Researching a school, I came across a comment from one alum who expressed concern about the school having reduced tuition. They believed it “sends a negative signal to prospective students and their parents/supporters. It smacks of desperation and denotes a lack of faith in the future of the college.”
Would you agree with this statement? While I can see their point, my opinion is some colleges are finally starting to realize they can’t continue to charge $65k/year and expect to survive in this competitive environment. That’s just smart business, not desperation. Yes, I may take a hard look at the school’s financial situation, but my perceived value of their education has not dropped. Am I off base? Do you see this as a huge red flag?
You are correct. The reason that we have the current environment of college list prices increasing faster than inflation has to do with top tier schools having more demand for their product than they can possibly meet (how many businesses do you know which turn away 90% of potential customers?), so because of their strong brand, can increase prices with impunity; and, the belief among parents that higher sticker prices equate with higher quality paired with the very human desire to have their kid get a ‘scholarship.’ Things like USNWR rankings have fed that monster.
However, there is another fact that most parents do not understand that as the sticker prices go up, so does the average national discount factor. Parents DO have a number in their heads for list price that they won’t let their kid go above when thinking about colleges. So, as list prices go up, schools without a strong brand see their potential customer base shrink.
There have been a few schools which have reduced their list price over the past few years, and some have done it skillfully. Others have not.
The current business model (it is far more complicated than most parents, or even university staff, understand) is indeed unsustainable. There are two segments of the market which have benefitted from this: the elites (who are aware of the impact on the market their raising tuition every year without a need to do so financially, but do it anyway), and the stronger public colleges. They have a great interest in maintaining the status quo; the vast majority of colleges and universities are trapped in this business model which is likely to lead to the end for many of them. So be it?
There are many bothersome impacts from this market progression, one of the most harmful is the smaller and smaller pool of lower income families who feel encouraged to aim high for their strong students. They look at that $ number and it seems ridiculous to them. So, elite schools have to work harder and harder every year to find and attract those students.
It is kind of a giant mess, and many who understand the business model of higher ed are worried; as I said, holding the line on tuition and/or cutting the list price must be done skillfully or else signal to the market they there is trouble, hence beginning a death spiral for that college.
There will be ‘industry consolidation’ in the coming decade or so; many private schools (who face a myriad of challenges) will either close or be absorbed by larger institutions, often public. Survival of the fittest?
Is there a benefit to society to have SO many colleges and universities, ranging in sizes from a few hundred undergraduates to 50,000? Will the market prefer to have their kid learn physics from the PhD from State U 100% in person? Or, from video lessons (real time or not) from a Nobel Laureate 2000 miles away, along with 10,000 other students? The fact is that our higher ed system is based on a delivery model which is about 500 years old, when access to knowledge sources (books) was extremely rare. That is no longer true (most of us carry the knowledge of a zillion books within our smart phones). So, there are many forces in play which will force higher ed to evolve. The increasing list-price issue is only one. But it is real and it is now.
Yep, and the reverse is true as well. Purdue has chosen to freeze tuition for the past 9 years in a row. They’ve kept the overall cost (relatively) low but the amount of merit $ being offered has also plummeted. We had friends whose kids were 8 years ahead of our D who were floored that she didn’t see any merit $ with much, much higher scores/GPA than their kids who got 1/2 rides.
There is an article in this week’s Chronicle of Higher education called “ The great enrollment crash: Students aren’t showing up and its only going to get worse”, bu its behind a paywall.
I came across one school in our search that advertised its $10,000 tuition cut. It didn’t make me think less of the school, in fact it made me check it out more because our foremost objective was to save money. However, their automatic merit was also about $10,000 less than similar schools, resulting in the same net price as all the other local privates. So it was just another marketing effort- there is the type where the prices start high but everybody gets an impressive sounding scholarship; or there is look at us we cut tuition by $10,000!
@bjscheel I find that merit is usually tied to maintaining a certain GPA. I’d prefer to take the price cut and less merit over higher sticker and more merit that could potentially disappear. In any event, I agree that it’s marketing effort as I would think the ultimate goal is to increase enrollment.