Friday, December 27, 2013

Experimenting with Price Cuts in Higher Education

I've long been an advocate of cutting tuition and getting away from the wrong-headed "luxury-price signals quality product" logic so common in lower and middle tier higher education. There are many reasons not to "just do it," but more than a few things in favor of the idea should at least motivate serious discussion:
  • honesty in pricing might better reflect institutional values;
  • some prospective students never consider a school, knowing sticker price is out of their reach; the current system discriminates against such "humble realists";
  • institutions should grapple with the fact that full-pay families might not be willing to participate in the institution's redistribution scheme if they thought (knew) about it;
  • it is not clear there is any dis-interested, scientifically valid research on the implications;
  • revenue models rarely take into account the cost of administering Byzantine financial aid schemes;
  • some institutions are unfairly labeled "elitist" based on sticker price alienating people to whom their mission otherwise would appeal;
  • tuition discounting is one of many opacity practices that undermine administrators', board members', and faculty members' capacity to effectively monitor the economics of their institutions.

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