<p>Bottom line is simple supply/demand. The top privates are still in fine shape, with very healthy endowments and plenty of wealthy full-pay parents that subsidize the low-incomes that complete their demographic model for diversity purposes. The state flagships are doing quite well also, the secondary choice of the high-income HYPS wannabes that didn’t make the grade. These flagships are also–when they can–inching up the percentage of out-of-state admits to make up any future monetary shortfall.</p>
<p>It’s most of the rest that are sucking wind at this point. It’s the reality of a $45-50K/year COA for some faux designer private that was doing swimmingly until, after the economic meltdown, parents deciding “I’m paying THIS for THAT?!”, a true emperor that has no clothes type deal. </p>
<p>That’s where the marketing departments kick in, enticing potential customers with the carrot-and-stick for the express purpose of filling their classes while not letting on that they, in fact, are priced too high to begin with–typical discounting. I remember, during D2’s college search five years ago, a middle-of-the-road private coming back to us 3 or 4 different times with extra incentives, basically negotiating with themselves. (D2 ended up attending an OOS state flagship.) Looking back, I think they were ahead of the curve in that respect.</p>
<p>Curious about some of the wording, such as jnm123 above, “faux designer private.” Just because a school isn’t in the top 50, or 100, doesn’t mean it’s not a good school, it just means it doesn’t cater to the kids on the top end of the GPA/SAT spectrum. And isn’t that fine? Don’t those kids deserve an LAC-type school, good teaching, no TAs, etc. The category is far from bogus. As with anything, the quality is different at each place. And at such places, bring on the discounting for kids at the upper end of the spectrum, to lure them in! I can’t afford for my kid to go to a $60K a year school.</p>
<p>Redpoint–these might be & probably are very good schools indeed, just not at the price offered. It worked in 2005, not today. In fact, I commend them for at least being pro-active and trying to fill the seats in their freshman class. They do what they have do to accomplish that. But the discounting–much like the struggling fastfood joint with coupons in every newspaper–smacks a little of desperation. Why not lower the tuition and be done with it? Why can’t the market fluctuate on college tuition too, like everything else?</p>
<p>Anybody on CC as long as I have follows the mantra ‘there’s a perfect school for every kid’. And increasingly, I’ve been a big proponent of value over prestige. Savvy parents of HS sophomores & juniors should have a good time helping their kids decide–it’s a blank canvas out there.</p>
<p>If everyone gets the discount, then of course the school should just slash the price. If they are giving discounts to lure in better students, to strengthen the school, then that’s reason to keep them.</p>
<p>Look, I love Hampton Inns and stay in them a lot. But if they told me their rack rate was the same as the Ritz, offset by a special “discount” to get the price back down to $120 a night, I’d probably see through it pretty quickly. </p>
<p>Since Roberts Wesleyan is now our case study, it looks to me like it must be an efficiently run place to stay above water on opex while collecting only $12,000 in revenue per student. It might be a good model for other small privates. But Wikipedia tells me that it has an endowment of only $16 million and change and enrollment of 1823 students. In other words, if enrollment drops by even 100 students, the million dollar operating surplus will be gone, and there isn’t much institutional cushion to back stop it. Also, keep in mind that these sorts of schools are now locked in a pitched battle to keep cost growth (including faculty health care, which tends to rise at a rates significantly above general inflation) from outstripping growth in revenue per student. That’s a real management challenge, and I still suspect that many smaller privates out there won’t be up to the task over the long term.</p>
<p>SOG–I agree with you completely. I also think that as schools figure out how to appropriately charge for MOOCs, including proper oversight, feedback, grading, and monitoring, that the decline of some marginal schools will be hastened.</p>
<p>The endowment numbers can be deceiving. Many colleges have debts that are larger than their endowment. The number that should be reported is net endowment after debts, as an average per full time equivalent student. </p>
<p>Also, I’m told that some universities with huge endowments avoided selling assets that they had grossly overvalued, so they could continue to claim they were valuable.</p>
<p>jnm123, that’s pretty subjective. A small regional LAC might very well offers a better education than a less-than-stellar state flagship or, in some cases, a “designer” private (to use your language). Better access to professors, undergraduate research opportunities, less competitiveness–some of these things can be distinct and meaningful advantages to students. The fact that they have to market themselves is no less noble than “top” schools barraging high school kids with glossy brochures and offers to waive application fees in an effort to boost their selectivity ratings by turning more of them away.</p>
