Check out small colleges!

MONEY MONEY MONEY: The elephant in the room

Q: Why does a dog bite its own tail?

A: Because they can

Why do “highly ranked” small colleges charge so much? Because they can.

Why do “not so highly ranked but still very good” mid-range small colleges still have a hefty price tag? Because, in American, perception=reality and high cost=high perceived value. Everyone wants bragging rights about their children.

Let me explain.

It is all about economics, really. Supply and demand. If a college is highly ranked, more students apply for admission and a smaller percentage are admitted and enrolled. There are waitlists. People WANT the college more than the college actually WANTS or NEEDS them. So…people will pay. These schools have large piggy-banks (endowments), so they will give a lot of need-based gift financial aid (without any loan money in the package) to lower income students (this is how low income but high-academic-achieving can afford to go to Ivy and other “prestige” schools without paying anything at all out of pocket). However, once the family income rises to a certain level, most of these highly ranked schools do not (and do not need to) give any gift aid at all.

As the costs of these highly ranked colleges increase, the “other” colleges have a choice to make: keep their costs low without giving a lot of scholarship/grant money to entice students….OR increase the “listed price” but offer incentives to lower the price. Most of them, purely because of competition within the college market, raise their prices but give huge amounts of scholarships and grants to entice people to come. They do not want to be “perceived” as being lesser in value than the “prestige” schools.

These are good colleges. They give a great education. However these colleges NEED and WANT the student…more than the student wants or needs the college. They admit a higher percentage of applicants, they seldom have wait-lists, and quite often they are still admitting students even after the May 1 “decision date.” They also, from time to time, will “price-match” other colleges by adjusting their aid awards.

If a college leaves their price tag low…they are perceived (incorrectly of course) as being worth less…and perhaps even perceived as being “desperate” or in severe financial distress.

What does this lead to? Lots of confusion, and lots of competition among about 600 of the 700 small private colleges in the Nation.

Let’s say you are a parent of a very bright student who could attend any college (academically) that they would like to. #1 in their class. 1600 SAT. 36 ACT. And let’s say your income is $400,000 and your EFC (Estimated Family Contribution as calculated by the FAFSA) is above 70,000. What are your choices?

A.  Prestige/Ivy type school for $70,000/year (and you get no gift aid at all)

B.  Mid-Range school that has a list price of $48,000 but offers a $27,000/year scholarship the day your kid is admitted (net price = $21,000)

C.  Mid-Range school that has a sticker price of $21,000/year (and you get no gift aid at all).

From a “bragging rights” perspective (so you can wear that T-Shirt that says “my son attends XYZPrestigeschool) you can choose “A”

From a “bragging rights” perspective (so you can tell your friends that “my son was admitted to XYZPrestigeschool but chose to attend ABCMidRange school on a HUGE scholarship”) you can choose “B”

From a “pragmatic” perspective (so you can tell your friends that “my son was admitted to XYZPrestigeschool but chose to attend ABCMidRange school which offered us a great financial opportunity”) you can choose “C”

Mid-range colleges usually tend to pick “B” and use scholarships and grants to “entice” people to attend. The reason they usually do not “just reduce their price” is because they do not want to be perceived as either desperate or cheap.

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I hope for a day when all colleges get together and adjust their prices back to what they really are. I would like to see all 600 or so mid-range colleges do what Greensboro College (NC) is doing: Check out this article:

https://www.greensboro.com/news/education/greensboro-college-announces-deep-cut-to-tuition/article_362514b1-979a-5078-bb5c-fd5e21f381a1.html

Unfortunately, this is about as likely as finding proof of Big Foot, the Loch Ness Monster, and UFO’s on the same day….but a guy can  always remain hopeful, right?