Tuesday, December 12, 2006

Progressive pricing of education

The New York Times seems to have just discovered, in a front-page story today, the way that private colleges price their services in the U.S.: charging families higher or lower tuition based on what they're able to pay. I'm not sure why this is news -- when I was in college the financial-aid office was perfectly candid about it.

Maybe its just the cute news angle they found, about several colleges which only woke up to the game recently and discovered that raising its tuition made it seem like a better school. So they raise the tuition by 18% and the financial-aid pool by 20% and promptly start getting more applications, because full-cost-paying families assume that a place that costs more must be better. (Or perhaps because .edu-world currently offers its customers no single quantifiable measurement of quality other than sticker price, and bitterly resists attempts to create one such as the US News and World Report rankings.)

I was surprised at just how progressive private-college pricing has become: "aid is now so extensive that more than 73 percent of undergraduates attending private four-year institutions received it in the school year that ended in 2004, not even counting loans." And I happened recently in my office to hear, from the executive director of an association of small Midwestern colleges, another point made in the article: "some students may not even apply to private colleges, scared away from the start by tuition and unaware of the available discounts." The solution to which is, of course, clueing them in to the system and the opportunity to benefit from it. (Like the first time an older relative explained to you that nobody actually pays the listed price at a used-car dealership.)

The article did quote someone raising the familiar spectre of a "squeeze of the middle class": upper-income families can pay full sticker price while poor families get lots of aid. No actual data was offered to back that up, and since the article notes that aid is offered to families earning as much as $150,000/year if they have several kids, the worry seems to depend on a rather expansive definition of "middle class". Or for that matter of "squeeze."

Other than sardonic amusement at the discomfort of certain parties with discovering that they must deal with (horrors!) market dynamics like supply and demand, I'm fine with all this. Access to the finest system of higher education on the planet is being priced in a highly progressive manner? Works for me.

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