<p>Not debating the ‘nobility’ or subjectivity of anything. Colleges & universities are, at its very core, a business, with profit and loss to be considered. If you can charge it & can GET it, good for you. But the old saying ‘caveat emptor’ should be kicking in to parents about this time as well, to be a savvy buyer. This article is saying to students & parents, hey, check out some of these obscure privates, VISIT them for God’s sakes, see if it works for you. If so, what will they give you? What stats do you have to offer, where does your demographic fit in with what they’re looking for? Some of these colleges will need to negotiate with parents like used car salesmen, and I love it. It might bring some of these educators back to the real world… :)</p>
<p>It’s a bit more nuanced than that. Colleges and universities make decisions every day that actual business never would – and the world is a richer place for that. But they do need to be financially self-sustaining. I’m certainly not cheerleading for a bunch of schools to go under, but I think many of them have financial models that are under pressure from online education and savvier shoppers. </p>
<p>For reference, I think someone here recently posted a link to this collection of defunct colleges. If you browse it, you’ll see that, as in so many other segments of American society, there has been an incredible amount of churn over the years. </p>
<p>Definitions feel wobbly here. We seem to be writing about different places lumped into one category. Regional LACs that discount to everyone that few people have heard of, that are very cheap (Roberts Wesleyen?), well-known LACs that offer merit aid to lure in better students, that aren’t in the USNWR top lists (Lewis & Clark, maybe?), CTCL schools with good merit, such schools that offer money and a great program, such schools that offer money that don’t have great programs, small LACs with dwindling resources that are about to crash, ones that are respectable that won’t crash. . .</p>
<p>I believe the baseline price for nearly any school is what the student can borrow from sub and unsub stafford loans plus the value of the pell grant ($5500). The assumption is that either parents make enough income to cover the value of the pell grant or they have enough need to receive some portion or all of the pell grant. Based on that the least expensive school for anyone should be around $12k/year (in my estimation that would include tuition, fees and books). Those who make more money would have the opportunity to pay for room and board, and other expenses that go along with sending your child to a university you cannot commute to. </p>
<p>In this scenario those universities which charge more would need to offer some perceived value which buyers would be willing to pay extra for. Obviously the elite universities have that status to offer as value. LACs are suffering because of a loss of real income over the last decade and a loss of perceived value of a liberal arts degree. Those with low perceived value may be stuck in the situation that buyers will not even be willing to pay the minimum cost expected to attend a four year university. The current discounting (scholarships/institutional aid) is the schools way of finding a price point that buyers will be willing to pay without actually lowering tuition. If the current trend of lower real incomes and lower perceived value continues, in my opinion many won’t survive into the next decade.</p>
<p>Interesting comparison, Golfather. Those numbers may be influenced by the college’s calculation of what it actually costs them for each additional student. They are probably making a profit off of the marginal and wait listed students who pay the list price. Of course, you can get into arguments about what is the average cost per student vs. marginal cost per additional student.</p>
<p>If you look at the list prices of many of the for-profits, it is directly linked to what they think they can get out of the average student from pell grants, federal loans and veteran’s benefits.</p>
<p>Some less selective private colleges have adapted well by emphasizing career-based education, including many health care and business programs. One of those colleges is very insistent to say that it is definitely NOT a liberal arts college. That approach has helped them receive large donations from the local business community.</p>
<p>Actually it’s in the Top 100 LACs! Kiplingler’s Top 100 Best Value LACs, that is.</p>
<p>I don’t really understand the point of your argument against all reason - there are price variations among private schools and they do not all cost the same. You can turn it into “expensive schools are all expensive” or some other tautology if it makes you feel better.</p>
<p>If I look at the top 100 LACs according to US News, I see tuition variation (ignoring publics) from $46K to $22K and every number in between. Is that your idea of “all the same”?</p>
<p>That was not our experience. My daughter applied to 6 different LACs (ranked from about 25-75 in US News) and the net cost varied from $39K to $0K. However, 3 of them were clustered together at $39K-$38K, so if she had applied to only those three I’d have gotten the same impression.</p>
<p>Now in a case like that BobWallace and Goldfather there is no sure way to know that your child will be getting that merit award is there? I suppose the only way is if it is automatic due to your kids stats. So it seems that there is a lot of homework needed if you want to trigger this sort of reduction. You need to make sure your kid is in the top part of the stats of kids applying. At least this is how my mind is thinking about this.</p>
<p>This is true. Winning merit awards, especially large merit awards, requires a good strategy. You need to cast a wide net and target the right schools.</p>