Tuition Hikes and Student Performance

This paper develops a simple time-allocation model to examine the relationship between college tuition and students’ performance at college studies. We find that an increase in tuition lowers performance. Further, it is found that an increase in the wage rate lowers performance (since it results in an increase in the hours spent working). Our model thus (indirectly) provides theoretical support to the empirical finding that an increase in the minimum wage may actually increase employment, established through the studies of (among others) Card (1992a, 1992b), and Card and Krueger (1994). We also examine how the mean and variance of the students’ household income affects the average performance level. We find that an increase in the mean raises performance. Interestingly, a change in the variance that leaves the mean unchanged has no effect on the average performance level. INTRODUCTION Annual increases in tuition have become a staple feature of the American college-education picture (see Kline and Murray-Plumer, 1998; Levinson, 2001). While most parents do contribute (in differing degrees) towards meeting the college expenses of their children, their levels of support have not been rising in proportion to the tuition increases (see Kline and Murray-Plumer, 1998). The onus, then, has fallen on the student to come up with larger and larger sums of money to close the “fundinggap.” Students have sought to meet this burden through increased borrowing and working additional hours at their part-time jobs (or taking on employment if they were not employed) The increased “work-responsibility” has, expectedly, not had a salutary effect (to say the least) on their performance at college studies (see Wehrman, 2003). The above discussion, then, suggests a negative relationship between changes in tuition amounts and changes in performance at college studies. The primary objective of the present paper is to make a first attempt at formally investigating this “tuition-performance” relationship. 4 One might wonder as to the purpose of a formal investigation since the underling logic of this relationship seems quite clear. A formal investigation, however, may help shed light on questions where pure intuition offers little guidance or the guidance that is offered lacks a firm footing. Some such questions are: a) Would an increase in the “teenage-wage” cause students to work less and spend more time on their studies, resulting in better grades? b) Suppose at a certain college, the relatively rich parents become richer and the relatively poor parents become poorer (implying that the variance of the 1 See, e.g., Aichlmayr, 2000; Report: University of Kansas, 2002; Wehrman, 2003. 2 This negative effect has been more pronounced for lowincome students (see Wehrman, 2003). 3 One might argue, here, that even if a student works longer hours in response to a tuition hike, her performance at college studies may not suffer if she lowers her course-load. It is true that some students do, in fact, so lower their course-load, but a large majority of the students seek to maintain their “usual” course-loads (see Wehrman, 2003). 4 The investigation will be largely exploratory in nature at this stage of development of the paper. More depth will be achieved as our work progesses.