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Office of Institutional Research, Planning & Effectiveness

How Living Costs Undermine Net Price As An Affordability

MetricBraden J. Hosch, Ph.D.

Asst. Vice President for Institutional Research, Planning & Effectiveness

Association for Institutional Research Annual ForumDenver, COMay 29, 2015


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

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 “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

HOW LIVING COSTS ARE DETERMINED


LIVING COSTS AS SHARE OF COA

59.170.5

58.8

35.649.3 50.2

43.5 45.4 47.3

0

20

40

60

80

100

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

Per

cent

Institutional Level

Reported Living Costs as Share of Cost of Attendance

Public Private not-for-profit Private for-profit


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

Tuition & Required Fees Living ExpensesBooks

Grant Aid Net Price

Cost of Attendance


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

SELECTED RANKINGS USING NET PRICE


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 2013-14Selection 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 collegeDoes 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 MONTHSRoom & Board Costs Other Costs

TotalHousing 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


9,126 24,856

Avg. Estimated Living ..


ESTIMATED LIVING COSTS BY REGION


$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

West Midwest South Northeast

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


REPORTED VS. ESTIMATED LIVING COSTS

18.936.8 31.3 29.1 31.0 29.6

45.2 47.0 38.4

71.655.4 60.6 63.2 53.1 58.5

40.848.5

45.8

9.5 7.8 8.1 7.7 15.9 11.9 14.04.5

15.8

0102030405060708090

100

Public Privatenon-profit

Privatefor-profit


Privatefor-profit


Privatefor-profit

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

Per

cent

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



Milwaukee County

$0$2,000$4,000$6,000$8,000

$10,000$12,000$14,000$16,000

Comparison of Living Cost Allowances to Estimated 9 Months Living Costs, Denver County, Colorado

Estimated Living Cost Room & Board Other


Milwaukee County

$0

$5,000

$10,000

$15,000

$20,000

$25,000

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



LIVING COSTS, 9 MONTHS PHILADELPHIA (DETAIL)


Milwaukee County

0

5000

10000

15000

20000

25000

Comparison of Living Cost Allowances to Estimated 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


Cost variation is not limited to urban areas (but easier to observe)

RURAL EXAMPLE: SUMTER, SC

0

4000

8000

12000

16000

20000

SumterBeauty Coll

U of SouthCarolinaSumter

CentralCarolinaTech Coll

MorrisCollege

Comparison of Living Cost Allowances to Estimated Living

Costs, Sumter SC



LIVING COSTS, SUMTER CO., SC

University of South Carolina-Sumter13,755

Sumter Beauty College

15,705

Morris College

8,725

Central Carolina Technical College

11,231

-3,164 3,816

Avg. DiffReportFromEst

Sumter County, SC Estimate: $11,889

Scale: 2 miles


• 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

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

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 2012 2013

Public 4-year

Public 2-year

Privatenonprofit


OFF-CAMPUS LIVING COSTS BY YEAR

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 2012 2013

Public 4-year

Public 2-year

Private nonprofit

For-profit(academic 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. 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

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

mailto:[email protected]

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