The power of pricing: college tuition

Does our love of a discount make us pay more for college tuition?

A recent Mother Jones article compares college tuition pricing to holiday sales at the mall. We may like thinking we paid 70 percent less for that sweater, but in reality the retailer never expected the sweater to sell for the sticker price.

And so it goes with colleges. Many colleges list very high tuition prices, then give students grants and scholarships and financing to lower the actual cost. The market is so confusing, the price information so jumbled, that colleges are now legally required to provide online calculators so that prospective students can attempt to get an accurate number of what they’ll pay.

For example, my alma mater of Whitman College is now listed as one of the most expensive in the nation, based on its published tuition costs. At the same time, the average student debt at graduation for Whitman students is at or below the national average. The difference is discounting through scholarships and grants.

Not just private schools, but state-run universities as well use complex discounting that can complicate price comparisons.

Higher education is starting to experiment with pricing. Concordia University-Saint Paul, in Minnesota, “reset” their tuition starting in the fall of 2013. They reduced tuition by $10,000 a year, but also decreased their discounting. The real cost of attendance changed little. But the lower, clearer, simpler pricing led to an all-time high in new undergrad enrollment.

One idea getting attention is income-based repayment. Instead of students paying tuition upfront, graduates pay a portion of their income once they start working. Mark Yudof, president of the University of California system, is considering income-based repayment for the UC system. Some colleges make a variant of this approach available to students struggling to repay their college loans.

Innovation in pricing makes it possible for people to make large purchases like houses and cars, buy over time through layaway and credit, and pay more securely through credit cards and online transactions. Higher education is not often considered an innovator in marketing, but changes in pricing could help solve the problems of rising prices, mounting student debt, and loan defaults.

Would a pricing change at your local college or university entice you into the classroom?

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