A preliminary assessment

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A preliminary assessment of the distributional
impacts of institutional grants Prepared for
presentation at the 22nd Annual Student Financial
Aid Research Network Conference David S.
Mundel June 2005 david.mundel_at_comcast.net
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Institutional grants (i.e., price discounts) are
a major source of grant aid to undergraduates
Current dollars for dependent students
enrolled FT/FY in a single public or private,
not-for-profit college or university (limited to
US citizens and resident aliens potentially
eligible for federal aid)
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Institutional grants or discounts lower the
prices paid in all types of colleges and
universities
Full-time, full-year dependent students in
2003/2004 (limited to US citizens and resident
aliens potentially eligible for federal aid)
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Institutional grants or discounts reduce the
prices facing all types students
Public four-year colleges and universities
Public two-year colleges
Private non-profit, four-year colleges and
universities
Parental income quartiles
Full-time, full-year dependent students in
2003/2004 (US citizens and resident aliens
potentially eligible for federal aid)
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Traditionally, institutional grants or discounts
have been viewed independently, using broad
averages
Average institutional grants in private 4-year
colleges and universities
Parental income quartiles
Full-time, full-year dependent students in
2003/2004 (US citizens and resident aliens
potentially eligible for federal aid)
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These types of assessments tend to present an
incorrect view of the distributional impacts of
institutional grants
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The average size of institutional grants varies
within categories of colleges
Low price private colleges and universities

Average discount
High price private colleges and universities
Average discount
For full-time, full-year dependent undergraduates
in 2003/2004
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And, the enrollment patterns of different
types of students differ within categories of
colleges
Percent of private college students from an
income group, enrolled in a particular type of
private colleges
Low price private colleges and universities

Average discount
High price private colleges and universities
Average discount
For full-time, full-year dependent undergraduates
in 2003/2004
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In addition, it is important to consider that
colleges set both list prices and amounts of
institutional grants
Discounted Price List Price minus Institutional
Grant
Discounted price is both the amount of revenue
that a college receives as a result of a
students enrollment and the amount that a
student pays (from his/her own resources and
resources provided by others)
discounted price is a measure of the amount
that a student pays not how a student pays ---
with resources from parents, external grants,
loans, work, etc.
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Whats wrong with looking at list prices and
institutional grants or discounts separately?
(continued)

• When comparing the treatment of different groups
  of students, the patterns of list prices,
  institutional grants, and discounted prices may
  suggest very different distributional impacts

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To assess the net impact of price discounting,
we need to examine patterns of both list prices
and discounted prices

• A potential approach
• Calculate the ratio of enrollment share to
  revenue share for each group of students assuming
  that students pay list prices (T)
• Calculate the ratio of enrollment share to
  revenue share for each group of students assuming
  that students pay discounted prices (DT)

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• A potential approach (continued)
• To calculate the net impact of price discounting
  (NIPD), subtract the ratio of enrollment to
  payment shares for list prices from the ratio of
  enrollment to payment shares for discounted prices

If NIPD 0, then discounting has had no impact
of proportionality of payment share of group
i NIPD 1, then discounting has resulted in a
reduction in the proportionality of payment
share of group i (i.e., a positive
distributional result for the group under
review) NIPD in an increase in the proportionality of the
payment share of group i
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Some preliminary assessments of the
distributional impacts of price discounting
NIPD
NIPD
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Some preliminary assessments of the
distributional impacts of price discounting
NIPD
NIPD
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Some additional preliminary assessments of the
distributional impacts of price discounting
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Some additional preliminary assessments of the
distributional impacts of price discounting
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A preliminary assessment of the distributional
impacts of institutional grants