The Princeton Review's pricing method has a terrible impact on Asians, study finds

Asian families living in the US are almost twice as likely to be charged higher prices by college test prep service The Princeton Review, according to a new study from ProPublica.

The Princeton Review determines pricing based on a potential customer's ZIP code. As ProPublica notes, there is a nearly $2,000 difference in the highest and lowest prices for the Princeton Review "Premiere" SAT prep course, the company's most expensive tutoring service.

"When it came to getting the highest prices, living in a ZIP code with a high median income or a large Asian population seemed to make the greatest difference," according to ProPublica reporters by Julia Angwin, Surya Mattu, and Jeff Larson. "Customers in areas with a high density of Asian residents were 1.8 times as likely to be offered higher prices, regardless of income."

High-income ZIP codes were twice as likely to be charged a more expensive price, according to ProPublica, although this was not always the case. The report noted that "affluent neighborhoods in Dallas are charged the lowest price, $6,600."

ProPublica found several low-income areas with large Asian populations that were charged Princeton Review's higher prices.

"Consider a ZIP code in Flushing, a neighborhood in Queens, New York. Asians make up 70.5% of the population in this ZIP code. According to the US Census, the median household income in the ZIP code, $41,884, is lower than most, yet The Princeton Review customers there are quoted the highest price," according to ProPublica.

Another example cited by ProPublica is "the gritty industrial city of Westminster, California," where half the residents are Asian with a below average median income, but are charged Princeton Review's second-highest price.

A Princeton Review spokesperson emphasized to Business Insider that the company uses ZIP codes to determine pricing because "95% of our tutoring is all in person." The other 5% are also matched with local tutors, in case the student wants to meet in person, rather than over Skype or another form of online communication.

Prices change among different geographic areas, the spokesperson said, due to differing costs of doing business and varying competitive markets for tutoring services.

The Princeton Review sent ProPublica the following statement:

For each online test prep tutoring service in question, The Princeton Review offers four different prices, based entirely on the geographical region in which the product is offered. These geographical delineations are not drawn at the neighborhood level, but instead are entire cities, regions or states, where pricing is not determined by an algorithm, but by the differential costs of running our business and the competitive attributes of the given market. This is a ubiquitous practice across all commerce, both online and offline. For example, our product costs more in New York City and the surrounding area than it does anywhere else in the country, just as virtually every good or service does, be it gasoline, rent or eggs. No region is a perfect cross-section of the rest of the country, and the areas that experience higher prices will also have a disproportionately higher population of members of the financial services industry, people who tend to vote Democratic, journalists and any other group that is more heavily concentrated in areas like New York City than in the rest of the country at large. But to equate the incidental differences in impact that occur from this type of geographic based pricing that pervades all American commerce with discrimination misconstrues both the literal, legal and moral meaning of the word.

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