[leplen]

Price discrimination in the form of scholarships and the "show us exactly how much money is in your wallet" scam they call "need-based-aid" allowing universities have essentially perfect price discrimination and to gobble up the entire consumer surplus is definitely a big part of it.

Imagine any other service where they demanded your bank statements before they told you what they would charge you, and the impact that would have on sticker price.

[SkipperCat]

I've always wondered why the family that pays full price for tuition does not get the tax credit for their charitable contribution to some other student whom they subsidize.

If I donated $20k to a university, I'd get to write that off as a charitable contribution in my taxes. If I pay full tuition and 1/3 of that goes to a student needing aid, I get no deduction.

[rendang]

It's typically the opposite of what you say - the true expenses/student that a private university pays is much higher than even the richest kid pays (difference made up for by the endowment's income)

So the better question is why they don't raise prices such that the rich kids have to pay the true full price & have more money for aid for the less-rich.

[vernon99]

That’s the only thing that bothers you? :) How about we outlaw the price discrimination described in the parent comment? I think everything else just pushed the conversation deeper in the weeds and does us all a disservice.

[meetingthrower]

100%. There are revenue management consulting firms that boast of increasing price realization by 15%+ by managing admission rates, communication patterns, and "scholarship grants" to optimize bottomline price.

When the marginal cost of each student is probably $20K, anything over that is awesome. So even if you give a $30k "merit scholarship" to a full pay student you are making bank, as you are still clearing $50K+ as a university.

Perverse outcome of this is that the richer students will get more "merit aid."

Also, Ivy leagues + Stanford and MIT are a cartel, and don't give merit aid. So they use the "need based" aid system to even more increase their price realization from the richest folks.

(Ask me how I know: parent who went way too deep on this, and is now stroking a $85K check to an ivy.... lol.)

[gnicholas]

What makes you say the marginal cost of each student is $20k?

[happytiger]

It’s the same system California is putting in place with income-based energy billing.

Income-based billing is rife for abuse!

[maxrecursion]

The main political realization I had with growing up lower class, still live in poorer areas, and making it to being high income is that basing government programs around income is terrible policy.

1. It's extremely unfair

2. It punishes those working to get ahead

3. It creates 'welfare cliffs' where people become worse off for getting jobs. Losing Medicaid is the best example of this.

4. It makes the program exponentially more expensive to maintain because you have to hire people to track who gets it and who doesn't, look for fraud, monitor for when the income threshold needs changed, etc..

It's just terrible policy all around. We learned this during covid. It's so much easier to write people a check and tax the the high earners more to make up for them getting a check.

[weitendorf]

It's not just price discrimination, but the process of applying and choosing a college is essentially an auction process designed to benefit colleges over students. US colleges all band together to participate in a single coordinated system (FAFSA, college ranking systems, the common app, Early decision rules, etc.) , acting almost like a cartel, so they get away with it. If you view the college application process through the lens of Mechanism Design you can see that colleges hold all the cards and so the entire system is designed to their benefit: https://en.wikipedia.org/wiki/Mechanism_design

What exactly is unfair about the process?

1. The colleges which most heavily implement price discrimination are the most desirable to attend and also tend to accept large portions of their student body through Early Decision applications that don't allow apply to most (not all) of the other most desirable colleges. This means that accepted ED applicants have no recourse beyond either accepting or rejecting the proposed "aid package".

2. Highly desirable colleges aim for high applicant "yield" for rankings/planning, which in aggregate makes it so most of their accepted students only get into one highly desirable college. Even outside of early decision applicants, this puts applicants in a bad bargaining position - they must choose between either paying more for the ~single highly desirable college they got into or less for a less desirable college.

3. You cannot generally bid between colleges even if you got into comparably desirable/expensive desirable colleges (you can't tell Dartmouth and Brown that each is proposing a cost of $40k/y and have them bid against each other). This is because they essentially operate as a cartel. This limits downward pressure on prices.

4. The application process operates in rounds with fixed dates, there aren't really do-overs within a given year, and waiting for the next year changes the process (you're either a transfer or gap year applicant). This puts a lot of pressure on applicants to accept the least-worst option and doesn't give them the ability to react to a bad outcome by eg applying to more places after the fact.

5. The acceptance criteria are opaque and in many cases subjective (eg your application essays). Applicants need to hedge their bets and deal with a lot of uncertainty. Any accepted offer from a highly desirable college then feels like a gift and not worth squandering/negotiating.

6. As you mention, colleges know exactly how well you'll be able to pay, and because they act as a cartel that disallows bidding wars or negotiation + all the other forced scarcity/time pressure I mentioned, they can essentially extract as much from applicants as they want, up to their sticker price.

It's worth mentioning that not all competitive colleges participate in the cartel to the same degree as the Ivy League. When I was applying to colleges, I remember MIT and Caltech had Early Application (not Early Decision) processes, didn't make applying in those rounds as beneficial as ED colleges, and didn't have as many athlete/legacy "backdoors" as the Ivy League.

I also remember that Duke and Vanderbilt offered full merit scholarships to some students who might've received no need-based aid, which I was fortunate enough to benefit from and am extremely grateful for, even if it was probably a self-serving policy to poach applicants away from the Ivy League/improve yield.

[lupire]

The weirdest part in all this is that the people who architect the system are making essentially no money from it. All of extra tuition money just goes to pay random employees. A strange way for greedy provost to use ill gotton gains.

[meetingthrower]

Beautiful reply. #3 can be pushed by aggressive negotiators, but requires "like for like" schools to make a mistake. Then you can leverage one school to ask for more money from another.

[KRAKRISMOTT]

A fairer system would be SAT score weighted by contribution and legacy status, it makes it nice and fair for everyone.

[kristopolous]

Traffic citations in some municipalities do this.

College shouldn't be structured like a punitive sacrifice for poor behavior

[mrgaro]

Pretty much every company who does not list prices publicly in their website does this. If the vendor recognizes your company name, the price will be bigger :(

[xtiansimon]

If you get food stamps or other services from the social safety net, then you have to show your financials. Requiring the same for educational subsidies seems to follow the same rationale.

[i_am_jl]

There's a difference between "Show us how much you have, we will give you more until you have enough" and "Show me how much you have, we'll raise prices until you can barely afford it with a high interest loan."

[deprecative]

That just goes to the immoral and unethical nature of means based assistance. It makes no sense to deprive people of aid because they make a dollar over some arbitrary line.

[fishpen0]

Funny enough this is exactly how vendor engagement goes when you are publicly traded. They can see your books more or less and charge wildly different numbers to different companies. It has nothing to do with how much you use the product or the resources you'll use and everything to do with what they think you are worth. We've had so many calls where we're like "brand new product with team of 10 wants your thing" and they come back with a high 6 figure saas contract. It's so fucking annoying that they don't have to show their prices online and can make all their customers sign pricing NDAs

[exe34]

I suppose it's karma for all the companies that refuse to publish the salary being offered for jobs upfront.

[rahimnathwani]

  Imagine any other service where they demanded your bank statements

Many private K-12 schools do this as well.