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Market Rate Tuition July 24, 2012 Cohen Hardin Pan & Tschirhart Applied Economic Research Group AER A Determination and Analysis for Florida State University.

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Presentation on theme: "Market Rate Tuition July 24, 2012 Cohen Hardin Pan & Tschirhart Applied Economic Research Group AER A Determination and Analysis for Florida State University."— Presentation transcript:

1 Market Rate Tuition July 24, 2012 Cohen Hardin Pan & Tschirhart Applied Economic Research Group AER A Determination and Analysis for Florida State University

2 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

3 Determination & Analysis Market Rate Cost to Students Advised Increases

4 Background Drastic cuts Lost revenue FSU $65 million No raises for 5 years Capped growth rate Current tuition $5,826

5 What is a market rate? Price Quantity D1D1 S1S1 S2S2 P1P1 P2P2 P1P1 Q1dQ1d Q2dQ2d

6 House Bill 7129 Preeminence Bill High quality research universities Removes tuition cap Improve value of degree and quality of education

7 Determination & Analysis Market Rate Cost to Students Advised Increases

8 How do we estimate tuition? Select relevant market

9 Aggregated Research Activity Index Per-capita Research Activity Index Very High Research (N=108) High Research (N=98) Research University (N=88) General Selection Process FSU UCF USF UF UM FAU FAMU FIU UWF Source: Carnegie Foundation

10 General Market General Selection Process Very High Research (N=108) Public (N=73) Private (N=35) Public (N=73) Solutions Preeminence Bill Carnegie Classification

11 How do we estimate tuition? Select relevant market Select standards for comparison Public Carnegie Classification Preeminence Bill

12 Carnegie Classification Preeminence Bill

13 Preeminence Selection Carnegie Classification Preeminence Bill

14 Carnegie Classification Preeminence Bill

15 How do we estimate tuition? Select relevant market Select standards for comparison Average the tuition Public11 or more Carnegie Classification Preeminence Bill

16 Preeminence Bill Estimates Preeminence Bill Carnegie Classification

17 Carnegie Foundation Classifies higher education institutions Characteristics Public, Private Undergraduate population Used to control for institutional differences Preeminence Bill Carnegie Classification

18 How do we estimate tuition? Select relevant market Select standards for comparison Public Preeminence Bill Carnegie Classification

19 Carnegie Selection Preeminence Bill Carnegie Classification

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

21 Carnegie Estimates Carnegie Classification Preeminence Bill

22 Susceptible to outliers Characteristics differ Small sample sizes Concerns with Averages Preeminence Bill Carnegie Classification

23 Preeminence Bill Carnegie Selection Hedonic Regression Solutions

24 Hedonic Regression Vector of attributes for a good Contributions to price Typically used to price housing Bedrooms Square footage Lot Size Carnegie Classification Preeminence Bill Hedonic Regression

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

26 Regression Selection Carnegie Classification Preeminence Bill Very High Research Public Private Hedonic Regression

27 How do we estimate tuition? Select relevant market Select variables for regression Very High Research Public Carnegie Classification Preeminence Bill Private Hedonic Regression

28 Close Teacher-Student Relationship Price Quantity D1D1 S1S1 D2D2 S2S2 Q1dQ1d P1P1 P2P2 Carnegie Classification Preeminence Bill Q2dQ2d Hedonic Regression

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

30 What Affects Tuition? Carnegie Classification Preeminence Bill Hedonic Regression

31 Available Proxies for Attributes Carnegie Classification Preeminence Bill Hedonic Regression

32 How do we estimate tuition? Select relevant market Select variables for regression Run the regression Carnegie Classification Preeminence Bill Very High Research Student Faculty Ratio Room and Board External Funding Rank Student Services Degree Offerings PublicPrivate Hedonic Regression

33 Regression Selection Carnegie Classification Preeminence Bill Very High Research Public Private Hedonic Regression

34 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

35 VariableParameter EstimatesStandard Errors stufac **( ) lnstuserv0.246***(0.0689) lnrb0.185(0.193) lnexternal-0.180**(0.0789) rank (0.169) rank *(0.133) rank *(0.122) rank (0.118) rank (0.125) rank (0.125) as high grad (0.123) asp high grad-0.018(0.0696) pas some grad (0.194) pas high grad (0.0622) Constant7.781***(2.081) *** p<0.01, ** p<0.05, * p<0.1 Public R2R2 Adj R (N=70) F-ValueProb> F

36 Student-Faculty Drives Tuition Carnegie Classification Preeminence Bill NegativePositive Hedonic Regression

37 Regression Selection Carnegie Classification Preeminence Bill Very High Research Public Private Hedonic Regression

38 VariableParameter EstimatesStandard Errors stufac **( ) lnstuserv0.120***(0.0407) lnrb0.307**(0.134) lnexternal-0.122***(0.042) rank *(0.123) rank **(0.105) rank *(0.105) rank (0.102) rank (0.105) rank (0.108) as some grad (0.168) as high grad (0.0631) asp some grad-0.249(0.168) asp high grad (0.0449) pas some grad0.0316(0.169) pas high grad (0.0511) public-1.108***(0.0681) Constant8.046***(1.378) *** p<0.01, ** p<0.05, * p<0.1 Public and Private R2R2 Adj R (N=104) F-ValueProb> F

39 Public and Student-Faculty Drive Tuition Carnegie Classification Preeminence Bill NegativePositive Hedonic Regression

40 Estimated Tuition Carnegie Classification Preeminence Bill Hedonic Regression

41 Determination & Analysis Market Rate Cost to Students Advised Increases

42 Declining Tuition Coverage

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

44 Students with Bright Futures & Prepaid

45 Bright Futures Breakdown

46 Costs Remain Zero for 34%

47 Costs Increase by Less Than $2,000

48 Determination & Analysis Market Rate Cost to Students Advised Increases

49 Prepaid Plan Prices Double

50 Forecasted Recommendations

51 $0 - $5,501 15% to Market Rate 6.5% $7,781 Determination & Analysis Market Rate Cost to Students Advised Increases

52 Cohen Hardin Pan & Tschirhart Applied Economic Research Group AER


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