Research
Upper tail drivers, steady contributors, and equalizers: How individual revenue sources shape financial inequality across higher education institutions.
John Jesse Cheslock, Penn State ScholarSphere, 2025
This paper provides the first comprehensive description of how individual funding sources shape financial inequality across higher education institutions.
The description employs a new set of revenue measures derived from multiple subcomponents of the Integrated Postsecondary Education Data System finance survey. These measures address limitations pertaining to aggregation and standardization found in previous work. The methods—a decomposition of the Gini index—come from the literature on income inequality. The results detail the contributions of individual revenue sources to overall inequality patterns for the 2004 through 2020 fiscal years. Net tuition revenue from government scholarship programs equalizes per-student revenue while net tuition revenue from students and their families steadily contributes to differences across institutions, especially for total revenue inequality. Government grants (net of student scholarships) and private gift, grant, and investment revenues contribute greatly to upper-tail inequality within the private sector and among public doctoral universities. Government appropriations play a hybrid role, equalizing revenues between the public and private sectors and differentiating revenues within the public sector. Over time, the revenue mix changed the most at public doctoral universities, where private revenue sources increasingly shaped resource differences.
Do not discard $16 billion: Accounting for IPEDS system administrative unit observations.
John J. Cheslock, Penn State ScholarSphere, 2025
Around $16 billion in revenues and expenditures are reported within administrative unit observations in IPEDS finance data each year.
Commonly used procedures for preparing IPEDS finance data lead researchers to incorporate none or only a portion of these dollars. When incorporated, the dollars are sometimes only assigned to some of the system members (i.e., the higher education institutions associated with the administrative unit). This research note provides clear guidance for how researchers can fully incorporate these dollars and connect them to all system members. Before doing so, it analyzes IPEDS data to reveal five novel findings regarding revenues and expenditures held within administrative unit observations. The guidance contains a simple decision rule that will prove useful for most studies: The allocation solution (i.e., allocating administrative unit dollars to individual institutions) should be used for systems housing four-year public institutions and the collapsing solution (i.e., combining information for all system members into one observation) should be used for systems solely housing private institutions or two-year public institutions. Further information is supplied for those who want to develop methods that are tailored to the particulars of their studies. To make the guidance feasible to implement, supplementary resources are provided. This research note ends with an illustration that demonstrates how research findings can meaningfully vary across alternative treatments of administrative unit observations.
Adjustments needed: The reporting of scholarship grants within the IPEDS finance survey.
John J. Cheslock, Penn State ScholarSphere, 2025
Researchers that do not properly adjust IPEDS Finance data so that they align with reporting guidance and practice will employ flawed measures of organizational finances.
This research note provides an accessible introduction to the reporting guidance provided to higher education institutions regarding scholarship grants, the most challenging aspect of financial data. It also describes reporting practice and reveals great variation across institutions in their treatment of scholarship grants. In some instances, this variation relates to differences across accounting standards and the flexibility contained within individual standards. But in other instances, the variation reflects inconsistencies between reporting guidance and reporting practice. The implications of reporting practice for measures of net tuition revenue, government non-scholarship grants, government scholarship grants, and student-based tuition payments are considered. Clear guidance is provided for researchers seeking to measure these constructs within specific contexts. Guidance is also provided for organizations that shape reporting practice through reporting guidance and survey design.
An updated taxonomy of tuition discounting.
John J. Cheslock, Penn State ScholarSphere, 2025
A taxonomy of tuition discounting was introduced by Allan (1999) that allows researchers to choose between alternative tuition discounting measures to find one that best aligns with the context of their study.
But researchers have not connected the taxonomy to publicly available data, evaluated the suitability of that data for measuring key concepts in the taxonomy, or identified how discounting patterns vary across the taxonomy’s measures. I engage all three of these tasks to help researchers identify opportunities to employ the taxonomy in their work. Through refinement of concepts and the provision of formulas, the taxonomy is connected to data from the IPEDS Finance survey. The reporting patterns associated with two key variables from that survey—funded and unfunded institutional scholarship grants—are evaluated to confirm that they generally match expectations. Data from the period spanning the 2004 and 2020 fiscal years are employed to describe discounting patterns for multiple measures from the taxonomy. The differences across discounting measures relate to an institution’s control status (public versus private nonprofit), Carnegie classification, and level of private gift and endowment income revenue.
