Article: How do colleges decide their pricing?

Helping talented low-income students attend college, however, isn’t about getting 10 more poor but uber-briliant kids into Harvard; it’s about getting 1,000 more poor but talented kids into any decent college. It’s almost as though we only care about poor kids if they are Harvard-brilliant worthy and to heck with them if they are smart and hard working but not at that league.

Yes. Isn’t that part of the argument I was making for why differential pricing based on ability to pay is a net benefit to society? Because for 99% of colleges that’s a key source of funding of scholarships. Tuition isn’t a make or break for the Harvards of the world.

There are other ways to help low-income students, like Pell grants and other programs. Those are good things, but one big problem is that it seems like the schools just raise their prices to capture most of the surplus benefit, so in the long-run they just drive the cost of college education up for everyone across all income brackets. We need to do something drastic on the cost control side to make the system work better. One advantage of the tuition cross-subsidy model is that it doesn’t frictionlessly inject new money into a bottomless pit, so it doesn’t cause costs to rise.

As far as state subsides for public universities go, study after study has shown that they benefit the upper middle class the most; they mostly aren’t targeted at low-income students. However, public universities have done a better job at cost control than private ones.

Just wanted to note that I didn’t make this claim—I was simply noting college pricing as one of many sectors where the idea of a nicely rational capitalist system breaks down because of the lack of transparency.

@pardullet

I have a good grasp of how financing works, thank you.

My point is, this is a case being used to show how outrageous it is that college is cheaper - sometimes- for lower income people and I am pointing out that the example of cars and houses really doesn’t work because they are, in fact, cheaper for higher income people.

@al2simon

Good, then you get my point. I agree completely and I wish people would stop comparing the two.

Middlebury’s enrollment is 2,526, and they have a budget of $287,000,000, so they are spending $113,618 per student.

In order to spend $113,618 per student, Middlebury must have quite a few well-paid upper-level administrators in the strata.

OHMom says (paraphrased) “low income people get shafted on interest rates solely due to their income.” I responded that, no, it is not due solely on their income, it is based on their greater risk of default . See the difference?
You imply that “the man” is shafting poor people. I’m pointing out that it’s financial risk, not an attempt to lavish favors on the wealthy or step on the downtrodden.
You are correct that comparing financing a veh/home is quite different than a college education. Apologies for not clarifying my point.

And you are incorrect in that statement. Loan rates are based on credit quality, not income level. You can make a $1,000,000 a year and have lousy credit. Between the following two choices, who would get a lower interest rate on a 30 year mortgage?

A - Annual Income $120,000, credit score of 500, bankruptcy in the past seven years.

B - Annual Income $80,000, credit score of 750, no bankruptcy in the past seven years.

I didn’t say “solely”. But I agree the comparison is a mess, that’s why I made my post, to point out the absurdity of it.

Loan rates are based on both, zinhead, that’s why they ask about your income and don’t just give you and your 750 credit score whatever car or house you want.

The rate based on credit score and the amount is based on income and debt to income ratios. There- you are both right.

Just so. And the price of a college isn’t ONLY determined by your income either. Your grades/test scores, your athletic desirability, artistic/musical ability, state of residence, to name a few, can all affect the price.

@Pizzagirl-of course not. But the price of the car doesn’t change because of income.

@dadof1-I am not being political. I’m not sure how you got that from my post.

@OHMomof2-financing and price are different. The price should be the price. If it’s negotiable, fine. However, charging more for something simply based on income is no different from charging more for something because of race, or some other thing that has nothing to do with the price of the thing. It’s absurd.

It may be absurd to you but it’s very common and certainly goes beyond income. In fact having a lower income - needing financial aid - can make it harder to get into some colleges, period. I find it absurd that a college will change the price for me if I can throw a football but that’s life.

The price isn’t different based on income. How much help the college, and in particular its donors, are willing to give a student to reach that price, is what varies based on income. It’s an important distinction. To say, “I want to pay what the students whose tuition is supported by donors are paying” is all well and good, but who do you think will pay to lower those costs for you?
(Speaking of need-based aid.)

I know I’m going to regret trying to teach ECON 101 here, but … low income and high income people actually pay essentially the same cost for car loans. It’s true that low-income people often have a higher stated rate, mainly because of worse credit or lower down-payments. But they default a lot more, and those who default often get a great deal because they getting to use the car for free for many months until it is repossessed or whatever. After you factor in the losses on these loans, plus the labor cost of collecting the car back, the rates they pay in aggregate are really no different (at least for the last 15-20 years - they paid more in the early 90’s and before).

Houses are much more complicated to analyze because of the tax-deductibility of mortgage interest vs. the owner-occupied imputed rent effect. I don’t know how this all nets out. But I can tell you that on an aggregate basis, all the subprime borrowers in the 2000’s did a lot better with respect to what they paid on their loans than conventional borrowers … after all, who the hell do you think all the banks etc. lost all their money to in the “Big Short” movie?? The stripper who owned 5 houses :wink:

People default on student loans too.

I’d also like to see the car dealership that asks me for my grades and sat scores so they can calculate the price of my car. Our maybe they’d like to have me write an inspiring essay about my volunteer service in Costa Rica for the special pricing offered to just a few aspiring car buyers…

^Actually, my kid gets better pricing on his car insurance for having good grades. He had to bring his transcript to the broker for the good student discount.

Mine too :slight_smile:

Airline tix are among the MOST transparently priced goods on the market. Yes, a seat can be sold at different prices, but the price is offered to all and is published publicly so anyone can compare the price vs other airlines. The ticket price shows the airline portion of the fare and the tax portion of the fare.

It’s not like college pricing where only Family A is offered the discount price, but not Family B.