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In the face of declining state support, many universities have introduced differential pricing by undergraduate program as an alternative to across-the-board tuition increases. This practice aligns price more closely with instructional costs and students' ability to pay postgraduation. Exploiting the staggered adoption of these policies across universities, this paper finds that differential pricing does alter the share of students studying engineering and possibly business. There is some evidence that student groups already underrepresented in certain fields are particularly affected by the new pricing policies. Price does appear to be a policy lever through which state governments can alter the allocation of students to majors and thus the field composition of the workforce. [Copyright John Wiley and Sons, Ltd.]

AbstractThis paper examines the effect of marginal price on students' educational investments using rich administrative data on students at Michigan public universities. Marginal price refers to the amount colleges charge for each additional credit taken in a semester. Institutions differ in how they price credits above the full‐time minimum (of 12 credits), with many institutions reducing the marginal price of such credits to zero. We find that a zero marginal price induces a modest share of students (i.e., 7 percent) to attempt up to one additional class (i.e., three credits) but also increases withdrawals and lowers course performance. The analysis generally suggests minimal impacts on credits earned and the likelihood of meeting "on‐time" benchmarks toward college completion, though estimates for these outcomes are less precise and more variable across specifications. Consistent with theory, the effect on attempted credits is largest among students who would otherwise locate at the full‐time minimum, which includes lower‐achieving and socioeconomically disadvantaged students.