Two high school seniors with a B-plus average and similar extracurricular activities get accepted to the same four-year private college. Their household incomes are nearly identical.
One would pay $29,700 a year to attend the school, while the other would pay $51,000. What gives?
Mysteries such as this have plagued American families for decades.
In a rare bipartisan move, legislators want to combat consultants’ use of “yield management” tactics, similar to how the airline and hotel industries fluctuate prices based on demand and the lack of information available to consumers.
If information such as a school’s break-even cost is available to families, then colleges and universities, the vast majority of which are nonprofit, are less likely to engage in discriminatory pricing, lawmakers say.
Grove City College Vice President Lee Wishing III testified that although his school now discloses its break-even cost ($35,290) and charges all students the same price, hundreds of institutions engage in pricing schemes with the help of consultants who have gained access to families’ financial information and may be well aware of the specific schools that candidates are considering during their search.
Schools that don’t have large endowments set their sticker prices high and then provide students tens of thousands of dollars in “scholarships” to make them feel valued, even though that net price is still well above the break-even price and might be far more than what another student is paying.
“It’s just remarkable to see how the whole industry knows this is happening. Everybody knows but the students and the parents,” he said. “The ethical implications of these things, to see them demonstrated [by consultants], are jaw-dropping.”
Some of the more competitive colleges and universities, which do have large endowments, also gain access to families’ financial information and other colleges of interest before they determine a student’s likelihood to attend and how much of a discount is needed to entice them, according to Andrew Gillen, a research fellow at the Cato Institute, a libertarian think tank.
“At the top end [colleges], the level of the price discrimination that they engage in is shocking,” he said.
Price transparency varies by school. Many disclose the maximum rates that students will pay based on their household income before they are considered for merit-based scholarships or financial aid packages.
Smaller, less competitive private schools across the nation are struggling financially, and many have closed in recent years. Grove City’s transparency model might set a standard for stability.
Hartwick College, in upstate New York, recently slashed its sticker prices from about $56,000 to $22,000 (plus $16,000 for room and board), and students are still eligible for up to $10,000 in merit-based scholarships, according to its website. That institution has been struggling with declining enrollment for several years.
Dan Godlin, founder of the New York City-based CollegeCommit student tutoring and college consulting service, said the individualized net prices set at schools across the nation are based on need-based aid, merit scholarships, and how much they want a particular student in an incoming class.
He said college pricing transparency legislation could be a game-changer. None of the committee witnesses expressed opposition.
“Now, I understand colleges worry about losing flexibility. Merit aid and scholarships are tools they use to compete,” Godlin said in an email response to The Epoch Times.
“But from where I sit, clarity almost always wins. Families are making six-figure decisions, and they deserve to know the real cost before they invest all that time and energy.”
