|Type of paper:
|University Learning United States Money
Tuition deregulation in Texas transferred the mandate of setting tuition fees from the state legislature to institutions. With the deregulation, the price of tuition increased significantly, especially in the most prestigious institutions. The institutions also differentiated their prices based on the nature of the undergraduate program. Prices increase for most lucrative majors, such as nursing, engineering, and business were higher for large institutions. The rise in prices was also high for learning institutions that had high initial costs or courses with a higher initial cost. The increase in tuition rates was, however, low for institutions that had low-income students. The Texas deregulation has had an impact on tuition and the level of education in the nation. Through an analysis of tuition deregulation in Texas, it is evident that higher learning institutions have taken advantage of this to create a market position based on a specific niche and intended public image. A review of various market determinants of pricing are examined, and a conclusion is reached on the impact that deregulation has had on autonomy and pricing system in state universities.
Why Pricing Autonomy In Texas?
College decisions are based on the value that the institutions provide to their students after the learning period. Critics are more concerned with the high cost of college education, the graduation rates, and the prospects for graduates. Lawmakers and policymakers are more concerned with the cost of tuition and the associated benefits; they have, therefore, opted to make colleges more accountable for their value. The possibility of basing federal financial aid to the measure of value and performance has been explored. A low level of direct support from the state has made it difficult to maintain and improve the quality levels of their programs. The continuous decline in the graduation rates since the 1970s is attributed to the fall in educational resources.
The fall in the level of state support has raised affordability concerns. Many institutions have responded by increasing the tuition fees to meet the necessary level of quality. Even though the increase in price will compensate for the loss of state revenue, the decision leaves out the institutions that have little flexibility in their ability to set prices. A high level of tuition fees allows institutions to fund a higher level of investment as compared to when the state supports them. Institutions seeking to expand on essential areas such as research may attach a higher price tag to their courses. The price, however, remains capped by the designated regulators. Deregulation allows for designated teaching, this means that institutions with a higher building fee can capture the cost through fees.
Basis of the Pricing Models
Kim and Stange, (2016) note that with the increase in the level of state appropriation, the rise in tuition in public institutions is much slow. The proportion allotted for the out of state students influences the tuition level. Factors such as a higher endowment per student, more seating capacity, and a high ratio of graduate to undergraduate are more predisposed to higher tuition levels.
There are significant differences between public and private institutions in response to market changes. Changes in tuition or subsidies are more evident tin elite private colleges as compared to public institutions. The explanation is that public facilities are regulated by state rules or political pressure. Even though public institutions seek extra resources, pressure from alumni, governing boards, and interest groups affect the pricing decisions.
There is a significant difference in public institutions, private institutions, and institutions across states. The governance structures in the institutions have been pointed out as a mediating factor. Kim and Stange, (2016) point out those public institutions with more autonomy, tuition and fees are much higher.
Many institutions have turned to differential tuition to encourage improve or maintain program quality even with lower state appropriations. Differential pricing is compelling for expensive majors or those that may lead to jobs that have a higher rate of economic returns.
The Desire for University Autonomy in Texas
In the wake of deregulation, the price of university education accelerated in the state. The raw cost of tuition in Texas and other states closed in the years after the deregulation. Before the deregulation, the college prices in the state were close to those in other states; however, the new rule saw the process significantly diverge. The price growth was particularly high in selective institutions and was not offset by the extra grant aid. Moreover, higher prices were seen in institutions with the greatest initial cost and for more lucrative programs within institutions. Higher learning institutions with were income students recorded a low price growth. Additional grants also helped offset the price growth for the students with low income. Deregulation brought about more differentiation within higher institutions of learning in Texas.
With the deregulation, public institutions responded to the microeconomic incentive, but they put in measures that were meant to protect the low-income students. Even though it is no surplice that there was a price alternation, the pattern followed to see the price was specific to the learning institution. State lawmakers focused on the broad affordability as compared to individual capacity. On the other hand, institutions placed more attention on program quality and the need for a higher level of differentiation. The efficiency and equity of the deregulation programs brought about an impact on the institutional capacity and quality of the program. The biggest take away from this is documentation on how institutions change their pricing models when given a full authority to do so.
University autonomy is one of the disruptive changes brought into the education sector. Even though it provides an opportunity for higher learning institutions to tailor their programs based on the market position that they intended to create. The question of whether it allows for a win-win situation is aroused. It is evident that even though the institutions desire to improve their programs and provide better quality for students. The students for whom the program was designed may be left out as they cannot afford the fees required.
Andrews, R., & Stange, K. (2016). Price Regulation, Price Discrimination, and Equality of Opportunity in Higher Education: Evidence from Texas. doi: 10.3386/w22901
Hall, J. C., & Karadas, S. (2017). Tuition increases Geaux away? Evidence from voting on Louisiana's amendment 2. Applied Economics Letters, 25(13), 924-927. doi: 10.1080/13504851.2017.1386273
Kim, J., & Stange, K. (2016). Pricing and University Autonomy: Tuition Deregulation in Texas. RSF: The Russell Sage Foundation Journal of the Social Sciences, 2(1), 112. doi: 10.7758/rsf.2016.2.1.06
Kramer, D. A., Ortagus, J. C., & Lacy, T. A. (2017). Tuition-Setting Authority and Broad-Based Merit Aid: The Effect of Policy Intersection on Pricing Strategies. Research in Higher Education, 59(4), 489-518. doi: 10.1007/s11162-017-9475-x
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