Wednesday, December 20, 2006

Joe Six Pack U. 16, Country Club U. 4

By Richard Vedder and Matt Denhart

As stated often before, there are two types of universities from the student perspective. The first is the no-nonsense, low cost commuter school that serves the human capital investment needs of students --it is a cheap way to try to get the credentials needed for good jobs. The second type of school is the residential university, which in addition to the investment function, has a socialization function, promoting social interaction between students who literally live together. These schools tend to be more expensive, mainly because of room and board costs, but also because they tend to have somewhat higher tuition and are usually somewhat more prestigious. They tend also to be more research oriented.

It might be expected that over time the growth would be in the residential schools, since an increasingly affluent population is willing to pay for the socialization as well as the education. Thus, we might well predict that the long term trend should be for enrollments to rise more at residential universities than commuter colleges.

That trend did hold in the 1990s, but abruptly reversed early in this century. We took 25 public residential schools, often flagship universities, and paired them with 25 public commuter schools in the same states. For example, we took the University of Illinois at Urbana-Champaign and compared it with the University of Illinois at Chicago Circle, a commuter school. Similarly, we compared the University of Georgia in Athens, predominantly a residential school, with George State University in Atlanta, which is heavily a commuter institution.

In the 1990s, total enrollment rose more in the residential schools than in the commuter institutions -- 7.70% vs. 5.29%. An increasingly affluent American population wanted to buy the best for their kids, including the expensive residential experience. From 2000 to 2004, however, a huge shift occurred. Enrollments in the commuter schools soared, rising 15.99 percent, nearly quadruple the 4.32 percent rise in the residential institutions. While belt-tightening associated with the 2001 recession may explain some of it, we suspect the huge increase in commuter enrollment may reflect a more long term substitution of lower price commuter schools for expensive residential colleges at a time when college costs were soaring. In other words, the notion that college students and their parents are unresponsive to tuition fee increases that have been going through the roof may be erroneous. While the government often provides a bit of grants, the incremental cost of going to the more expensive schools is often paid for by the students and their families --and they are sensitive to those costs.

To be sure, a more rigorous and comprehensive study is needed, and perhaps things are reverting to the 1990s trend as the economy booms and tuition increases moderate a bit. But the 18 to 24 age cohort is going to start shrinking in size soon, and I suspect the residential college’s share of the enrollment pie may be in for a somewhat longer term decline. People are getting sick and tired of spending $20,000 a year to send kids to Country Club University for five or six years, when Joe Six Pack University will give a nearly equivalent credential for less than half the cost.


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