Why some institutions can afford to market opaque sticker prices

New York University, Tufts University, the University of Pennsylvania, Yale, and Vanderbilt are inching ever closer to the $100,000 price tag, which may shock a public already disdainful of higher education's high costs.

As the cost of higher education continues to rise for students across the socioeconomic spectrum, public and private institutions’ marketed sticker prices have become an increasingly unreliable metric for applicants to gauge how much they will pay, a new report from Brookings declares. As affordability becomes a louder demand among a skeptical public, some institutions may be incentivized to continue marketing artificial tuition prices.

The inflation-adjusted sticker price at a four-year public college rose by 66% from the 1995-96 academic year to 2019-20 and increased by 79% at private colleges. However, the rate of students who paid the full sticker price decreased dramatically during that period. Only 26% of in-state public college students paid this published rate in 2019-20, compared to the 53% who did three decades ago. At private schools, the rate of students paying sticker prices fell by nearly half.

Colleges and universities have increasingly leveraged their arsenal of merit- and need-based aid packages to discount their tuition once they enroll, leaving whatever students have left to pay as the net price. While the net price students have had to pay has increased, too, in the past three decades, it’s far lower than the sticker price, and higher-income students experienced the highest pay increases.

If a tree falls in the forest…

Despite institutions’ heightened commitment to offering palatable aid packages, aspiring collegegoers and the public at large are unaware that what students actually pay for is far lower than what’s advertised, which can spell enrollment trouble. A pair of reports highlighted in a recent Forbes article found that students don’t apply to colleges with high sticker prices. Similarly, only 19% of Americans know that lower-income students pay less for college than higher-income students, according to a 2023 survey from the Association of American Universities. As a result, colleges and universities may be inadvertently marketing to lower-income students that their school is not for them despite the aid that shows otherwise.

“College is indeed expensive for higher-income students, but the affordability problem is much greater—and more consequential—for lower- and middle-income students,” wrote Phillip Levine, the report’s author and economics professor at Wellesley College. “We cannot expect students to make sound decisions regarding educational investments if they do not understand how much college will actually cost them.”

More from UB: The 5 metrics colleges and universities should measure to boost their value

Should your institution drop its sticker price?

New York University, Tufts University, the University of Pennsylvania, Yale, and Vanderbilt are inching ever closer to the $100,000 price tag, which may shock a public already disdainful of higher education’s high costs. However, some institutions that leverage an intimidating sticker price are incentivized to keep up this practice—and equally dissuaded from stopping.

Institutions with a high sticker price who consider slashing their sticker price to market their affordability face a “prisoner’s dilemma,” the report added.

“If any one school changed their policy on its own, it would lose students,” wrote Levine. “If all agreed to so simultaneously, that would overcome the problem, but it also likely would be seen as a violation of anti-trust laws.”

Elite colleges and universities associated with the highest echelons of society also have a tactical reason to keep up appearances. Protected by their high endowments and alumni networks, they can afford to slash students’ tuition by more than half through in-house financial aid while ensuring they retain their luxury-like outward perception.

“The most expensive schools, led by the Ivy League, know they are selling a priceless dream,” David Novak and Hanif Perry, marketing strategists at Prophet, wrote in a University Business column. “They represent the pinnacle of social status, offering an incomparable educational experience.”

But not all institutions are adhering to this model. Some regional private colleges and universities that face the most competition from nearby publics have engaged in tuition resets to attract more students. Evidence from Kennedy & Company, a higher education consulting firm, says the tactic is highly beneficial.

Willamette University, a private liberal arts college in Oregon, experienced an enrollment uptick in 2021 following abysmal rates in 2019. While the university credits much of this increase to the merger with a nearby arts college, the university also experienced a high rate of enrollment from community college transfers.

Last September, Bridgewater College in Virginia slashed its sticker price by 63% to convey to students that higher education isn’t ridden with barriers.

“We want them to know we were always as affordable as most public colleges, but we were hiding it behind this very gaudy price tag,” said President David Bushman.

Alcino Donadel
Alcino Donadel
Alcino Donadel is a UB staff writer and first-generation journalism graduate from the University of Florida. His beats have ranged from Gainesville's city development, music scene and regional little league sports divisions. He has triple citizenship from the U.S., Ecuador and Brazil.

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