Student Matriculation Decisions and Financial Aid

14 STUDENT MATRICULATION DECISIONS AND FINANCIAL AID* Michael L. Tierney The Pennsylvania State University A common bit of folklore is that public and private postsecondary insti­ tutions are in direct competition for students. Further, private institu­ tions lament the fact that they are at a competitive disadvantage due to the "tuition gap," the difference between the stated tuitions of public and pri­ vate institutions. However, this tuition gap argument overlooks the fact that both public and private institutions employ differential pricing poli­ cies by awarding financial aid to students from varying income and ability levels. The net effect of such aid practices is to narrow the differences in the costs of attending these institutions. Questions remain, however, concerning the effectiveness and efficiency of these financial aid programs for providing equality of choice between pub­ lic and private institutions. The purpose of this study is to examine some of these questions. Specifically, what is the additional cost of inducing one more student to enroll in a private rather than a public institution? Given these estimates, what are the trade-offs between additional federal government expenditures and increases in the proportion of students enrolled in the private sector? For purposes of this paper, these latter questions will be confined to the federal government's Basic Educational Opportunity Grant (BEOG) financial aid program, primarily due to the difficulties in­ volved in estimating the costs to the taxpayer of other financial aid pro­ grams . A Model of Student Public/Private Choice Behavior This study assumes that the decision of a student to matriculate at a particular institution is the termination of a sequential choice process. The first decision in this process is the decision to attend or not to attend a postsecondary institution. Once the future student has decided to go to college, he must decide to which institutions to apply. (Hereafter, the in­ stitutions to which the student applies will be called the student's choice set.) Within each student's choice set, it is assumed that there is at least partial ordering of the student's preferences, in which one institution is the most preferred or "first choice." Finally, the future student is con­ fronted with a decision to matriculate at one institution from among those offering admission. Figure 1 displays these stages in the college student's choice process. Although this schema is becoming increasingly demanding in terms of data re­ quirements, it does not display some additional alternatives. For instance, the figure does not display the "not accepted" possibilities due to the fact that the decision to admit is an institutional and not a student decision. The varying probabilities, unless otherwise indicated, are based upon calcu­ lations presented later in this paper. There are, of course, alternative ways of partitioning this complex de­ cision process. For instance, Kohn, Manski, and Mundel (1974) postulate that if an individual is not able to matriculate at his most preferred institution then he probably will not go to college at all. These alternative formula­ tions must also be investigated because the way in which these complex deci­ sions are partitioned may affect the overall understanding of the college choice process (See Luce, 1959). A critical constraint in partitioning such *This paper is a revised version of a presentation made at the ASHE Annual Meeting, April 19, 1979, Washington, D.C. The author wishes to acknowledge the value of the comments of the anonymous reviewers in preparing the revi­ sion . 15 STUDENT COLLEGE CHOICE DECISION PROCESS Figure 1 COLLEGE CHOICE DECISION PROCESS 1 Estimates developed by Carroll, et al., 1977. complex decisions is the practical question of the way in which the data are collected. This last issue is discussed below. The focus of this study is upon the last stage in this decision process. Further, the study is concerned with only those students who have at least one public and at least one private institution within their choice sets, as is indicated in Figure 1. The research question addressed is: Given the initial preferences for either public or private institutions, what is the probability that a student will matriculate at a private college or univer­ sity? Estimates of the final four probabilities in Figure...