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Here is the main point of the article: Students at private colleges received an average 42 percent discount on their tuition in 2014-2015. As recently as 2010,

Here is the main point of the article: Students at private colleges received an average 42 percent discount on their tuition in 2014-2015. As recently as 2010, it was 36 percent. There is another number that is perhaps even more important for students and parents to consider. The same survey, from the national association of college financial officers, found that the average discount for first-year students is 48 percent. That gap of six percentage points between the overall rate and the discount for freshmen usually means that colleges are giving bigger grants to first-year students than everyone else. In other words, it’s a classic bait and switch. Colleges attract students with a bigger discount and a boatload of financial aid the first year, and then once the students like the campus and want to stay to actually finish their degree, they give the students less aid for their remaining years. The author never fully distinguishes between scholarships and financial aid. He lumps them together in a "discount" category. The two forms of cost-saving are very different and should have been addressed separately in the article. It makes sense that merit scholarships pay our more on aggregate to freshmen rather than seniors, as some percentage will lose their scholarships due to poor grades (happened to a friend), social infractions, or some other merit scholarship-ending action. Most scholarships in my experience are real (half tuition, full tuition) rather than nominal ($25k per year). I can't speak to financial aid, but I assume it's like any other contract where you can see the terms and conditions and amount that the college is willing to subsidize your education expenses every year, subject to certain academic and social standing requirements. Again, some percentage of students probably lose financial aid for not meeting these requirements from one year to the next. Maybe it's easier to game financial aid as tuition rises and students are offered a fixed nominal amount? Is it fair to characterize financial aid as a bait and switch?

maratd 11y ago
> the college is willing to subsidize your education expenses every year The college isn't subsidizing anything. It's called price discrimination. That's what the article is partially about. If you look at the demand curve, you see that different people are willing to pay different prices for the same service. Some people have more money, some less. Some want it more, some less. Ideally, what a service provider wants to do is charge everyone the maximum price they're willing to pay. This maximizes their revenue at the expense of everyone else. They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake. They discount using scholarships, financial aid, and other programs. And then they sell you the bullshit that they're helping you. We don't tolerate this abuse from any other industry.
- jazzyk 11y ago
  What about cars? No one ever pays sticker price, but some pay more than others. What about airline tickets? Some people pay more than others for the same class of seats, depending when purchased. Elastic pricing is not the problem. The problem is the collapse of free markets in such areas as education, airline travel, etc. In the higher education area, it manifests itself with pretty much all private colleges charging $50K/year and up, regardless of their repute/ranking. Ironically, it is usually the better known colleges who offer the best discounts (if you have high GPA/SAT, etc)
- xlm1717 11y ago
  I would argue we tolerate it from the insurance industry, particularly health insurance. Medical providers and drug makers blow up their prices to ridiculous levels, and then use insurance to discount the prices for us so at the end we "only" pay co-pays. There's some token anger against insurance companies, but at the end of the day what do we do? Demand to be their customers!
- roymurdock 11y ago
  > They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake Ridiculous for some, not ridiculous for others. Some parents don't even bat an eyelash while writing the $200k check for their kid. If schools couldn't get away with charging the $200k sticker price, they wouldn't. First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. Thankfully, we aren't at that point yet. I agree that the system is broken and extortionate, and that a lot of students are getting much less out of a degree/attending school than what they are paying for it. But it's what we as a society are choosing to reinforce. Public education is still seen (in most cases) as inferior to private education by parents and employers. We are not enforcing a progressive tax system to reduce inequality and generate revenues to pay for more investment in education and infrastructure. Instead we are spending on war, social security, and healthcare. We are transferring wealth away from the young and the middle class to the old and the wealthy. As a democratic country, these decisions are on all of us.
codegeek 11y ago
"Is it fair to characterize financial aid as a bait and switch?" Yes it is. Absolutely in my opinion. My theory is that the ridiculously rising cost of tuition is directly correlated to financial aid. Govt or even private lenders pump in more money as aid, colleges take advantage of that by raising tuition further. If only Colleges were told that there is not going to be more financial aid available, I wonder if that would factor in the tuition cost for next year and onward. Just wonder.
- dublinben 11y ago
  It is easy to point to the subsidy of financial aid as the likely source of rising tuition, but there is no evidence to support this. The most significant act of education subsidization by the Federal Government, the post-WWII GI Bill, had essentially no inflationary effect.[0] However, in the decades since then, states have largely defunded higher education. Schools have been directly forced to make up the difference through raising tuition, which can often only be paid for through loans. [0]http://www.npr.org/2014/03/18/290868013/how-the-cost-of-college-went-from-affordable-to-sky-high http://www.npr.org/2014/03/18/290868013/how-the-cost-of-coll...
  - codegeek 11y ago
    "which can often only be paid for through loans" That is my point exactly. I am not referring to only Govt. aid but also private loans. The entire idea that private loan is available makes it easy for these institutions to raise prices. Again, this is my opinion. I could be wrong. But imagine this. An institution like Phoenix etc. are charging high fees just because loans are available to students. They tout the availability of loans in fact. My point overall is that having a really high fees and then mentioning "loans available" may be causing some of the rising tuition. May be.
  - jerf 11y ago
    Why are colleges getting more expensive much faster than inflation then, for decades at a crack? Shouldn't technology be reducing administrative overhead? Shouldn't technology be reducing prices somewhere, while other things remain constant-after-inflation? I understand the political inclinations behind denying aid is the problem, but if it isn't "student aid has gotten too easy so of course the colleges have raised their prices", it's probably something even worse for the universities politically. That's more or less a morally neutral explanation, a simple and plausible story of incentives gone wrong.
rndmind 11y ago
IMHO retrospectively view this type of behavior by universities will be looked at as fraudulent and predatory behavior.

