<p>"Using admissions data for top-tier institutions from fall 1998 to fall 2005, we found that moving onto the front page of the U.S. News rankings provides a substantial boost in the following years admissions indicators for all institutions. In addition, the effect of moving up or down within the top tier has a strong impact on institutions ranked in the top 25, especially among national universities. In contrast, the admissions outcomes of liberal arts colleges--particularly those in the lower half of the top tier--were more strongly influenced by institutional prices."</p>
<p>Well, of course they matter from a marketing point of view, which is all this article seems to address. I thought the live “does it matter” question was more about how well the rankings correlate with the quality of the education received or prospects for success in career or grad school.</p>
<p>I’m an academic and I have sat on various strategic committees. It’s well known in the industry that tuition signals quality. Lots of research supports this but I’ll give you one real life example: Once we were given the green light by the powers-that-be, we increased tuition in one school program from approx. $5k a year to $35k. Our program offering did not change (merely the law changed which enabled us to do what we did with tuition). Our applications rose dramatically in response!</p>
<p>I have read of this phenomenon before. A few private colleges in the past, in response to the burden of paying sky-high tuition costs, reduced their sticker prices. As a result the number of applications they saw the following year actually dropped significantly.</p>
<p>The current strategy seems to be to keep raising the tuition, but advertise the availability of financial aid.</p>
<p>Perhaps every college should charge $100,000 in “tuition” but give back $75,000 or so in “scholarships”. They would not have to raise tuition for a few years at least but could just lower the “scholarship”.</p>
<p>anyway - ditto what Kei said about attachment to brands.</p>
<p>The father-in-law of a good friend of mine owned a chain of supermarkets in Mexico. He told me once that he had been importing a very good Spanish Rioja wine for a few months, but demand wasn’t really high. He decided to double the price, and demand quadrupled.</p>
<p>The “price = quality” assumption is part of this. But there’s also an economically irrational calculation that many people make about financial aid. Say school X costs $25K and will give $10K in financial aid, while school Y costs $35K and will give $20K is financial aid. The net cost is the same in either case ($15K), but a lot of people intuitively feel school Y is being more generous because it’s giving “twice as much” financial aid, and because financial aid represents a larger fraction of the sticker price (about 60% for school Y v. 40% for school X).</p>
<p>There’s another factor that may also push in the direction of higher tuition. US News rewards schools with higher rankings for higher per-student expenditures. Thus although school X and school Y in the example above may have identical net tuition revenues, school Y will be able to claim higher total expenditures, and therefore higher expenditures per student, by nominally charging a higher tuition and then passing the additional revenue right back to students in the form of financial aid, which counts as an expenditure. It’s all an accounting gimmick, of course, but US News will bless school Y for its generous expenditures-per-student, and students and their parents will be happy thinking they’re buying a superior product at a steeper discount. And the cost of tuition will spiral higher and higher.</p>
<p>This reminds me of a story a close relative who is a very well known and respected physician told me. Two of his patients asked if they could meet with him. He said sure and the two women came in. They said, “This is difficult to discuss, but are you as good a doctor as such-an-such in a nearby city.” He said, Such and such is a fine doctor, but what is bringing this up?" They said, “We were discussing doctors at the club, and such and such charges so much more than you do, we were wondering if that was because he is better doctor.” He said he could not believe, patients were questioning him because he charged too little!</p>