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Why falling demand hasn't brought down college sticker prices

hechingerreport.org

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Re: Why falling demand hasn't brought down college sticker prices

#41

Post by raiyu »

technologyvault wrote: post #22

A few observations about this "will the traditional college survive" situation, which I've been following for a long time. The higher education market feels a bit like the healthcare market in that it's somewhat difficult for the consumer to tell what the actual cost will be prior to purchasing the product. Published tuition rates and other costs of attending school feel like they're abstracted until a long-term comm…

I think salaries for football coaches is the one area where they aren't having issues because they get direct revenue from their sports teams in terms of ticket sales, merchandise sales, and TV rights. If the teams do better, all of those metrics increase, so investing there would make sense. Additionally they don't have one of the largest costs for traditional sports teams, player salaries.

Re: Why falling demand hasn't brought down college sticker prices

#42

Post by pessimizer »

brdd wrote: post #5

I only read the article (and not the podcast, if it's different) but I think their argument misrepresents how the economics of higher education work. > "Economics 101 suggests that declining demand results in lower prices." This isn't true for college sticker prices because colleges have perfect price discrimination. Most students don't pay the sticker price; they pay exactly what they "can". In no other industry do…

> This isn't true for college sticker prices because colleges have perfect price discrimination. Most students don't pay the sticker price; they pay exactly what they "can".

> In no other industry do we have such perfect incentives aligned on the provider side to increase prices--

(Healthcare.)

Re: Why falling demand hasn't brought down college sticker prices

#43

Post by gowld »

TangoTrotFox wrote: post #29
onlyrealcuzzo wrote: post #23

Earlier quoted context omitted.

For established non-profit schools? Or new, mostly for-profit schools? I find it hard to believe any reputable, 20+ year-old, non-profit schools are losing money. They should own their assets outright, have extremely low interest rates on any outstanding debt, pay close to 0 taxes. Wages for non-executive staff are not keeping pace with inflation. How are they losing money?

Berkeley is arguably the poster child for many of these problems. They continue running on a deficit.

Berkeley is intentionally a subsidized public school, so their deficit is entangled with their subsidy. Nearly government-funded programs are likewise.

Re: Why falling demand hasn't brought down college sticker prices

#44

Post by pessimizer »

akgoel wrote: post #36
lordCarbonFiber wrote: post #28

Earlier quoted context omitted.

Except that the raw "information" taught in colleges doesn't represent enough value to even show up as a line item in a cost breakdown. Anyone can read a book, or even watch a lecture; the value add is access to research, access to professors, and perhaps most importantly, access to a community of motivated(to a degree) students all in plus/minus the same point in their lives. MOOCs on the internet can't compete on a…

The only "value add" for colleges is the signaling provided by getting the degree, i.e. going through the application process and committing to finishing a 4 year degree. This is most easily measured in the income data for college-grads vs non-college-grads. This data is so easy to measure that you can measure the "value" of a college degree, currently something like $17K per year more for the graduates.

Don't underestimate the value of circulating amongst the children of the wealthy. These are the connections that will get you work and investors, especially if you manage to marry one of them, which has always historically been the most common mode of class mobility.

Your wealth is directly related to the people who you associate with. If you're any lower than upper-middle class, college will be your last opportunity to associate with the rich through simple elbow grease and charm.

Re: Why falling demand hasn't brought down college sticker prices

#45

Post by gowld »

lordCarbonFiber wrote: post #28
technologyvault wrote: post #22

A few observations about this "will the traditional college survive" situation, which I've been following for a long time. The higher education market feels a bit like the healthcare market in that it's somewhat difficult for the consumer to tell what the actual cost will be prior to purchasing the product. Published tuition rates and other costs of attending school feel like they're abstracted until a long-term comm…

Except that the raw "information" taught in colleges doesn't represent enough value to even show up as a line item in a cost breakdown. Anyone can read a book, or even watch a lecture; the value add is access to research, access to professors, and perhaps most importantly, access to a community of motivated(to a degree) students all in plus/minus the same point in their lives. MOOCs on the internet can't compete on a…

Right. The "basic core education" is what you get from a community college or a European public school -- and look at what the expenses is for those (total funding, per student).

The rest is all up-charge for intangibles

Re: Why falling demand hasn't brought down college sticker prices

#46

Post by gowld »

moorhosj wrote: post #15
sp332 wrote: post #6

The article doesn't mention that middle management exploded at colleges in the last few years, and those people are going to try to hold on to their jobs no matter how low enrollment gets. http://blogs.wgbh.org/on-campus/2014/2/6/growth-nonacademic-... Also I think the part about half of tuition at one school going to "discounts and financial aid for freshmen" is misleading. That's not really costing the college mone…

It’s costs the college revenue, just as tax cuts cost the government revenue.

That's like saying piracy costs $TICKET_PRICE * #viewings, or that the value of donated software is its sticker price, or that buying a department store shirt "on sale" costs the seller any money.

It completely ignores the possibility of non-purchase, which is the dominant alternative among options. "Would have paid" is a tiny fraction.

Re: Why falling demand hasn't brought down college sticker prices

#47

Post by gowld »

jfasi wrote: post #9

I wonder how this drop in demand is distributed between American students who are eligible for financial aid and federally-backed student loans and foreign students who almost always pay full price. As an anecdote from my own engineering school experience, a staggeringly large proportion of my classes were populated by foreign, usually Chinese and Indian, students. My college has a pretty good brand, and I understand…

> (at least if the number of Canada Goose coats and Supreme hoodies is any indication).

Why crane your neck to check the outfits, when you can glance at their cars?

http://www.mlive.com/lansing-news/index.ssf/2014/04/michigan...

"People who haven't visited Michigan State University's campus lately may be surprised to find Maseratis, Lamborghinis and Bentleys driving around. ...:

Re: Why falling demand hasn't brought down college sticker prices

#48

Post by pessimizer »

crb002 wrote: post #16

Federal Student Loan bubble sets a price floor screwing all the poor students with debt they otherwise could avoid in a free market.

Sadly, they would also avoid college in a free market. The problem is that the state should be setting a price floor of $0, which would limit the motivation to compete on debt to private schools.

Re: Why falling demand hasn't brought down college sticker prices

#49

Post by gowld »

jdeibele wrote: post #27
lainga wrote: post #3

Earlier quoted context omitted.

I am guessing that total applications are up while total numbers of applicants are down (and thus there are more applications submitted per person)?

Yes. One of the things that's different is that there's now https://www.commonapp.org/ which says "you can apply to more than 700 colleges" using it. To some degree, application fees (paid per college) are still a deterrent but some people qualify for free application fees. There was an article about a young woman who was accepted at more than 100 colleges. http://www.ibtimes.com/teen-gets-accepted-more-100-colleges-…

Common App is at least 20 years old.

Re: Why falling demand hasn't brought down college sticker prices

#50

Post by mathattack »

onlyrealcuzzo wrote: post #23
oflannabhra wrote: post #12

Earlier quoted context omitted.

The point of the podcast, at least, is that despite all of your points, colleges are taking on enormous amounts of debt, while enrollment is shrinking . They are losing money.

For established non-profit schools? Or new, mostly for-profit schools? I find it hard to believe any reputable, 20+ year-old, non-profit schools are losing money. They should own their assets outright, have extremely low interest rates on any outstanding debt, pay close to 0 taxes. Wages for non-executive staff are not keeping pace with inflation. How are they losing money?

Anyone can spend beyond their means. New dorms, fancy technology, state of the art gyms, expensive non-revenue sports....

The nature of their governance structures makes it easy to spend money but harder to save it.

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