Good Information Crowds Out Bad Information

How the wealthy get discounted college tuition and why we should all be talking more about our finances

When I was a senior in high school, I was accepted into Harvard. When the envelope arrived, I thought, This is a lovely piece of paper, but I can’t go. We couldn’t afford it.

On a phone call with my parents and the Harvard admissions counselors, they asked us, “How much can you contribute?”?

“Nothing,” we answered honestly.

“Where will you go instead?” they asked.?

I had appointments at West Point and the Air Force Academy and was fully prepared to go. I answered plainly, “The Air Force Academy.”?

The call ended and with it my enrollment to Harvard, or so I thought.?

A few weeks later, another envelope arrived. This one congratulating me on being named a Harvard Scholar — an honor for the top 100 incoming freshmen, and one that came with a full ride. Nothing had changed about me: no new information about my grades had been uncovered, no new achievement or legacy connection had been revealed. The admissions department simply knew more about how much I was able and willing to pay, and where I was headed instead.?

The admission and aid policies are the ultimate black box to the majority of Americans

Though the financial aid policy at Harvard is quite different today; this situation unfolds today in many institutions in the United States. Higher education institutions are happy to perpetuate the idea that they are purely selection committees dedicated to enrolling the best student body possible and that any amount of tuition is “worth it.” In reality, the admission and aid policies are the ultimate black box to the majority of Americans — a complex system that’s one part merit-based, one part need-based, and one part marketing and sales.?

Good information crowds out bad information

In my town in southern Mississippi, no one asked how much I was offered in grants and scholarships, and certainly no one discussed graduation rates, post-enrollment earnings, or the impact my major would have on the value of my degree. Instead, they asked me, “What’s your aid package?” In other words, how much are you taking out in loans??

Years later, I found out most of my future classmates had very different conversation —?the wealthy are “smarter consumers” of higher education. They knew that scholarships and grants are a discount on education, and that institutions give those discounts at the end to further entice students who might otherwise go elsewhere.?

Colleges are motivated to enroll students who will take out loans, which are readily available in high dollar amounts. When a student enrolls and pays with federal loans, the student typically pays full price —?since?they’re able to finance 100% of the cost, they can “pay” 100% of the cost and will do so readily because they are extremely motivated to go to college. As Kevin Carey put it for Slate, in the aptly titled article The Single Most Important Thing to Know About Financial Aid: It’s a Sham, “While the ‘sticker price’ for tuition at some institutions exceeds $50,000, most colleges don’t have enough market power to charge anything close to that. For them, the real concerns are, ‘How likely is this applicant to enroll, if we accept them? And what’s the most amount of money they’d be willing to pay?’” The ugly reality is that you’ll get a better deal on your tuition if you have money to pay for college than if you don’t.?

Good information dies without community

I was lucky when I was talking with Harvard that I had a powerful best alternative to a negotiated agreement, or BATNA, in my pocket?and told them about it,?but the good information that the sticker price isn’t a set price died with me. I didn’t have anyone else to share that with and no one but me benefited. If I had been part of something like Sawa , the power of information could have benefited the entire community.?

The unspoken rule we’re breaking at Sawa is this: My financial situation is none of your business. We believe that it should be easier and more comfortable to talk about financial issues, share good financial information, and to help each other out when we need it. I wish Sawa existed then and am grateful we’re building it now. The best time to plant a tree was 20 years ago, the second best time is now.?