Student Aid: Price Discount or Educational Investment?

How University Endowments Respond to Financial Market Shocks: Evidence and Implications

“…13 Winston (1999) summarizes a number of ideas relating to universities' objective functions, including Clotfelter's (1999) suggestion that universities are motivated by "the pursuit of excellence," Bowen and Breneman's (1993) notion that universities seek to improve the quality and equity of educational services, and James ' (1990) idea of "prestige maximization." More recently, Hoxby (forthcoming) posits that a university maximizes its contribution to the intellectual capital of society, valued at social returns.…”

Applying economics to institutional research on higher education revenues

“…To this point, I have simply discussed higher education institutions in the aggregate, but Bowen and Breneman (1993) note that important differences exist between selective and nonselective institutions. For selective institutions, the treatment of institutional aid as a cost may not be problematic, because these institutions have an extended queue of students desiring enrollment and consequently are never under capacity.…”

“…So enrolling a student needing large amounts of financial aid presents a real monetary cost: the missed opportunity to enroll a student who would pay full tuition. Bowen and Breneman (1993) call institutional aid an educational investment for this case, because revenue is forgone to ensure the school has a student body possessing certain characteristics. For nonselective institutions, Bowen and Breneman (1993) describe institutional aid as a price discount, a term borrowed from microeconomic theory.…”

“…Bowen and Breneman (1993) call institutional aid an educational investment for this case, because revenue is forgone to ensure the school has a student body possessing certain characteristics. For nonselective institutions, Bowen and Breneman (1993) describe institutional aid as a price discount, a term borrowed from microeconomic theory. Because these schools cannot fill their capacity simply by enrolling students paying full tuition, no revenue is forgone by offering financial aid.…”

Student Aid Issues at Private Institutions

“…There is a wide range of arguments on this topic, but the key question is whether tuition discounting is an effective means of ensuring sufficient class size to create net revenue (Bowen and Breneman, 1993). Some research shows little correlation between enrollment and tuition discounting (Lapovsky, 1996).…”