@corinthian I don’t think my daughters would have rated the less expensive school inferior. However, in our search, the options for reasonable cost were public (both in and out of state) and merit. For D1 none of the public options were strong in her exact field. The merit award brought the private school very close to the cost of the public. D2 will be looking at both private with merit and public. Personally, I’m very grateful for the availability of merit and I don’t care whether its called a scholarship or a discount. And I’m proud that my kids’ hard work will result in some extra affordability. It will make the college process far more affordable for all of my kids.
College pricing is a very sophisticated example of what economists call “third degree” price discrimination. Which means selling the exact same product (a seat in the frosh class) at different prices to different groups of consumers. The price changes based on the characteristics of the particular consumer segment. Every single school (from Harvard to Podunk U) does it.
Giving senior or student discounts on movie tickets is a crude method of 3D price discrimination on the basis of income/ability to pay. On the assumption that students and seniors (as a group) have lower incomes and might not buy as many tickets without the discount. College need-based financial aid (which is a much bigger deal than merit) is a very sophisticated way (requiring the FAFSA system) of doing that same thing. Those who make more pay a higher price and the schools (including Harvard) do a lot of things to make sure they get the 40-50% full payors that they need to make budget. Hello legacy admissions! Hello ED/SCEA!!
Now since these are colleges, though, there’s a charitable rationale (which the movie theater does not share) to income-based price discrimination in addition to the economic one.
Another huge example of 3D price discrimination is in-state and OOS tuition. One of the things you need in order to effectively price discriminate is to keep the customers in their assigned boxes. You need to keep the senior tickets from being resold to and used by non-seniors. Similarly State Us adopt strict residency requirements to keep almost all OOS-ers from being able to become IS-ers.
Giving varying discounts based on academic scores (merit aid) is just one other way to 3D price discriminate – i.e. selling the same college seat at different prices to different kinds of customers.
Merit aid gets the bad rap for being “the best class money can buy.” But it is hard for me to see how it is any better/worse or fair/unfair than any of the other 3D price discriminations that are out there. For example, you can make a great economic argument that Harvard should raise its COA from $70k to maybe $250k, and then have need-based financial aid cut off moved from $250k up to $1 million. Under the current system the $250k family pays 28% of their income to Harvard, while the $1 million family pays 7%. Why is that amount of regressivity fair?
And it is no surprise that the sweet spot of the merit system is that $250k family. $70k for Harvard is very tough, but $35-40k for USC or Tulane is do-able.
In some cases it’s a bit like Kohl’s. No one ever believes, or is willing to pay, their full price on the price tag. Some will pay the standard 15% off, some wait for the bigger discounts (and/or stack sales/coupon/discount deals) but few pay the full sticker price and see it as a bit of a joke.
@droppedit , have you ever seen a physics professor drive? No thanks! :))
I’m completely fine with merit aid for hard working kids. There has to be something for students that are trapped between “not eligible for need based aid” and “not being able to afford full pay”.
The only thing I know, is that after paying to send 2 kids through college, I deserve a $1$#% trophy. A huge pretentious trophy that plays Pink Floyd’s “Money”… :-bd
@lastone03 Those kids trapped in the bubble can and should apply to the schools where they will get merit/tuition discount offers. It may mean applying to schools where these kids are in the top 10-20% of the school’s stats, but there are plenty of opportunities is the student looks for them.
@jym626 Yep. That’s when you drop down a tier and take the money. Two of my three have done that.
It may not even be be necessary to drop down a “tier” (and those are hard to gauge these days). But- your point is spot on. There are plenty of hungry schools looking for students at all levels, and be the student they want and the doors (and their checkbook) will likely open.
Yup $30,000 looks to be a particular sweet spot…in the neighborhood of what many privates cost after the generous discounts and for Michigander comparrison, the cost of their instate flagships w/room and board. Plus it is a doable $$ for middle class families
So I would appreciate some advice. Daughter is down to two schools and has only 13 days left to decide. She is leaning towards the more expensive private (vs. our state flagship). The private offered $27k merit (or tuition discount if you prefer). I was thinking of calling the private and trying to negotiate a few thousand dollars more. Is this a bad idea? I feel Like I have nothing to lose, but don’t want to come across poorly. Thoughts?
@hoosierdaddy18 You have nothing to lose. They aren’t going to rescind the offer or reduce your aid just because you asked. Lots of people do negotiate and some are successful.
@hoosierdaddy18 IU is a pretty good deal. But if it were my kid, for a couple thousand more, I would let her go private if a smaller atmosphere would be better for her. Sometimes it is more challenging to get classes at a state U and kids wind up going an extra semester or taking summer sessions to keep on track (it winds up costing more). My daughter’s 4 year Indiana private guaranteed in and out in 4 years. She received a healthy scholarship and graduated last May. Most importantly, she loved it and is gainfully employed. 
@hoosierdaddy18 - Did your daughter’s grades happen to go up significantly since she got into Tulane? Or did she win any additional award? They might, might consider upping her to the top automatic scholarship if you can make a good case for stronger accomplishments/ grades, etc. since her $27K award. Good luck.
@droppedit @vistajay My physics professor drives just fine (in ideal conditions, no rain, snow, heavy traffic, mountain roads, and we won’t even go into the parallel parking morass.) However, forget having him lecture while he drives. If I ask him a question while he is driving – he says “You know I can’t multitask.”
I have a friend who is a statistics professor and you can’t stop him from lecturing while he drives.
@momfromli What do you consider the bottom tier? There are over 3,000 colleges in the United States. Most of the rankings don’t go past a few hundred, so even the schools toward bottom of those rankings are still quite aways above the bottom.
I committed to my absolute safety, and I’ll be starting there in the fall, for no other reason than the full ride they gave me. I got into better - much better - schools, but none gave me a full ride. Most kids leave this state for college, and this university definitely uses scholarships to try and convince students to stay. I think a lot of lower ranked places do that, and as college costs keep rising, it’ll become more common and effective.
I haven’t seen where everyone receives the same discounts at all. In fact, for merit scholarships you have to have certain test scores and GPA to qualify for them.
@flmom26 Exactly my point. It may be that nearly everyone gets something, but few get the top awards.