Published on 2014/07/07

A Consumer-Friendly Tuition Model: 21st-Century Higher Ed

A Consumer-Friendly Tuition Model: 21st-Century Higher Ed
An effective tuition cost model is critical for institutions to increase access to the programs and innovations that set them apart.
In a competitive marketplace, the real winners are the consumers. Innovations in pricing models are meant to demonstrate value to the consumer while also differentiating competitive deals. Strategies such as “bundling” or “half-off” or even “first one free” are retail promotion tools to attract potential customers by considering how they can “save” by purchasing certain products.

Is higher education any different? Recent high-profile competency-based programs seem to be following the market trend of innovative pricing models. Some institutions offer a “one-price” tuition model that includes learning materials and all the credits students can successfully complete within a given time frame. Is it what some students want? It makes sense, after all; if you can bundle your cable TV bill, why not apply the same financial principles to higher education? It could make the cost structure easier.

Not all universities have the freedom or the willingness to experiment with innovations in pricing models. Public universities, for example, face constraints in how their tuition is accounted for in their overall state budgets. At Utah State University (USU), most tuition flows back to state government, which then allocates budget funds to the university — leaving little room for flexibility and innovation. However, several years ago, the university implemented a tuition “plateau” meant to reward students for taking more credits in a given semester. For example, the tuition cost per credit goes down for each additional credit you register for until you reach a plateau whereupon additional credits no longer cost the student anything. This model encourages students to take more credits, thereby speeding up their route to completion.

Interestingly, online course tuition at USU used a different model than the plateau. Previously, the university was authorized by the state Board of Regents to charge a flat, per-credit tuition for online courses. This benefited online-only students taking fewer credits, but did nothing to incentivize students to take more credits. Indeed, students who were taking both traditional and online courses were also charged two different rates — with the resulting complaints from these consumers. More than 25 percent of USU online students are on the University’s main campus — taking both online and in-person courses. It became apparent, in a competitive education environment, that this was not the pro-consumer cost model that would attract (or even satisfy) a new type of higher education student.

Recently, USU announced that all courses, regardless of delivery method (i.e. traditional, online, hybrid, video conferencing) would charge the same plateau tuition rate — thereby allowing students to flow seamlessly between delivery methods without the negative consequences (and confusion!) of different pricing models. Additionally, the university lowered the tuition plateau from 13 to 12 credits. Now, all credits count toward the plateau, and the expectation is that more students will “bundle” different delivery methods — with the goal of finding the delivery method that best meets their needs, without having to factor cost into their decision.

We’re pushing to find innovative solutions to meet the needs of the 21st-century higher education student. By offering multiple delivery models and introducing more flexible course scheduling, we’re striving to meet student demand — how and when they need their education. However, these efforts would be fruitless if we didn’t also provide an effective cost model for students, something that follows the market trends. After all, if this is what consumers expect in a competitive marketplace, higher education should respond in kind.

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Readers Comments

Val B 2014/07/07 at 11:30 am

I’ve heard of other institutions that have used this “plateau” model with good outcomes. It provides students with the necessary incentive to take on a heavier course load to speed up the time to completion. The fact that this model is applied across delivery methods is also useful for helping the student to develop an education pathway that works for his or her schedule, needs and strengths. I would hope extra support is offered by USU to help students determine how best to take advantage of plateau tuition pricing.

Stephen Gotti 2014/07/07 at 6:44 pm

At the outset, the plateau tuition model has a lot of promise. But there are potential challenges that could arise, most notably that students may feel pressured to take on a greater course load than they are ready for in order to benefit from this model. This could be of particular concern among non-traditional students, for whom cost of higher ed is often a significant factor, and who may not be fully aware of the expected workload in these courses.

Dan Jones 2014/07/08 at 7:32 am

Institutions need to be clear about their objective for seeking out or developing innovative pricing models. “First course free” and other such gimmicks are more marketing tactics than they are innovative pricing schemes. Their intent is to attract enrollment, not necessarily to help the student. The plateau model mentioned seems to be an attempt to help students improve their time to completion. I would be interested to know what kind of thinking has been done around an innovative pricing model that would improve access to higher ed.

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