How Living Costs Undermine Net Price As An Affordability Metric Braden J. Hosch, Ph.D. Asst. Vice President for Institutional Research, Planning & Effectiveness Association for Institutional Research Annual Forum Denver, CO May 29, 2015
OVERVIEW 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 through Wisconsin HOPE Lab: Robert Kelchen, Seton Hall University Sara Goldrick-Rab, Univ. of Wisconsin-Madison
NET PRICE AND COST OF ATTENDANCE CALCULATIONS Tuition Required Fees Books Room & Board* + Other Costs Cost of Attendance * based on living arrangements Cost of Attendance - Grant Aid Net Price
HOW LIVING COSTS ARE DETERMINED Set in a manner determined by the institution (SEC. 472. 20 U.S.C. 1087) Sparse guidance in FSA Handbook: periodic surveys of student population, assessing local housing costs or other pertinent data otherwise reasonable methods NASFAA Monograph
LIVING COSTS AS SHARE OF COA 100 Reported Living Costs as Share of Cost of Attendance Percent 80 60 40 59.1 35.6 70.5 58.8 49.3 50.2 43.5 45.4 47.3 20 0 4-year or above 2-year Less-than 2-year Institutional Level Public Private not-for-profit Private for-profit
APPLICATION OF GRANT AID TO COSTS 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 Cost of Attendance Tuition & Required Fees Books Living Expenses Grant Aid Net Price
SELECTED RANKINGS USING NET PRICE Federal Uses: HEOA Watch Lists College Navigator White House Score Card Rating System (?) Selected Ranking Publications: Washington Monthly U.S. News Best Value Colleges Kiplinger s Best Value Colleges
METHODOLOGY Generate county-level estimates of cost-of-living Compare campus-reported costs for living expenses off-campus, not with family to countylevel estimates Results analyzed by sector and geospatially
REGIONAL ADJUSTMENT APPROACH (1) 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 (2) 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)
INSTITUTIONAL DATA 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
LIMITATIONS 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
OVERARCHING FINDINGS 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
COUNTY-LEVEL ESTIMATES, 9 MONTHS Room & Board Costs Other Costs Housing Food Total Transp. Health Care Misc. Total Total Min 2,862 1,665 4,572 2,061 1,224 621 4,077 9,126 25th pctile 3,969 1,872 5,877 2,331 1,809 702 4,860 10,863 50th pctile 4,662 1,944 6,606 2,421 1,890 729 5,040 11,678 75th pctile 5,623 2,068 7,711 2,565 2,025 774 5,371 12,940 Max 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 12,272 SD 1,572 214 1,719 266 457 80 682 2,213 Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 3.
COUNTY-LEVEL ESTIMATES, 9 MONTHS Avg. Estimated Living.. 9,126 24,856 Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 3.
ESTIMATED LIVING COSTS BY REGION $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Living Cost Allowances (over 9 months) for Off-Campus Students Not Living with Family, by Region, 2013-14 $0 West Midwest South Northeast Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 2.
Percent REPORTED VS. ESTIMATED LIVING COSTS 100 90 80 70 60 50 40 30 20 10 0 9.5 7.8 8.1 7.7 71.6 18.9 Public 55.4 60.6 63.2 15.9 11.9 14.0 53.1 58.5 36.8 31.3 29.1 31.0 29.6 Private non-profit Private for-profit Public Private non-profit Private for-profit 40.8 4.5 48.5 45.2 47.0 Public Private non-profit 4-year or above 2-year Less-than 2-year Below Estimate By $3,000+ Above Estimate By $3,000+ Within $3,000 of Estimate 15.8 45.8 38.4 Private for-profit Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 4.
Milwaukee County $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Comparison of Living Cost Allowances to Estimated 9 Months Living Costs, Denver County, Colorado Estimated Living Cost Room & Board Other
Milwaukee County $25,000 $20,000 $15,000 $10,000 $5,000 $0 Comparison of Living Cost Allowances to Estimated 9 Months Living Costs, Philadelphia County, Pennsylvania La Salle University Natl Massage T Inst Drexel University Curtis Inst of Music Temple University Jna Inst of Culinary Univ of Sciences Star Career Acad Hussian Sch of Art Penn Acad Fine Arts Prism Career Inst Orleans Tech Inst Moore Coll of Art Saint Joseph's Univ University of Penn Lincoln Tech Inst Philadelphia Univ Restaurant Sch WHC Aviation Inst Maint Empire Beauty Sch Chestnut Hill Coll Univ of the Arts Estimated Living Cost Room & Board Other ITT Technical Inst Kaplan Career Inst Art Inst of Phila. Metro Career Ctr Jean M Aveda Inst Holy Family Univ Comm Coll of Phila Peirce College LT Int Beauty Sch
LIVING COSTS, 9 MONTHS PHILADELPHIA (DETAIL)
Milwaukee County 25000 20000 15000 10000 5000 0 Comparison of Living Cost Allowances to Estimated Living Costs, Milwaukee County, Wisconsin Estimated Living Cost Room & Board Other
Washington, DC 25000 20000 15000 10000 5000 0 Comparison of Living Cost Allowances to Estimated Living Costs, Washington, DC Estimated Living Cost Room & Board Other * No reported data
LIVING COSTS WASHINGTON, DC
RURAL EXAMPLE: SUMTER, SC Cost variation is not limited to urban areas (but easier to observe) 20000 16000 12000 8000 4000 0 Comparison of Living Cost Allowances to Estimated Living Costs, Sumter SC Sumter Beauty Coll U of South Carolina Sumter Central Carolina Tech Coll Morris College Estimated Living Cost Room & Board Other
LIVING COSTS, SUMTER CO., SC Sumter Beauty College 15,705 University of South Carolina-Sumter 13,755 Morris College 8,725 Central Carolina Technical College 11,231 Scale: 2 miles Avg. DiffReportFromEst -3,164 3,816 Sumter County, SC Estimate: $11,889
IMPLICATIONS Net price statistics for institutions with sizeable commuter populations are not necessarily valid across groups Net price should not be used for accountability within broad groups of institutions without correction for living costs Benchmarking activities should examine variation in COA budgets prior to examination of net price
UNINTENDED CONSEQUENCES 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
ON-CAMPUS LIVING COSTS BY YEAR 16,000 14,000 12,000 10,000 8,000 6,000 Public 4-year Public 2-year Private nonprofit 4,000 2,000 0 2006 2007 2008 2009 2010 2011 2012 2013
OFF-CAMPUS LIVING COSTS BY YEAR 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Public 4-year Public 2-year Private nonprofit For-profit (academic year) For-profit (program) 0 2006 2007 2008 2009 2010 2011 2012 2013
RECOMMENDATIONS (1) 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 3 rd party rankings, unless statistically adjusted
RECOMMENDATIONS (2) 4. Failing adoption of #1-3, for the purposes of net price calculations, consider using (nearest) campus living costs for off-campus costs 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
RESOURCES & CONTACT INFO 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/ Braden.Hosch@stonybrook.edu