Posted by: bridget | 12 December 2006

Tuition Hikes Attract More Applicants

Somewhat counterintuitively, universities are finding that increasing tuition helps to increase the number of applicants.  The theory is that students believe that the higher-priced school offers a better education (similar to how consumers believe that higher-priced goods are of a higher quality).  Generally, schools align their tuition with that of similar or slightly better colleges.  Given the astronomical costs of college (some schools are nearly $50,000 per year for all expenses), it is odd that raising tuition does not deter applicants who think that they could not afford it.

Aside from the general theory that consumers believe that a higher price means better quality, the pachyderm would like to offer a few alternate, education-specific explanations for this phenomenon:

  • A higher price may deter less wealthy students but the losses could be offset by an increase in applications from more wealthy students (or students who do not mind taking out large student loans for their education).
  • Students graduate from college with an average of $20,000 in loans.  High school students may be willing to take on more debt than in previous generations, but expect that it is an investment in human capital.
  • Cheap schools are generally found in the South, in rural areas, and are small schools that are not affiliated with large graduate programmes.  Snob appeal on all three counts.

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