Making College More Affordable
This chapter is from the book
This chapter is from the book
This chapter is from the book
Making College More Affordable
- Colleges have gotten increasingly good at price discriminating. The list price is set high, and then many customers are offered a discount called “financial aid” based on their ability to pay. Here’s the secret plan: In the future, Harvard will cost $1 billion a year, and only Bill Gates’s children will pay full price. When anyone else walks through the door, the message will be “special price, just for you.”
- —Greg Mankiw, professor of economics at Harvard University
One of the curious aspects of how colleges price their bachelor’s degrees is that students pay different prices for the same education. Colleges essentially price themselves like airline tickets.
A person who books a flight on United Airlines at 11 p.m. on a Tuesday might pay $50 less than a fellow passenger who waits until waking up on Wednesday to make the reservation. We know the airlines have their reasons for their price fluctuations, but heck if we know what their motivations are.
College pricing can be just as mysterious. The prices families pay can vary significantly and, on its face, make as much sense as an airline charging more money for reservations made within hours or minutes of each other. (I’ve even had airlines boost their fares while I was in the middle of making a reservation.)
The students who enjoy the cheaper prices aren’t always the most deserving. It’s not always the brightest students or the most financially needy teenagers who receive the biggest awards. You can have two equally smart students whose families make the exact same income and own houses with the identical equity, and one might end up paying full fare while the other enjoys the blue-light special price.
The best way to increase your family’s chances of capturing a price cut is to understand the motivation behind the pricing discrimination that routinely happens behind closed doors on college campuses. When money is limited, and it is for nearly all institutions of higher education, colleges and universities do play favorites with their applicants.
Beyond the colleges’ own pricing practices, financial aid formulas also pick winners and losers. Not all families who hope to win at what they often perceive to be a financial aid lottery are treated equally. You can blame a lot of that on politics. Student aid experts aren’t the ones in charge of the methodology that most schools use to determine how much aid individual students will receive. Congress oversees the system, which explains a lot.
In the next 14 chapters, you will get an inside peek on why the system rewards some students and leaves others with staggering debt. More importantly, you will learn what you can do to make college as affordable as possible for your family.
So let’s get started.