirhart Applied Economic Research Group AER