Economics of Higher Education

Very often in higher education, when we look at enrollment numbers, the numbers are aggregated.  We look at the headcount of students or the number of full-time students or the number of new students or transfer students, etc.  We also look more and more at the discount rate, once again by different categories of students.  We know, for example, that typically first time full-time students have a higher discount rate than transfer students or part-time students or continuing students.  And because of that we know that increases or decreases in categories also have bottom line implications, even if the total number of students remains the same.

Some of our institutions admit students to individual schools or programs within their university.  Others, more prevalent in number, admit students to the university and once admitted, these students can major in almost any area and can typically switch majors at their discretion.  In those cases, there can be huge cost differences that also can positively or negatively impact the bottom line.

STEM courses and STEM majors have become more and more popular on many campuses.  I understand the shift in student majors given that in engineering and in various science disciplines the job prospects after graduation are more robust than in certain other fields.  For both students and their parents, job prospects are not an insignificant factor and, while fully supportive of the liberal arts, I know that this emphasis on outcomes measures is a reasonable response by both students and their parents.

In these areas, faculty are able to request higher initial salaries and, often, start up funding in addition. Labs often are larger than classrooms but enrollment is often smaller than in a regular classroom.  Campuses, which look like they have plenty of room in general and teaching rooms in particular, can often look much more restrictive and crowded as the change in enrollment patterns and in the layout of physical plant takes place. It might even be economically advantageous to limit enrollment in some areas while providing additional economic incentives to enroll in lower cost, lower equipment intensive areas.

I often talk about the importance of being an intentional community to the extent possible. Trying to shape the enrollment, not only by level of student achievement and the commensurate scholarship/financial aid commitment but also by major so that that the lower cost majors can help moderate the higher cost majors and in that way keep tuition growth somewhat in check.  And if we can add future donations by major to our equation, we can be even more sophisticated in our analysis.