When Everyone Gets a Discount on College Tuition

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"Full pay students across the country are gold,”?the president of Colorado College, Song Richardson,?said at a national summit?hosted by the U.S. Education Department this week.

Richardson wasn’t endorsing the approach, only that it’s the reality of the business model for tuition-dependent colleges. Much like full-fare business travelers subsidize the low fares for leisure travelers at airlines, wealthier students do the same for their classmates.

The problem for higher ed, however, is that over the last decade full-pay students have become a rarer commodity—the result of declining household incomes in the U.S., increasing sticker prices at colleges, and more families simply saying No to paying full price even when they can.

How bad is it for the bottom line of colleges?

Recently, the CFO at a small private college shared data with me that show?the percentage of full-pay students at the top 150 liberal-arts colleges has fallen overall from 22% to 16% since 2012.?(Full-pay students in this case are defined as those who receive no?institutional?aid, so they still might access outside dollars, including loans, to pay for tuition.)

The rapid deterioration of full-payers has been most acute in the middle—those institutions that rank between 51-100 among the the?U.S. News?top liberal-arts colleges.

Today, 89% all full-pay students who go to a liberal-arts college are enrolled at a campus in the?U.S. News?top 50.?For those campuses in the middle, their pricing strategy is a vicious cycle: they try to improve their ranking by attracting students with better academic profiles, but to do so they need to offer superior financial aid packages than schools further up the rankings, which only exacerbates the discounting.

All this doesn’t mean there are fewer families?capable?of paying full price.?It’s just that they are being very picky about where they cover full freight. And that means they're only willing to do it at the most selective universities and liberal-arts colleges. That in turn, skews the classes at these institutions to the wealthier side, compared to their counterparts further down the rankings.

A?study?out earlier this week,?found that at a group of 12 institutions—the entire Ivy League plus Stanford, Duke, M.I.T. and the University of Chicago—applicants from families in the top 1% were 34% more likely to be admitted than other applicants with the same SAT/ACT score, and those from the top 0.1 percent were more than twice as likely to get in.

In my parlance,?these 12 colleges are “sellers.”?They don’t need to discount and families who can afford it are more than willing to pay full price because the institutions have something to sell—a brand name known worldwide giving their graduates access to elite employers.

Indeed, the new research this week found that attending one of these colleges increased a student’s predicted chance of earning in the top 1 percent. What’s more, it nearly doubled the estimated chance of attending a top graduate school, and tripled the estimated chance of working at national news organizations and research hospitals.

Bottom line:?In many ways, the story of American higher education over the last decade has also been the story of America and a culprit in the current state of college finances: the hallowing out of the middle.

• The decline of the middle class in America, along with continued anemic college-going rates among low-income households has put more pressure on colleges to squeeze as much as they can from those who they deem can afford it.
• And that starts in the admissions process. Even when colleges claim to be “need blind”—not taking an applicant’s income into account when reading their application—there are so many clues for them to see from zip codes to parental occupations to activities.
• It’s one reason why colleges are pushing back on attempts to end legacy admissions or spots for athletics—two groups that tend to bring wealthier students to campus.?
• Of course, some of the sellers are so rich themselves they don't need full-pay students to balance their books. More on that in a future newsletter.

—Speaking of my?"Buyers and Sellers" list of colleges,?which looks at institutions in the admissions process through the prism of their institutional aid policies, we’ll be releasing an updated list with more current data this fall.

??? Events

The "Next Office Hour" returns next month?with a special evening edition focused on college admissions for the new academic year.

Joining me on?Tuesday, August 29 at 8 p.m. ET/5 p.m. PT, will be? Timothy Fields , associate dean of undergraduate admission at Emory University, and? Shereem Herndon-Brown , founder of Strategic Admissions Advice. They are also both co-authors of?The Black Family's Guide to College Admissions.

We’ll be talking about how to reassess your college list in this new admissions environment, whether test-optional admissions is here to stay, and how hoslitic review is changing. We'll also be taking questions from those who join us live.

???Register for free here?(and to get a recording afterwards).

SUPPLEMENTS

???Mental Health and Higher Ed.?A new survey of more than 1,000 faculty members in the U.S. by Course Hero found than nearly half say that their students come to them with a mental health concern multiple times per month or more. One in five faculty say they receive mental-health related requests for extensions or accommodations on assignments weekly or multiple times a week. (Course Hero).?

??Next Stop for Student Loan Relief: Negotiated Rulemaking.?After the U.S. Supreme Court rejected the Biden Administration’s loan-forgiveness plan last month, the Education Department initiated the official process to write a regulation granting student debt relief. How does that process, called negotiated rulemaking, work? Alison Griffin of Whiteboard Advisors (and a former congressional staffer) has a good explainer in?Forbes, along with a useful graphic of the process. (Forbes)

???Retention and Persistence are Back.?College enrollment might not have returned to its pre-pandemic levels, but there is one good piece of news on the enrollment front for institutions: more students are staying in college. The percentage of college freshmen who started in the fall of 2021, and returned either to the same institution for their sophomore year or transferred somewhere else, are back to their pre-pandemic levels, according to new data out this week from the National Student Clearinghouse Research Center. (Inside Higher Ed).

Until next time, Cheers — Jeff?

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