maratd 11y ago

> the college is willing to subsidize your education expenses every year The college isn't subsidizing anything. It's called price discrimination. That's what the article is partially about. If you look at the demand curve, you see that different people are willing to pay different prices for the same service. Some people have more money, some less. Some want it more, some less. Ideally, what a service provider wants to do is charge everyone the maximum price they're willing to pay. This maximizes their revenue at the expense of everyone else. They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake. They discount using scholarships, financial aid, and other programs. And then they sell you the bullshit that they're helping you. We don't tolerate this abuse from any other industry.

jazzyk 11y ago
What about cars? No one ever pays sticker price, but some pay more than others. What about airline tickets? Some people pay more than others for the same class of seats, depending when purchased. Elastic pricing is not the problem. The problem is the collapse of free markets in such areas as education, airline travel, etc. In the higher education area, it manifests itself with pretty much all private colleges charging $50K/year and up, regardless of their repute/ranking. Ironically, it is usually the better known colleges who offer the best discounts (if you have high GPA/SAT, etc)
xlm1717 11y ago
I would argue we tolerate it from the insurance industry, particularly health insurance. Medical providers and drug makers blow up their prices to ridiculous levels, and then use insurance to discount the prices for us so at the end we "only" pay co-pays. There's some token anger against insurance companies, but at the end of the day what do we do? Demand to be their customers!
roymurdock 11y ago
> They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake Ridiculous for some, not ridiculous for others. Some parents don't even bat an eyelash while writing the $200k check for their kid. If schools couldn't get away with charging the $200k sticker price, they wouldn't. First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. Thankfully, we aren't at that point yet. I agree that the system is broken and extortionate, and that a lot of students are getting much less out of a degree/attending school than what they are paying for it. But it's what we as a society are choosing to reinforce. Public education is still seen (in most cases) as inferior to private education by parents and employers. We are not enforcing a progressive tax system to reduce inequality and generate revenues to pay for more investment in education and infrastructure. Instead we are spending on war, social security, and healthcare. We are transferring wealth away from the young and the middle class to the old and the wealthy. As a democratic country, these decisions are on all of us.

codegeek 11y ago

"Is it fair to characterize financial aid as a bait and switch?" Yes it is. Absolutely in my opinion. My theory is that the ridiculously rising cost of tuition is directly correlated to financial aid. Govt or even private lenders pump in more money as aid, colleges take advantage of that by raising tuition further. If only Colleges were told that there is not going to be more financial aid available, I wonder if that would factor in the tuition cost for next year and onward. Just wonder.

dublinben 11y ago
It is easy to point to the subsidy of financial aid as the likely source of rising tuition, but there is no evidence to support this. The most significant act of education subsidization by the Federal Government, the post-WWII GI Bill, had essentially no inflationary effect.[0] However, in the decades since then, states have largely defunded higher education. Schools have been directly forced to make up the difference through raising tuition, which can often only be paid for through loans. [0]http://www.npr.org/2014/03/18/290868013/how-the-cost-of-college-went-from-affordable-to-sky-high http://www.npr.org/2014/03/18/290868013/how-the-cost-of-coll...
- codegeek 11y ago
  "which can often only be paid for through loans" That is my point exactly. I am not referring to only Govt. aid but also private loans. The entire idea that private loan is available makes it easy for these institutions to raise prices. Again, this is my opinion. I could be wrong. But imagine this. An institution like Phoenix etc. are charging high fees just because loans are available to students. They tout the availability of loans in fact. My point overall is that having a really high fees and then mentioning "loans available" may be causing some of the rising tuition. May be.
- jerf 11y ago
  Why are colleges getting more expensive much faster than inflation then, for decades at a crack? Shouldn't technology be reducing administrative overhead? Shouldn't technology be reducing prices somewhere, while other things remain constant-after-inflation? I understand the political inclinations behind denying aid is the problem, but if it isn't "student aid has gotten too easy so of course the colleges have raised their prices", it's probably something even worse for the universities politically. That's more or less a morally neutral explanation, a simple and plausible story of incentives gone wrong.

rndmind 11y ago

IMHO retrospectively view this type of behavior by universities will be looked at as fraudulent and predatory behavior.