Several of the schools my son is looking at, mostly tiny liberal arts schools without national reputations, seem to offer “merit aid” to 100% of the students they accept. One school we looked at states that they offer merit aid to 100% of their applicants, and has a special $12,000 “merit award” specifically for people who don’t qualify for any of their named scholarships, which cover anyone with a GPS of 3.0 or higher.
If they’re giving $12,000 a year to the students who are barely accepted, why don’t they just charge $12,000 a year less to everyone, and then give $5,000+ to the people with 3.0’s or higher who currently get $17,000+?
A few are doing that. But they risk the sense that the lower priced school is less good somehow. And, the lore of getting a great scholarship/merit feels better to some than “oH, that is a low priced school”.
The one where I specifically saw the 100% figure, and the $12,000 scholarship for not being a scholar, was Lycoming but I have seen similar language elsewhere.
I sort of understand that it feels good to get a scholarship, but I also wonder if there are families that don’t get past the price tag when searching here or elsewhere, and so will never find out that Lycoming costs at least $12,000 than that price.
H works at a school with a tuition lower than many peer institutions. Comments are frequently made about how the school is “stingy” with aid. Many times these people are not looking at the net cost, just how much financial aid was offered to their kid. Not everyone takes the logical approach…
They do this to FLATTER their acceptees. Ooohh…I must be smart because they gave me a $12k scholarship!!! I can’t turn down this school; they’re giving me $12k per year!!!
People don’t often realize that the tuitions were raised just so that they can “discount”.
I remember a poster a few years ago that was looking for decent merit for her VERY modest stats son (ACT 20). She found a number of small lesser-known privates who were looking for warm bodies so they offered merit to (obviously) everyone.
One of their CSU’s would have been much better and cheaper, but those schools didn’t “show the love”.
OP, many Merit awards are private donors contributions. My D. was on full tuition Merit scholarship plus got a bit more later at in-sate public. She had about 10 individual scholarships with the donors names attached to them and later she got additional Merit for returning students based on her college GPA, which also was privately donated and had a lot of specifics about who should be rewarded, it was not just high college GPA. I bet that while 100% of the applicant pool is getting Merit award, the amount is different from applicant to another and some may not even fall under criteria for specific awards. And that is how college attracts the best HS students. They will loose this leverage if the price is simply dropped for all applicants. I do not think that they can legally treat donors contributions this way by simply applying it to tuition across.
Everyone has it right. There’s empirical research on this: higher ed customers (parents) prefer the high price plus discount to the transparent, lower sticker price. Practically every school that’s tried it gets spanked in the market.
Utica College is doing a “tuition reset.” From their website:
Utica College is ushering in a new era for college affordability, reducing the cost of undergraduate tuition and fees by 42 percent to fall below $20,000.
The tuition reset will take effect in Fall 2016 for all new and returning students in the on-campus undergraduate program. The 2016-17 published price of tuition and fees will be $19,996, and when the average room and board of $10,434 is added in, the approximate total cost of attendance will be $30,430 per year. That’s before financial aid.
We’ve seen ads about this for the past few weeks on the local (upstate New York) television stations. It will be interesting to see if it is a successful strategy for them.
You see the same pricing metrics in place everywhere based on willingness (or ability) to pay. ATT is the premium cell phone brand, Cricket the low cost brand despite being identical services. Prescription drugs in the US cost 5x more than in Europe. Full pay college parents subsidize students with FA. Those same colleges teach price stratification to maximize revenue.
I’ve seen college-offered summer programs for high school students do the same. Suddenly, the $3000 summer-intensive program is $4500, but acceptances comes with a $1500 scholarship. Some people truly think that they’re missing a great opportunity if they don’t accept and enroll.
the problem with some of these “trophies for everyone” scholarships is that you’ll see modest stats students wondering why they didn’t get a merit scholarship or asking how much they’ll get after applying to schools that give true merit scholarships (limited to their high-stats students).
Somebody can correct me, but a lot of students make mediocre grades that are not high enough to keep their scholarships. I had a fraternity brother who lost a full scholarship, and I suspect it is far more likely for average students to be unable to meet the academic requirements. So after a year, the choice is that the parents can pay more for them to stay with their friends or they can leave. Many parents will just pay more. But if the tuition is just lowered, that revenue is lost forever.
The schools keep sticker price high to signal high quality to applicants, then price stratify (or what is referred to as price discrimination - charging different prices to different consumers not based on cost of delivery) in order to help needed revenue capture, and affect the composition of the students they bring in. With FAFSA and CSS etc., consumers are providing all the family income and wealth info needed to further help price stratification strategies. This price stratification can in many cases support more cross subsidies in the system than solely allowed by endowments.
However, some students who lose their scholarships drop out or transfer away because the price without the scholarship is unaffordable. On the other hand, some schools may not object to such attrition, since the scholarships were offered to lure good students, but if the student is doing poorly in college, s/he is not really that good a student.
It is to the school’s benefit to be able to price itself individually to each student (price discrimination), since it can offer each student a price at which it thinks that student is able and willing to pay, whether the discount off the list price is called “merit scholarship” or “financial aid”. An “everyday low price” model without discounts may forego additional revenue from students who would be willing to pay more (mainly those who are wealthier and/or have academic credentials at the lower end of the admission range), but still be too high a price for some of those whom the school really wants (like a top student from a poor family).
The flattery part of the pricing model is much less important.
What’s most important is to be able to charge different prices to different people so as to maximize the overall goals of the school – revenue, full enrollment, acceptable academic quality, etc. It’s mostly about price discrimination. Exactly like how everyone on an airplane flight pays a different price.
If you charge everyone the same every day one low price, you lose a lot of control over who will wind up enrolling.
At some point the discounting does get ridiculous. Like the Jos A Bank ads – buy one suit full price and get seven for free!! At the sily levels, the transparent pricing alternative would seem to have some appeal. But so far there’s little evidence of schools using that model successfully.
Price discrimination is an old story wrt private colleges and universities (in terms of it being recognized and studied),;
The interesting development is that as state support for higher education has decreased in many states, many affected public institutions have also turned to increasing use of price discrimination strategies, most typically seen in merit scholarship-type price reductions offered to OOS applicants. As long as the incoming student is paying above the marginal cost of providing the education, this helps the institution with improving revenues.
"Somebody can correct me, but a lot of students make mediocre grades that are not high enough to keep their scholarships. I had a fraternity brother who lost a full scholarship, and I suspect it is far more likely for average students to be unable to meet the academic requirements. So after a year, the choice is that the parents can pay more for them to stay with their friends or they can leave. "
Well and a lot of them continue having straight As just as they did in HS and later even add more Merit scholarships for returning students which are based on the college GPA. Some students simply cannot afford having many Bs, not for financial consideration but for their future career opportunities. So, they just stick to As in every class. It is not that difficult. The ones who slip just do not try hard enough. There are many examples of both. However, if there is a doubt in regard to a specific kid, just talk to them before hand, lay all the cards open so there is no confusion about the priorities at college. They have to be very clear in their heads what they are actually doing at college, well, this will exclude those who are attending a certain college in order to get married to a specific type of person.