The Big Curve: Trends in University Fees and Financing in the EU and US

Globally, fees and tuition are growing as an important source of income for most universities, with potentially significant influence on the market for students and the behavior of institutions. Thus far, however, there is no single source on the fee rates of comparative research universities, nor information on how these funds are being used by institutions. Furthermore, research on tuition pricing has also focused largely on bachelor’s degree programs, and not on the rapid changes in tuition and fees for professional degrees. This paper offers a brief scan of pricing trends among a sample group of 24 public and private research universities in the US, all with a wide array of graduate and professional programs, and a small sample group of EU universities. We trace a pattern of convergence not only between US public and private institutions, but also find indications that these trends occur among EU universities. We theorize that pricing among major research universities is increasingly influenced by levels of market tolerance, and a convergence in pricing driven in part by the perception that price confers quality and a corresponding level of prestige to consumers. This study focuses on pricing, and hence does not delve into the complex moderating effects of bursaries and student costs such as room and board. The recent implosion in credit markets may seriously shake this emerging pricing model, in large part because it is increasingly dependent on students taking out sizable loans. But it is our sense that the long-term trends in pricing, including some level of convergence, will continue as institutions that are globally competitive look over their shoulder at what their perceived peer (or near peer) institutions are charging for specific degrees and programs. This in turn will influence the entire higher education market.