Friday, December 27, 2013

College as a luxury good (now half price!)

Over Christmas there was an interesting article in the Times about tuition pricing at private colleges--specifically, whether lowering the sticker price actually makes a college more appealing to its prospective applicants, or whether it makes more sense to retain a high official price (say, $35-45K) that in practice almost no one pays. It's an especially interesting read today, as we're bombarded with ads for after-Christmas sales promising us deep, deep discounts on goods that otherwise pass themselves off as luxury items.

Since I've only taught at public institutions and I don't have college-bound children, I haven't thought much about private-college pricing; I know it's high, obviously, and I've read that even those high prices don't fully cover costs, but I did not know that very few students actually pay sticker price, especially at less-selective colleges. According to David L. Warren, of the National Association of Independent Colleges and Universities, "About a quarter of students at independent colleges are full-pay, and at institutions with small endowments and small name recognition, it's single-digit" [as the article makes clear elsewhere "single digit" refers to the actual number of students--not the percentage of students--paying full tuition]. Financial aid at such schools is definitely not limited to students with financial need, or even those of exceptional academic achievement. In other words, the price tag at many schools is a made-up number designed to convince parents and students that a college with only a very local reputation is actually extremely selective and prestigious.

I get some of this logic; growing up, I had a friend whose dad owned an antique shop. Whenever he had trouble selling an item, he raised its price. It's easy to see why people would assume that the no-name private school that charges Ivy League rates must be providing a high-quality product; and if that's their assumption, of course they'd thrill to any discount. According to the article, a majority of the prospective families surveyed by Roger Williams University in Rhode Island reported being more interested in a college that officially charged $36,000/year but offered students an average of $13,000 in aid rather than one that charged $23,000/year.

But although everyone loves a deal, not all discounts on artificially marked-up products are equally appealing; you first have to believe in the product's intrinsic value before you care about how good a deal you're getting. If I find something I love at T. J. Maxx or Nordstrom Rack and I pay a quarter of the (alleged) retail price, then sure, I'll crow about the deal. But I care more about finding something I like, at a price I can pay, rather than any specific savings. And if even your state's most selective, public flagship university is cheaper than a small private college, it seems harder to assert that there's an easy correlation between price and value.

I also wonder how off-putting a high official price tag might be: do all your prospective students and their families know that aid is available, and how much? $23,000/year may already be too high a price tag for many students, but I imagine there are families that figure they could swing that cost, with loans and work-study, who wouldn't pursue an application at a school they believed to cost $36,000. Put another way, I'm probably not going to go into the Hermès store, on the assumption that I'd never be able to afford anything there--even on sale.

But maybe that's the point: a certain kind of college wants the kind of student who will nose around the the Hermès store, hoping for a luxury good at a discount price, rather than the one who's content buying something put out by the Macy's store brand.

Readers: do you have any experience with artificial pricing in the college market--or any thoughts about how it works and whom it appeals to?


Susan said...

At the public where I teach, the wisdom is that sticker price matters in another way: that is, people who know little or nothing about higher Ed assume the sticker price is the price. So instead of assuming that maybe they can get a bargain, they don't apply. A *huge* part of college outreach to poor and under-represented communities is in explaining the existence of price discounts.

So I am wondering as a follow up to your question, how class figures not all this. Does class (not just figured as income) fit into how people think about these things? As someone who had pretty hefty scholarships, I don't think I thought of it as a bargain; I just thought the advantage of a rich university was that they did discounts.

Bardiac said...

I had no clue about the discounts until I taught at a SLAC; my family "knew" that our state schools were affordable, and that's the only places I applied for undergrad.

Flavia said...

Susan & Bardiac:

Yes, that's exactly what I'm getting at in my final paragraphs: I suspect these schools aren't all publicizing how easy it is to get discounted tuition, or reaching out to communities where that information would be most valuable.

Some small private colleges really do reach out to economically disadvantaged students. But others seem to prefer to target a class of students/parents who don't want to be associated with that kind of school.

Maybe it's just a difference in market. Some prospective students (like our own students and their families) value state schools as an affordable way to get a good education. But other people assume they aren't exclusive enough, and would rather pay more for the trappings of exclusivity--even at a place where the admissions standards are lower than at the state school and where the school had less name recognition. Those, I'm guessing, are the people surveyed for whom a $23,000 price tag is a turn-off rather than an incentive. They want at $36,000 price tag (but a big discount!) because it suggests the riff-raff can't get in.

