Chairman Owens, Ranking Member Wilson, and esteemed members of the committee, thank you for giving me the opportunity to testify on these important matters.

Today’s topic on price transparency in higher education is an excellent one, as higher education tends to have both high and uncertain pricing, a particularly brutal combination for students and parents. One promising policy that could help address these problems is price transparency.

There has been momentum around three price transparency initiatives in higher education.

  1. Eliminating confusing financial aid terminology
  2. Net price transparency
  3. Price guarantees that lock in (maximum) prices for a predetermined number of years. States like Ohio and North Carolina have already implemented versions of this.

The Pros and Cons of Price Transparency

Reasons to support price transparency

  • · Economic
    • Increases market efficiency
    • More informed decision making
    • Reduced transaction costs
    • Competitive pressure
      • More informed customers mean more competitive pressure to keep prices low
      • Reduced price discrimination
  • · Moral
    • No more surprise bills

What Can We Learn about Price Transparency in Other Industries?

Healthcare has seen mixed effects from increased transparency.

  • Higher ed is more aggregated for billing purposes
  • · Higher ed purchasing is more predictable and can be shopped around prior to purchase
  • Compliance would not be as difficult for higher ed

Recommendations

The main conclusion is that the benefits of price transparency are almost certain to outweigh their costs. New legislation to increase price transparency is appropriate and should:

  • Standardize financial aid terminology.
  • Supplement existing net price calculators with a universal one that facilitates comparisons across colleges.
  • Require a price guarantee for the typical length of a program.
  • Make price transparency a condition of participation in Title IV programs like Pell grants and student loans to ensure compliance.
  • Forbid price controls through departmental regulation that seeks to set or influence the prices colleges charge.
  • Consider applying the price guarantee only for states that don’t implement their own version. Given that there are key open questions (e.g., tuition or total costs?, published prices or net prices?, how long should a guarantee last?), we might benefit from different states experimenting with different versions of price transparency. However, if states implement their own versions of price transparency, require standardized terminology and formats to ensure that information is machine readable and comparable across states.

Thank you again for the opportunity to provide this testimony and I look forward to answering any questions you may have.