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QOTD: College Price Discrimination December 13, 2007

Posted by federalist in Education.

I have never approved of the pricing gambit run by private universities: They run a wealth redistribution scheme by setting tuition above the marginal cost of educating a student, and then rebating the surplus to students that meet whatever criteria they think deserves it (low income, athletic ability, etc.).  WSJ editorial today touches on this:

“Colleges have little incentive to cut costs,” says economist Richard Vedder, the author of “Going Broke by Degree: Why College Costs Too Much.” Mr. Vedder explains that there are now twice as many university administrators per student as there were in the 1970s. Faculty members are paid more to teach fewer hours, and colleges have turned their campuses into “country clubs.” … Our financial-aid system also hurts middle-class applicants. Parents who have saved money for their child’s tuition quickly find that, by the strange calculus of financial aid, they are charged more for college tuition than if they had blown their savings on a bigger house. Mr. Vedder wonders why universities should get to ask the income of their students before telling them how much they’ll be charged. That sounds like price discrimination….

Public universities end up getting dragged into a similar gambit as they compete for attractive students, though they face some mitigating pressure from voting residents and taxpayers to keep things from getting completely out of line.



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