Research Project: An Analysis of Liberal Arts Comprehensive Tuition Pricing

Bethany Noltner ’17,  Economics and Management
Don Jones, Associate Professor of Management
Ryan Torkelson, Assistant Professor of Accounting

Gaining “Perspective” on Tuition

“The goal of our research was to determine what type of tuition pricing model is most effective for a residential liberal arts college,” Noltner says. “We looked at tuition from an economical, marketing, and accounting perspective. We also examined how consumers view the price of college tuition and how it affects enrollment and profit.”

The team also reviewed dynamic and fixed pricing at a sampling of institutions. Torkelson says, “Our goal was to quantify success and failure through various metrics. We looked at enrollment, Net Tuition Revenue, and length of the strategy execution.”

Getting an “Inside Look” into Higher Education

It was fascinating for Noltner to speak with vice presidents from colleges that use tuition models that are different from Luther. “It helped me to get a deeper understanding of their enrollment and financial aid process. It was also interesting to learn about the psychology behind it all and gave me a new perspective on how colleges calculate their tuition.”

Jones and Torkelson were intrigued by how colleges have no single method of establishing tuition. ”Many schools have tried different marketing techniques, yet there is not enough data to make sound conclusions,” Jones says. “We did learn that there was a level of risk aversion on trying new approaches to creative tuition pricing.”

A “Hot-Button” Issue

The cost of college and financial aid are popular topics. “When enrollment goes down, most students don't realize how much that affects a campus,” Noltner says. “A lot of small private colleges are beginning to face the reality that they’re not bringing in enough students to be sustainable.”

When this happens, it often starts the vicious cycle of raising tuition. Students start to feel the burden of the bigger expense and colleges try to help out by increasing academic scholarships. “In the end, colleges can earn less money even when students are paying a much higher price.”

What’s Interesting about Tuition Revenue

Noltner thought it was fascinating to learn how much revenue colleges gained per student. “It’s an interesting way to look at schools and make comparisons,” she says, “We learned that while some institutions have high prices and high discounts, they’re gaining the same amount from each student as low tuition, low discount colleges.”

Benefits of Collaborative Research

Noltner appreciated that both Jones and Torkelson have conducted extensive research in their fields. “They helped me look beyond Luther and at the bigger picture of the higher education market today,” she says. “They’ve also given me great direction on how to conduct myself in a workplace after Luther.”

Torkelson acknowledges that it was helpful that Noltner gathered and reviewed the research. “She brought a younger and unique perspective to this project,” he says. “And the project was especially relevant for her since she’s currently paying for college.”