<p>Many private colleges are using a** “high tuition, high aid” model**, whereby
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they're taking money from the rich and giving it to the poor. Many schools advertise sky-high tuition rates that only the wealthiest students ever actually pay, while dolling out generous financial aid packages to needier attendees.</p>
<p>… On average, schools spent 60 cents of every new tuition dollar on aid ...Overall, 58 percent of schools devoted at least half their new tuition money to aid.</p>
<p>… After cutting out all of the money that got funneled toward aid,* the average private college had 40 cents to cover all of their other rising costs
[/quote]
Here's</a> Where Most of the Money Goes When Private Colleges Hike Tuition - Jordan Weissmann - The Atlantic
So in essence, full-pay parents are not only paying for their own kid but a significant chunk for someone else's kid in terms of need-based and merit scholarships (i.e. it's not just the financially needy kids getting the money). There are also concerns that that high sticker prices scare off poor students from even applying.</p>
<p>In contrast, the Univ of Iowa has deliberately flattened its tuition
[quote]
A handful of schools have cut their tuition rates instead of increasing them. The resulting publicity generates increases in enrollment which can compensate for the lost tuition revenue. In addition, such cuts are usually accompanied by cuts in financial aid.
<p>Ethics aside, would it simply be easier for colleges to level the tuition like Iowa, and cut out the administrative burden of managing who gets the spoils?</p>
<p>When you’re deciding with your kids, it may not matter that much. You’re looking at options as to what you will pay and making your decision on a variety of factors. I don’t know if thinking about social justice is one of those factors but it didn’t cross my mind at all way back when. Of course I learned about this down the road and I was a little annoyed at first but it bothered me less and less as time went on.</p>
<p>College is quasi-capitalism where the sellers have held the upper hand for quite a while and part of that upper hand is due to an information imbalance. The information age is making a dent in that imbalance and it appears that some colleges are responding.</p>
<p>I guess that I’m a bit more of a spectator for a bit.</p>
<p>The “math” in the article does not come anywhere close to “proving” that tuition of full pays is subsidizing the financial aid of those receiving aid. The use of Harvard is a particularly odd choice of an example. Harvard itself says that the cost of a Harvard education is more than the cost of tuition … that all students are subsidized from the endowment … and that students on financial aid are just getting a bigger subsidy than those not on financial aid. If someone wants to try to prove statements such as this are false I’d be interesting in the argument … this article was not it … not anywhere close.</p>
<p>PS - cutting out financial aid essentially ensures NO students from poor families can attend that school. The day one of my schools eliminates financial aid is the day I stop donating to the school and any sort of volunteering or outreach on their behalf.</p>
<p>It’s actually not even “social justice” in the way that term is generally used.</p>
<p>You have to ask yourself wider questions… 1. Who pays social security? 2. Is it better to have an educated population, in general? 3. Do you want colleges to remain tax exempt? 4. Do you believe full pay students would be better off on a campus without anybody else? 5. Do you want there to be more or less college choices for your own kids?</p>
<p>I’m not really sure you can ask this question in the same way you can ask about roads or fire departments, or police departments.</p>
<p>I know of no other consumer product that offers variable pricing to the extreme that colleges tuition does. Even retail car salesmen do not reduce the sticker price of their cars to half-price or free for poor customers.</p>
<p>Well, I think, in general, most of us don’t consider education to be the exact same thing as a consumer product. I mean, I don’t know of a lot of retail car dealerships which are tax exempt, either.</p>
<p>I think there is an agreement that education is something that benefits us all, and that the circumstances of your birth ought not keep you from actualizing your potential. We all recognize, or most of us do, anyway, that all of us are better off if more of us are highly educated.</p>
<p>GMTplus7, do you consider a college education to be a consumer product? College recruiters, even in for-profit schools, are not paid by the head. At least they are not supposed to be paid that way.</p>
<p>Eyeglass pricing or medical labwork pricing makes college pricing appear ethical by comparison.</p>
<p>My new glasses “cost” $800, of which I paid $300 and the insurance “paid” $500. When the EOB arrived, they insurance actually paid $100 and the $400 was a “discount”. I’ve seen more obscene prices like those in routine medical test lab fees - $600 discounted to $50? </p>
<p>Like in college, some unfortunate soul did pay $800 for my frame/lens combination, and like in college, some unfortunate soul did pay $600 for my tests…</p>
<p>In the past ten years, as colleges have awarded more merit aid, the main beneficiaries have been higher income families, as SAT/ACT scores correlate very well with income level.</p>
<p>The institution I work for, a total of 19,000 dollars of need based grant aid is awarded by the institution itself, compared with about 13,000,000 for merit aid.</p>
<p>This complicates the picture being described here.</p>
<p>Harvard has always said that every student is getting a subsidy provided by the endowment, because it costs more than even the full-freight to educate a student, blah blah.</p>
<p>What I cannot figure out, then, is why Harvard costs the same amount as institutions with smaller endowments.</p>
<p>I am glad to see this thread, because in the past week some people was calling those full payers and near full payers as “entitled”. The truth is that full payers are helping to subsidize the finaid of low EFC students. </p>
<p>The pricing model that colleges implement hurt consumers on average because it introduces a lot of uncertainty about prices, thus consumers have limited opportunity to compare prices and select the most affordable options (this despite the NPC calculators), and also cause a self fulfilling effect, in which colleges keep increasing the COA without increasing delivered value to consumers, just because the other colleges did it first.</p>
<p>The fact that colleges can label loans as “aid” in ways that is confusing to many families who go ahead and sign the papers anyway, also help to fuel the problem.</p>
<p>I can. The problem is that many people cannot.</p>
<p>So if you have a significant fraction of the population who cannot think carefully about this issue (credit card, student debt, and mortgage bubbles anyone!?), then schools can have price takers that come from this population and rise prices.</p>
<p>Does he factor in endowment money? If not, then the analysis is flawed. But I agree with the basics, that rich kids are funding the show. But it’s a two way street. Poor kids are funding the prestige. Without the poor then there is no longer the prestige of low admittance rates or high test scores, etc. All in all I think it’s a pretty fair system.</p>
<p>Schools do use endowment to pay finaid… But then they use tuition to fund operations and replenish the endowment. In other words, money is fungible as we know.</p>
<p>A recent article by the President of Wesleyan University shows this:</p>
<p>@sosomenza, why do u assume the poor kids are smart and the rich kids are dumb? If the poor kids are so smart, then wouldn’t they receive MERIT scholarships anyway?</p>