“Our friends over at Planet Money built this interactive graphic that illuminates yet another aspect of the Education Department’s new College Scorecard. It shows the average annual price that families actually pay at 1,550 four-year colleges, by income.”
Airline tickets are a lousy analogy.
The pricing variation of air tickets is TOTALLY DIFFERENT than for college. A passenger paying 300 bucks for a refundable ticket is buying a different service than someone paying 100 bucks for a non-refundable ticket. Passengers buying refundable tickets are buying flexibility. They are purchasing hedging insurance for the right to cancel their trip.
Airfare pricing is also not means-tested. A rich person is charged the same price for the same ticket as a poor person. It’s just like in a supermarket. If the supermarket has a sale on iceberg lettuce, then everyone is eligible to buy it at the same sales price, regardless of their income.
For college tuition. Rich & poor are paying hugely different prices for the same thing.
The analogy holds in that each person gets a different discount off the price. Maybe car buying is another useful analogy.
Car buying isn’t means-tested either.
Unfortunately, the nature of the data makes the graphs unable to tell the story accurately and completely.
For example, you will note that the highest income category is termed “$110K+”. Apparently, that means all upper income bills fall into that category, which would make the $110K category appear abnormally high and would explain why the Annual Net Price never appears to meet the Sticker Price. Which, I guarantee you, it does.
College costs are one of the very few items where the price varies substantially based on your income, with the rich paying more.
Yes, of course the rich CHOOSE to buy more expensive items that the poor can’t afford (Rolexes and BMWs and the like).
And yes, the rich will occasionally haggle less, or be less inclined to use a coupon at a grocery store. But they COULD if they chose to.
Other examples: Things subsidized by the government in some fashion for low income folks - medical insurance, school lunches. Some charities also subsidize to some extent - hospitals, some nursing homes I think.
But the scale and range of subsidies at private colleges, who are mostly offering those subsidies without direct government support for them, surpasses anything that comes readily to mind in the US.
Airlines do try indirect means testing by trying to charge higher prices to likely business travelers whose businesses have more money.
Sometimes the price depends not on the flexibility of the ticket, but on the fact that you happened to buy it on Tuesday rather than Friday. Or you gambled and got a last minute deal. Or you planned ahead and got a 14-day out deal. Or stayed on a Saturday.
Similar to colleges, airfare pricing is often opaque to the consumer.
Airline seats are a commodity. Customers will typically select a carrier based on RATIONAL criteria, e.g., the cheapest fare, travel time. Emotion is not a big factor in the purchase process. The customers’ usage of the service is ephemeral, and they can be frequent repeat customers. Except during holidays, the product does not have scarcity.
A bachelor’s degree is also a commodity. But the matriculation experience is a life-time one off.
Upon further reflection, I think buying a college degree does share some similarity to buying a luxury car. The experience is fraught with opportunities for emotional manipulation and for IRRATIONAL financial immolation.
Out of curiosity, what colleges show up on that graph in the article when you land on it?
Airlines sell a product that has a fixed expiration time. So do colleges. Once the wheels are up or the academic year starts, the empty seat can’t be sold.
The cost of providing the product is largely fixed for airlines, at least in the short term. An 80% full plane pretty much costs the same to operate as a 100% full plane. Same for colleges.
Airlines sell the same product (a seat in coach from A to B) for different prices. Business travelers pay more. It is called variable or discriminatory pricing. So do colleges. Especially private colleges. Wealthy parents pay more; parent of kids with meh academics pay more.
In fact, the pricing structure devised by the college’s “enrollment manager” (previously known as the dean of admissions) was invented by the airlines.
Thanks @GMTplus7 .
Champagne supper on china and a layflat bed w feather pillows, plus double frequent flyer miles in int’l business class is definitely not same product as sitting in an iron maiden in economy class for 14 hours.
Seats in domestic coach sold at different prices are arguably not the same product. A more costly fully refundable ticket offers the option of flexibility and the eligibility for an upgrade that a cheap refundable ticket does not have.
A cheaper nonrefundable ticket purchased 4 weeks in advance poses greater no-show uncertainty risks for the customer than a ticket bought 4 days in advance. College tuition still has a refundable grace period in the first couple of weeks after enrollment regardless of whether the student is fullpay or receiving FA.
How does the selective and pricey colleges going to waitlist figure into all this? The enrollment managers use this tool as their back-up to fill in any vacancies. Some are called into summer and take that spot. other schools over enroll squishing students into triples that are meant to be doubles. I don’t think you can stuff more people into a plane than it has seats! And many times those wait-listers where vetted financially meaning it is at the school’s discretion who they pull in from the waitlist.
Kat
^ airplanes do go to wait lists, they call it “standby” 
And they have a meritocracy ranking with non res passengers/buddy passes. Maybe that’s more akin to employee discounts for staff/faculty kids.
Colleges also have price and service differentiated programs. They call them ‘executive’ programs and you get a concierge experience.
GMT – You are right that the airline seat “product” is not 100% identical to the consumer if one is refundable and another is not. But the key is the cost side. To the airline, one coach seat on flight #101 costs the same to produce as any other coach seat on flight 101. Same goes for all seats in English 101. From the perspective of the airline/college, all the seats are the same.
So what the airline does is divide the travelers into different groups in order to be able to charge different prices to each of the different groups. 4 week advance, 2 week advance, refundable, non-refundable, frequent flyer miles, last minute purchase, last minute sale, peak, off peak, holiday etc. etc. etc. They use all those different prices to fill all the seats and generate the max overall revenue.
The colleges also sell seats at lots of different prices based on dividing the kids up into groups. Early decision, rich parents, poor parents, smart students, dumb students, diverse students, athlete students, etc. etc. etc. They use all those prices to fill all the seats, generate budgeted revenue and meet other school goals. Like having enough smart kids, diverse kids, kids majoring in Greek, kids to fill out the soccer team roster, etc.
“I don’t think you can stuff more people into a plane than it has seats!”
I just saw on the news last night that Airbus has applied to put bunk bed seats into business class. They would both be in a reclining position.
http://www.nbcnews.com/business/travel/are-airline-passengers-ready-climb-flying-bunk-beds-n440246