Elite private colleges know how to squeeze parents dry, writes Andrew Manshel in the Wall Street Journal.
As high-school seniors around the country open their mailboxes looking for thick envelopes from colleges and universities, their parents are undoubtedly thinking, “Why does college cost so damn much?”—particularly if those children are headed to elite private institutions. Based on my experience as the vice president for finance and administration at a prominent college in the early 2000s, I suggest that the answer is simple: Top private institutions charge what they do because a substantial number of people will pay it.
Elite colleges don’t base tuition and fees on budgetary needs, he writes. They analyze what comparable colleges are charging to maintain the “pecking order.”
I learned that the most prestigious and desirable institutions have a good deal of information about the shape of the demand curve for the families seeking to obtain elite higher education for their offspring. These schools have the capacity to estimate with some precision how many applicants will go elsewhere for each additional dollar they charge in tuition and fees. Each sets its tuition so as to produce a targeted “yield”—the percentage of accepted students who actually enroll there. If in any year we over- or under-estimated the price changes made by the other schools, and we had moved up or down in rank, we corrected the following year by raising or lowering tuition by more or less to compensate. We essentially followed the price leadership of the wealthiest, most prestigious institutions.
The richest institutions could pay all operating expenses from endowments, Manshel writes. But “there are qualified paying customers lined up at the door,” so why not make ’em pay? Leaders of the elite private colleges could control costs and end inflation-busting increases, raise endowment payouts and “rededicate themselves to providing opportunity to the talented regardless of means.”
Wealthy grandparents can’t pass much on to their grandchildren directly, but they can pay unlimited tuition, notes George Leef. And colleges know that.
Because of financial pressures, middle-class students are more likely to choose community colleges as the most affordable route to a four-year degree, reports the Washington Post. But they may not find counselors with the time to explain which credits are transferable and which are not. (And why that information isn’t built in to the system I don’t know.)
Update: Better management could save UC-Berkeley $75 million a year, according to consultants. The report recommended “streamlining purchases, concentrating job duties and laying off redundant managers,” reports the San Francisco Chronicle.