Panel Paper: The Effect of Differential Tuition On College Major Choice

Thursday, November 8, 2012 : 1:55 PM
Carroll (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Kevin Stange, University of Michigan

Many universities have recently enacted differential pricing by undergraduate level and/or program as an alternative to across-the-board tuition and fee increases. Differential tuition makes prices more closely aligned with instructional costs and with students’ ability to pay post-graduation. For instance, engineers and business majors are more costly to teach but have higher earnings upon graduation and are thus in a better position to finance higher tuition fees with loans. This paper provides the first estimates of the consequences of these policies on students’ major choices. Results suggest minimal impact of differential pricing for engineering, business, and nursing on students’ major choices, with little heterogeneity by student characteristics such as family income. Other factors – preferences for certain majors, ability, and earnings differentials – must be a stronger determinant of major choice, leaving many students far from the margin of indifference between majors.