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Are College Costs Peaking?


“Tuition discounts” (grants and scholarships) at private colleges have been steadily rising for the past seven years, reports the WSJ. In 2012, the average discount rate hit 45 percent off of the total tuition bill—the highest it’s ever been.

The downward pressure on prices comes because colleges have been finding it difficult to hit their enrollment targets. Desperate to lure in more students, they are hoping that smaller tuition hikes and financial aid boosts will entice increasingly cost-conscious education consumers:

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. […]

Because of economic factors and political pressure on colleges to hold the line on tuition, “we have hit a tipping point on price,” said John Nelson, managing director at Moody’s Investors Service. Last year, the median sticker price at about 280 private colleges and universities tracked by the debt-rating firm rose 3.9%, the smallest increase in at least 12 years.

For too long, colleges haven’t really felt the need to compete with one another on price, choosing instead to attract students with state-of-the athletic facilities and other flashy but nonessential projects. These days, fear of indebtedness and cost-consciousness on the part of students and parents are focusing the pressure on colleges where it needs to be: providing a quality education for less money.

This is an encouraging sign, but we’ll know colleges are really getting serious about cutting costs when they start paring down their bloated administrative staffs.

[College quad image courtesy of Shutterstock]

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  • Pete

    Sure, colleges will lower tuition to get/keep students and don’t be surprised if they also soften the academic standards even more.

  • Corlyss Drinkard

    Does anyone have a good handle on reliable reports about how much of tuition costs go to pay for bloated sports programs? Or are these programs all with alumni money?

  • Jim Luebke

    So tell me, is it difficult for the Credentialed Elite to control who gets financial aid?

    When I was applying for colleges, scholarships could be handed out based on race, creed, color, or any criteria the donor chose (even nepotism).

    Berkeley decided that my merit-based Regents scholarship was worth less than the price of books for a quarter. (I went with another institution that gave me full tuition / fees for merit). Since then I’ve heard Berkeley has discontinued merit-based scholarships altogether. Abolishing objective measures of performance like standardized testing is a perennial favorite hobbyhorse of the Politically Correct, too.

    Clever manipulation of this system — eliminating objective measures of talent, eliminating funding based on talent, setting financial barriers to entry very high, then selectively lowering them for people the High and Mighty wish to prefer (to create clients, reduce the influence of opponents, etc) — could control access to power and inside information as effectively as rule by lobbyists.

    The Boomers aren’t just eating their children, they’re putting roadblocks up for talented people to get ahead, in favor of mediocre people who agree with their politics in exchange for a chance at power.

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