Living Costs Impact on Net Price Affordability
Living costs significantly affect the validity of net price as an affordability metric in higher education. This research highlights the challenges in determining cost of living budgets and explores the implications on grant aid application and overall cost of attendance.
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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 Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
NET PRICE AND COST OF ATTENDANCE CALCULATIONS Tuition Required Fees Books Room & Board* + Other Costs Cost of Attendance Cost of Attendance - Grant Aid Net Price * based on living arrangements Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
LIVING COSTS AS SHARE OF COA Reported Living Costs as Share of Cost of Attendance 100 80 70.5 59.1 58.8 60 Percent 50.2 49.3 47.3 45.4 43.5 35.6 40 20 0 4-year or above 2-year Less-than 2-year Institutional Level Public Private not-for-profit Private for-profit Office of Institutional Research, Planning & Effectiveness
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 Living Expenses Books Net Price Grant Aid Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
METHODOLOGY 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 Office of Institutional Research, Planning & Effectiveness
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) Office of Institutional Research, Planning & Effectiveness
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) Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
COUNTY-LEVEL ESTIMATES, 9 MONTHS Room & Board Costs Other Costs Health Care 1,224 1,809 1,890 2,025 3,933 Housing 2,862 1,665 3,969 1,872 4,662 1,944 5,623 2,068 12,051 3,690 15,489 Food Total Transp. 4,572 5,877 6,606 7,711 Misc. 621 702 729 774 1,386 Total 4,077 4,860 10,863 5,040 11,678 5,371 12,940 9,189 24,426 Total 9,126 Min 25th pctile 50th pctile 75th pctile Max 2,061 2,331 2,421 2,565 4,590 Mean SD 5,040 2,003 1,572 7,039 1,719 2,490 266 1,990 457 753 80 5,233 12,272 682 214 2,213 Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 3. Office of Institutional Research, Planning & Effectiveness
COUNTY-LEVEL ESTIMATES, 9 MONTHS Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 3. Office of Institutional Research, Planning & Effectiveness
ESTIMATED LIVING COSTS BY REGION Living Cost Allowances (over 9 months) for Off-Campus Students Not Living with Family, by Region, 2013-14 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 West Midwest South Northeast Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 2. Office of Institutional Research, Planning & Effectiveness
REPORTED VS. ESTIMATED LIVING COSTS 100 4.5 7.7 7.8 8.1 9.5 11.9 14.0 15.8 15.9 90 80 48.5 70 40.8 55.4 60.6 45.8 63.2 60 58.5 Percent 53.1 71.6 50 40 30 47.0 45.2 20 38.4 36.8 31.3 31.0 29.6 29.1 10 18.9 0 Public Private non-profit Private for-profit Public Private non-profit Private for-profit Public Private non-profit Private for-profit 4-year or above Below Estimate By $3,000+ Above Estimate By $3,000+ 2-year Within $3,000 of Estimate Less-than 2-year Source: Kelchen, Hosch & Goldrick-Rab (2014). Table 4. Office of Institutional Research, Planning & Effectiveness
Milwaukee County Comparison of Living Cost Allowances to Estimated 9 Months Living Costs, Denver County, Colorado $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Estimated Living Cost Room & Board Other Office of Institutional Research, Planning & Effectiveness
LIVING COSTS, 9 MONTHS, DENVER COUNTY Office of Institutional Research, Planning & Effectiveness Denver County Estimate: $13,878
Milwaukee County Comparison of Living Cost Allowances to Estimated 9 Months Living Costs, Philadelphia County, Pennsylvania $25,000 $20,000 $15,000 $10,000 $5,000 $0 Saint Joseph's Univ Comm Coll of Phila Peirce College La Salle University Moore Coll of Art University of Penn Holy Family Univ Univ of Sciences Curtis Inst of Music Philadelphia Univ Aviation Inst Maint Penn Acad Fine Arts Empire Beauty Sch Chestnut Hill Coll Univ of the Arts Drexel University Hussian Sch of Art ITT Technical Inst Jean M Aveda Inst Restaurant Sch WHC Art Inst of Phila. Prism Career Inst Metro Career Ctr Orleans Tech Inst Temple University Jna Inst of Culinary Kaplan Career Inst Natl Massage T Inst Star Career Acad Lincoln Tech Inst LT Int Beauty Sch Estimated Living Cost Room & Board Other Office of Institutional Research, Planning & Effectiveness
LIVING COSTS, 9 MONTHS PHILADELPHIA (DETAIL) Office of Institutional Research, Planning & Effectiveness Philadelphia Co Estimate: $16,020
Milwaukee County Comparison of Living Cost Allowances to Estimated Living Costs, Milwaukee County, Wisconsin 25000 20000 15000 10000 5000 0 Estimated Living Cost Room & Board Other Office of Institutional Research, Planning & Effectiveness
LIVING COSTS, 9 MONTHS, MILWAUKEE CO Office of Institutional Research, Planning & Effectiveness Milwaukee Co. Estimate: $12,753
Washington, DC Comparison of Living Cost Allowances to Estimated Living Costs, Washington, DC 25000 20000 15000 10000 5000 0 Estimated Living Cost Room & Board Other * No reported data Office of Institutional Research, Planning & Effectiveness
LIVING COSTS WASHINGTON, DC Office of Institutional Research, Planning & Effectiveness District Estimate: $20,394
RURAL EXAMPLE: SUMTER, SC Comparison of Living Cost Allowances to Estimated Living Costs, Sumter SC Cost variation is not limited to urban areas (but easier to observe) 20000 16000 12000 8000 4000 0 Sumter Beauty Coll U of South Carolina Sumter Central Carolina Tech Coll Room & Board Morris College Estimated Living Cost Other Office of Institutional Research, Planning & Effectiveness
LIVING COSTS, SUMTER CO., SC Scale: 2 miles Office of Institutional Research, Planning & Effectiveness 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 Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
ON-CAMPUS LIVING COSTS BY YEAR 16,000 14,000 12,000 Public 4-year 10,000 Public 2-year 8,000 Private nonprofit 6,000 4,000 2,000 0 2006 2007 2008 2009 2010 2011 2012 2013 Office of Institutional Research, Planning & Effectiveness
OFF-CAMPUS LIVING COSTS BY YEAR 16,000 14,000 Public 4-year 12,000 Public 2-year 10,000 Private nonprofit 8,000 6,000 For-profit (academic year) For-profit (program) 4,000 2,000 0 2006 2007 2008 2009 2010 2011 2012 2013 Office of Institutional Research, Planning & Effectiveness
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 3rd party rankings, unless statistically adjusted Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
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 Office of Institutional Research, Planning & Effectiveness
