College pricing now mirrors holiday retail sales pitches

Marian Wang | 1/10/2014, 6 a.m.
You know all those seemingly great sales during the holidays? It turns out, they are often a "carefully engineered illusion." ...
After a “tuition reset,” Concordia University found that the lower rates increased student applications, raising enrollments and, ultimately, net tuition revenue. Drew Geraets via Flickr

The growing discount rates and the lack of transparency in the pricing of higher education have prompted some schools to try another approach. A few colleges and universities have opted for “tuition resets,” announcing they’re slashing sticker prices by as much as $10,000 — while often reducing aid.

Call it the J.C. Penney strategy. The retailer tried to move away from high-low pricing and move to “everyday low prices,” only to find out the hard way that customers really, really love a discount.

Yet, at least initially, some colleges such as Concordia University have gone the “tuition reset” route and have found that the lower rates (and the accompanying PR boost about the lower rates) got more student applications in the door, raising enrollments and ultimately net tuition revenue. Whether that interest from consumers will continue after the headlines fade remains to be seen.

It’s worth mentioning that one big difference between the pricing of higher education and other consumer goods is the ease of comparison shopping: When you’re shopping for a new TV set, it’s relatively easy to compare prices with a little research. It’s much harder to do that with colleges, especially when you have to narrow down your options to a manageable number and submit applications before knowing for sure how much each option will end up costing.

There are, of course, tools out there intended to make college costs more transparent. Colleges are required to post net price calculators to give prospective students — or, at least, those who put in the time to find the calculators online and enter in their personal information — a better sense of what a given school might cost them after discounts. But the calculators have their limitations: Some estimates are more accurate than others, depending on the complexity of the colleges’ calculators, which are not standardized. (In more recent news, lawmakers have introduced a law aimed at making the calculators more user-friendly.)

As it stands, it’s not always clear whether consumers actually win when colleges — or retailers — tinker with their pricing and discounts. What is clear is that when the system isn’t especially transparent, discounts can get people overexcited, whether they’re real savings or not.