What I wonder is: at the kind of school where virtually no one is paying full freight, do the parents and students know this? Or are they encouraged to think that their discount is based on their special meritoriousness?

Susan said...

it would be interesting to see the different demographics of those who apply to publics and those who apply especially to the small (and often struggling) privates. Many of these have deliberately build local niches so that they are not as reliant on 22 year olds -- i.e. they have a great program for returning mothers, or they do nursing. But my guess is that their target demographic is much more aspirational families. (And the difference between attitudes to public universities in the east and west is relevant too.)

Bardiac said...

I think Susan's point about the difference in attitudes to public universities in the east and west is really important.

Contingent Cassandra said...

I don't think people know about the "discounts," and yes, that's a problem, and helps to perpetuate class stratification. In fact, I've been surprised by the disparity in knowledge of this phenomenon even between Ivy League grads and grads of flagship state schools who are currently, in every (other) observable way, in very similar professional/educational/class circumstances. Ivy League alums seem far more aware than others that extremely well-endowed Ivies may well cost any family that is upper-middle-class or below about the same, and possibly less than, their flagship state u. It's funny; I know some Ivy League grads who don't by any means idealize the institution, or the experience, and know that their offspring could get an excellent education at any number of places, but would still very much like to see their kids get into their alma mater, simply because it would be such a bargain.

Flavia said...

Susan: agreed about the desire to see those demographics!

As for attitudes toward publics, I don't totally disagree, though I think it's more narrowly regional and (to some degree) about micro-classes. If by "east" one means "northeast," maybe there's a prejudice toward privates. I agree that the West is generally less snobbish about public unis, in part because there are fewer unis, total, but I think large parts of the South and Midwest are similarly proud of their public universities--and race and class and aspirations and the local cachet of private colleges affect attitudes there, too. (I have a very vivid memory, at age 13, of some girl asking me where I wanted to go to college, and when I said, uh, dunno, the UW? She told me SHE wasn't going to the UW--she was going to a PRIVATE college.)

i said...

Well, up in Canadiah, as a high school student at what was, it's fair to say, the top public high school in the city, I had no freakin' clue about the discounts. I really did think the ivies were that expensive. A few, a very few of my classmates applied, got in, went. I guess they did their homework better than I did, though one had a prof father, so probably had some better information going in.

I do wish I had known, if only to have been able to try for it. (I'm pretty sure my friend who went to Yale, though he is indeed very smart, was neither smarter nor did he have a more impressive resume than I did.) I only applied to UNC, because I was up for the Morehead. It all worked out in the end, but the prices definitely, definitely put off capable people.

Moral of the story? Well, 1., it's also middle class people without the info who are turned off by the prices. 2. a lot of these people are truly competitive, and would have a real shot of getting in and doing well. and 3., I just realised I may still have a bit of a chip on my shoulder about it.

Anonymous said...

My sense is that private colleges do tend to be less than forthcoming about their discount rates, and the more tuition-dependent the school, the less forthcoming it will tend to be. You're quite right that lack of info about discount rates will discourage less privileged applicants, though that's a unintended consequence as far as the college is concerned (for selectivity stats, a college wants to maximize application numbers, period). The main reason, I expect, is that tuition-dependent schools really need their full-paying students, all the more so if those students are a small percentage of the whole. So they're in no hurry for those wealthy parents paying $40K a year to find out that almost everyone else is paying less. The same goal--the need for full-paying students-- is also the main driver of recruiting overseas. At my previous employer, a wealthy and elite SLAC (yet not so wealthy that it didn't pay attention to these matters) the administration talked a lot about "building an international student body," with all the predictable buzzwords; globalization, multiculturalism, etc. What they meant was "let's recruit more full-tuition rich kids from Hong Kong and Singapore." While the buzzwords were hypocritical, one can't blame them for strategizing in this way. The number of private schools rich enough to ignore such matters is very small. Cheers, TG

Flavia said...

Thanks for these thoughts, TG. I'm pretty sure the foreign students paid full price at my Ivy alma mater back when I was a student in the mid-90s, though I'm not sure if it's still true.

I hasten to add that they were also incredibly smart, and the admissions competition was surely at least as tough for them--but I recall the "ohhhh!" moment I had when being told that they didn't get financial aid.