WSJ: "Colleges Cut Prices By Providing More Financial Aid"

[Laura in CA]

Interesting article in today's WSJ.

 

It starts out:

 

 

Private U.S. colleges, worried they could be pricing themselves out of the market after years of relentless tuition increases, are offering record financial assistance to keep classrooms full.

 

The average "tuition discount rate"—the reduction off list price afforded by grants and scholarships given by these schools—hit an all-time high of 45% last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers.

 

"It's a buyer's market" for all but the most select private colleges and flagship public universities, said Jim Scannell, president of Scannell & Kurz, a consulting firm in Pittsford, N.Y., that works with colleges on pricing and financial-aid strategies.

 

It is likely that some private colleges will be forced to be even more generous with discounts this fall. As of the May 1 deadline for many high-school seniors to commit for their freshman year of college, early reports suggest some non-top-tier schools fell 10% to 20% short of enrollment targets, said Mr. Scannell.

 

The jump in aid shows that many colleges are losing pricing power as more families focus on cost and value, with about 65% increasing their discount rate in the fall of 2012. Except for the most exclusive schools, private colleges increasingly are vulnerable to the stagnant wages of many families, deepening student debt, the uncertain job market, growing questions about the value of costly four-year degrees and unfavorable demographics.

 

.....

[Tree Frog]

I couldn't read the article from the link provided (it required a subscription), but googled it and found it. It's an interesting read. I agree with one of the comments, though. Why not just decrease the cost rather than offering more financial aid? My dd will be a senior next year and is looking at colleges, especially Baylor. She will qualify for merit aid, but not need based aid. We're hoping Baylor will offer better incentives than the state uni. This article indicates we might get lucky.

 

edited for spelling. I don't post well in the middle of the night, apparently!

[Serenade]

Why not just decrease the cost rather than offering more financial aid?

 

 

Yes. I would like to see a fair tuition for all, not just certain demographics. College is weighing heavily on my mind right now. We are older parents and have some decent assets, but not enough to pay what most colleges want. Yet we will not qualify for any need-based aid, either. I feel like we're stuck between a rock and a hard place.

[elegantlion]

Total speculation, but by providing more aid they can still keep tuition higher. That way when things turn around the won't have to increase tuition, they can simply remove the additional aid. Then they don't look atrociously nasty. It seems more of a stop-gap measure than a permanent solution.

[Azalea]

Thanks for posting. I am still recovering from the shock of running the net price calculator for several colleges.

[Laura in CA]

My paper copy of the WSJ just came ... the article is on the front page.

 

I just posted it FYI ... especially in light of many discussions there have been on this board and IRL. Interesting that there has been downward pressure on tuition at many of the colleges outside the tippy-top.

[TravelingChris]

Also another reason is that they charge full tuition to international students but give discounts to US students.

[flyingiguana]

 

Yes. I would like to see a fair tuition for all, not just certain demographics. College is weighing heavily on my mind right now. We are older parents and have some decent assets, but not enough to pay what most colleges want. Yet we will not qualify for any need-based aid, either. I feel like we're stuck between a rock and a hard place.

 

You may well get need-based aid -- unfortunately, it won't be in the form of a grant. It will likely be loans (which I don't see as aid, but the colleges do like to count it in their statistics).

 

However, a lot of kids will get some kind of merit aid. So don't despair. The merit isn't all about stellar academics. Colleges like to draw in kids with different talents and backgrounds, and merit aid is how they do it.

 

I think the colleges see this as a more fair system. They're able to charge what each student can afford. This also keeps their campuses from becoming non-diverse enclaves of rich kids.

 

Well, to be more clear -- colleges are able to charge each student *closer* to what they can afford. When I see the debt most college grads in their twenties currently have, I'm aghast. (We're currently screening renters, so we're seeing a lot of this right now. We're about to rent to someone with a horrible credit score-- however, she's always paid her rent on time.)

 

A lot of the more savvy kids are doing a couple years at community college before transferring.

 

But the colleges are still pushing debt because they just have no idea that they're sending their graduates out into a cruel world where high paying jobs are hard to find.