The complexity is that so many people expect them and that simply dropping down in selectivity will automatically garner the discount but I think there is diminishing return on that thinking. The college is still a first choice for a segment of colleges so the reality is not every seat going in is for sale so to speak. They will use it to add whatever it is that might go missing to put together their traditional class. Plus the herd mentality rules…colleges get known for their discounting and within a few years more families rush to that college and then with more choices of students to pick from the discounts seemingly tighten up.
The moment colleges started deciding to equally price their tuition to top 20 schools, they HAVE to discount. Most people will not pay the same price for a seat at, say Brown, vs GW or Fordham. So the schools with these High sticker prices need to entice these higher-level students to attend. At the same time they can accept a nice quantity (10-20%?) of full pay lower rank students. The game works well for them because the High sticker price is resulting in a bunch of full pay students, whereas a sticker price that was, say $15,000 less, would not give them the ability to give so many discounts to the top students. It really hurts the average good student trying to attend Fordham, for example, who can’t afford the sticker price, doesn’t qualify for financial aid, and won’t get a discount. If the sticker price was more reasonable lots of these kids would attend.
I feel like this is going to blow up at some point with sticker prices getting into the $70,000 range (looking at you again, Fordham). But we’ve been talking about that for years and there’s no end in sight so I don’t know.
We need a really smart student to invent a new model that will upend the current model of College admissions and pricing. Like what Uber did for taxi service.
@suzyQ7 - Brown doesn’t offer merit aid.
I know that @jym626. I guess I didn’t make my point very clear. The sticker price at a top school like Brown is the same as the sticker price at lower-ranked schools like Fordham. Therefore lower-ranked schools have to discount.
@3scoutsmom I haven’t read the article, but I have heard that sentiment bandied about. Somehow people think its “unfair” that families with less need should get any kind of discount.
In Georgia, when they first developed the HOPE scholarship, they imposed an income cap, so families without perceived need were excluded from qualifiying for the scholarship… That didn’t go over well and the income cap was abolished about 2 years later. If it was designed to keep bright students instate, ability to pay should not matter. Ditto for these other merit awards in other schools. If they want to lure strong students, their/their family income should not be the issue.
@suzyQ7 Uber has certainly disrupted the taxi and car service market, but I am not sure it is a good example for long term stability…
“By any measure, Uber’s seven-year entrepreneurial journey has been extraordinary. No venture has ever raised more capital, grown as fast, operated more globally, reached as lofty a valuation – or lost as much money as Uber.” (Forbes https://www.forbes.com/sites/lensherman/2017/12/14/why-cant-uber-make-money/#5410852410ec). As consumers we love Uber, but their pricing and cost structure is so far out of whack it is doomed to fail without major changes.
The issue with merit scholarships lies more with the consumer than with the colleges. As consumers in the market we say that the model is wrong and should be change, but the market repeatedly demonstrates that what the are doing is what we want. The consumers in this market are more enamored with, and drawn to, merit scholarships than we are to simply providing an accurate price up front.
I’m not sure how accurate pricing would work since the colleges give different discounts to students with different levels of stats. Clearly, the schools are not just trying to fill seats but to buy the highest achieving students.
There’re some true merit scholarships, but most are just tuition discounts. Most privates more or less charge the same sticker price, even though their qualities vary dramatically. Most are not worth the sticker price and it’s kept high for optics. In reality, few pay the sticker price and many of these colleges discount their price in the form of merit scholarships to attract desirable applicants who may not qualify for need-based aid. Like constant discounts in merchandises with high list prices, these scholarships are part of these colleges’ marketing strategies.
All institutional scholarships are part of a colleges’ marketing strategy. They are a way to fill seats AND attract top talent.
I think the Uber model could work for college! I’ve read posts on CC about how there’s a glut of PhDs in the USA … so lets put 'em in cars! Just think, a kid needs a lecture on oscillation in physics. He fires up the Uber-versity app to find the closest available physics professor driving around and selects her. The prof pulls up out front in less than two minutes and gives the lecture. Just think of the continuing education benefits. Lets say I need a ride to the airport for a business trip. Instead of spending an hour making small talk about the weather or traffic or whatever … I get an hour lecture on the latest in String Theory!
Personal, inexpensive education, it could work 
I think of it more like the college is trying to find its place in two markets:
One is the attracting applications market, which is closely related to looking prestigious and keeping up in the rankings . Being a “cheap school” in comparison to their peers makes them look bad, which hurts ratings and results in fewer applications.
Then there’s the actual enrollment market, when parents are paying much closer attention to the bottom line. The parents now know little junior is not getting into Stanford, the schools where junior has actually been accepted are all pretty similar, and when it comes right down to it, they’re just not willing to pay a Stanford price for any random college. The one offering the sweet-spot discount wins!
IMHO, as a society, it’s important to reward students that work hard. Calling a tuition discount a “Merit Scholarship” suggests that it is a well-deserved reward - even if the majority of kids receive that same scholarship. Semantics are important, particularly when so much of college admissions seems random.
@droppedit I would use that app! I would invest in that app!
@HMom16 I don’t know of too many schools where everyone receives the same discount, however, I do know schools where nearly everyone receives some discount. I think under those circumstances, its fair to call it merit.
Two interesting articles on tuition discounting (I don’t agree with some of the comments in the second, the “essay” one, but it is interesting):
This one http://highereddatastories.blogspot.com/2017/06/the-discount-dilemma.html has an interesting table that shows the amount of discounting relative to the mean SAT scores of the colleges (left-hand column).
There’s bifurcation in college education. At the top end, supplies are limited and there’s great demand. Below the top end, supplies are abundant and there’s intense competition with peer colleges (and with online education in the not-too-distant future) as demographics are not in their favor.
@jym626, I just skimmed the second article but from what I gleaned, the problem I have with it’s logic is that schools have tried to go off of discounting and going with one low rate, and those schools have not found that strategy to be helpful for them.
@PurpleTitan - Take a look at the first article and the third. I would love to hear your thoughts. The reality, as you say, is that those schools who have tried just lowering the price didn’t do as well on a number of metrics.
Keep in mind that the “consumer” here is a combination of parent/student. The parent is hopefully more mature and able to perceive that the 35K school is as good as the $65K school that gives $30K in merit aid. But I know my D19 would not see it that way. She’d be afraid the 35K school is inferior and prefer the 65K school that “recognizes” that she’s special.