Almost no one really pays inflated college sticker prices–they just make education seem expensive. Now more colleges are getting real about tuition

 What private colleges tell you about their price is almost always a confusing number that bears little resemblance to the actual cost of providing an education. Most private colleges use a high-tuition-high-discount model in their pricing, setting a high sticker price and then offering deep discounts–through scholarships and other aid–to look affordable. Even though almost no one actually pays the full sum, tuition sticker prices have gotten so inflated that many families are having a difficult time embracing the notion that college is worth spending that much every year for four years.

This model, now the norm for all but the wealthiest and most elite private institutions, originated some 40 years ago. At the time, it was intended to make higher education more affordable to low-income students. A portion of the tuition dollars paid by some students was used to offset the tuition that couldn’t be paid by those needier students.

The system worked as long as there were enough students paying close to the full price so that some of their tuition dollars could help pay for the education of their needier peers. As the pool of potential students has gotten smaller, many colleges have found themselves fighting for students by offering bigger discounts to more students, including those who may not need them.

When there aren’t enough students paying actual tuition dollars to subsidize the others, the “scholarships” being offered stop being backed by real dollars. They don’t really help pay for anything related to the educational experience–they’re just coupons, designed to make something look more affordable. In other words, colleges are “buying” students with these discounts to generate at least some revenue from each student we enroll.

At many private colleges, student revenue is by far the largest source of institutional revenue. And here’s where the tuition discounts become a problem: Private colleges cut, on average, 56.2% of tuition for first-time undergraduate students, meaning that colleges, on average, give up $56.20 for every $100 they charge students for tuition. That number is much higher for those institutions that have depended heavily on the discounting arms race to bring students to campus over the last 20+ years. Tuition discounting is so embedded in our business model that we build our budgets not on the tuition price, but on the expected net revenue after the discount has been written off.

This creates a real financial challenge for individual colleges, but the worst consequence of runaway tuition pricing and discounting is the unintended consequence of appearing financially out of reach for so many prospective students.

We know that many students and their families look first at the published tuition price when making their college decisions–and won’t even consider private colleges if they appear too expensive. This is especially true for Pell-eligible students and first-generation college students, among others. The very students and families who stand to benefit the most from the kind of relational, supportive education offered at smaller private colleges are not even considering us. They may make other choices about where they will pursue their education–or may choose simply not to go anywhere at all.

Fortunately, some schools are reconsidering their approach. Recently, small colleges, including Colby-Sawyer in New Hampshire, Lasell in Massachusetts, and Wartburg in Iowa, have agreed to drop list prices by double digits. At Bridgewater College in rural Virginia, we’re getting real about tuition by reducing our undergraduate sticker price by more than 60% starting next fall to make programs more clearly accessible and to better reflect the cost of education.

Not everyone needs a college degree to be successful, but almost everyone’s life can be better and fuller if a college degree is part of their experience. The published tuition price should reflect the actual cost of a college education instead of making it a confusing part of a complicated pricing strategy. We owe it to students and their families–to be transparent about one of the most important investments they can make.

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