Ever-increasing listed tuition and institutional aid: The role of net price differentials by year of study.
John J. Cheslock and Sam O. Riggs, Educational Evaluation and Policy Analysis, 45(1), 3-26., 2023
Over the last forty years, non-elite private institutions have steadily increased listed tuition and institutional aid.
This practice has continued even though the net tuition revenue gains from incoming students have become minimal. We present a new explanation for why these yearly increases continue: The pricing structure of non-elite privates relies upon net price differentials by year of study that are generated through annual increases in listed tuition. We describe how the presence of transfer costs encourages the use of this pricing structure and then document the presence of this pricing structure using data from IPEDS and NPSAS. Similar analyses of public and elite private institutions reveal differences across sectors in the use of differential pricing by year of study.
The business model employed by US colleges and universities
John J. Cheslock and Artemio Cardenas
McNaughtan, H. Garcia, & S. Schiffecker (Eds.), Innovative and Comparative Approaches to Finance
and Budgeting in Higher Education (pp. 7-20), New Directions for Higher Education Number 198.
Hoboken, NJ: Wiley., 2022
A hallmark of the U.S. higher education system is its heterogeneity.
From research universities to community colleges, each institution seeks to excel in serving its respective mission. To do so, the institution must have a viable business model that ensures it generates sufficient revenue to offset expenditures. This article describes the business models currently used by different sectors of higher education, emerging threats to those business models, and the potential strategies that can be employed in response to those threats.
Concentrated or fragmented? The U.S. market for online higher education.
John J. Cheslock and Jaquette Ozan, Research in Higher Education, 63(1), 2022
As the financial challenges facing the U.S higher education industry mount, colleges and universities seek new activities that can improve their financial situation.
Online education programs are often viewed as a promising option due to growing student interest and the substantial net revenue generated by early entrants that leveraged economies of scale and scope. The number of schools that can experience similar outcomes will depend upon whether the online market is primarily concentrated, with a small number of higher education institutions enrolling most students, rather than fragmented, with large numbers of institutions enrolling meaningful amounts of online students.
Psychology, market pressures, and pricing decisions in higher education: The case of the U.S. private sector.
John J. Cheslock and Sam O. Riggs, Higher Education, 81(4), 757-774, 2021
We examine listed tuition and institutional aid practices within the US private sector, a sector where market pressures are relatively strong and consequently influence organizational behavior.
We present a conceptual framework that highlights three psychological aspects of pricing—the price-quality heuristic, ego-expressive aspects of aid, and the silver lining effect—that can influence the attractiveness of specific pricing strategies to prospective students. We review relevant literature from psychology, marketing, and behavioral economics to illustrate that these three psychological aspects should be especially important in higher education. Furthermore, we identify pricing strategies that could position colleges and universities advantageously within market-based competition due to these aspects. The key elements of the strategy include high listed tuition, widespread institutional aid awards, and aid awards that are framed in a manner that confers distinction upon the recipient. We use data from a range of sources to describe the nuanced ways in which these pricing strategies are used within the US private sector. Our empirical analysis reveals that many schools, especially those in the middle of the prestige hierarchy, provide institutional aid to all or almost all of their incoming students, which allows them to set listed tuition prices well above the demonstrated willingness to pay of students. We also present evidence that aid awards are named in a manner that exaggerates the distinction conferred by the award. Our conclusion highlights implications of our work for students, organizations, policymakers, and future research.
Decomposing financial inequality across U.S. higher education institutions.
John J. Cheslock and Yahya Shamekhi, Economics of Education Review, 78, 1-12., 757-774, 2020
The level of financial inequality among U.S. higher education institutions has important implications for students and society, yet few scholars have examined this topic using established methods for measuring inequality.
This paper updates and extends previous work while introducing decompositions that shed light into key trends that we observed for the 2004–2017 period: increasing inequality in total expenditures and decreasing inequality in per-student expenditures. The results of our decomposition highlight how these opposing trends related to rising differences in enrollments and an increasingly positive correlation between an institution's enrollment level and its expenditures per student. Our decomposition results also show that both between-group differences and within-group differences contributed to the observed trends. Further examination of within-group differences reveals that inequality patterns differed meaningfully by institutional type, with doctoral universities and private baccalaureate colleges possessing higher levels of inequality and a more positive correlation between per-student expenditures and enrollments than master's institutions and public associate's colleges.