Price Discrimination in Higher Education

A blog about business and economics.
Nov. 27 2012 8:24 AM

Price Discrimination in Higher Education

One important point about college tuition prices is that the skyrocketing headline figures can be misleading, since relatively few students actually pay full price. But Kevin Carey counters that precisely because paying full price has become nonstandard, we need to start thinking of this as a market segmentation strategy rather than the traditional concept of charitable financial aid:

Colleges engage in price discrimination via tuition discounting. Full sticker price is the equivalent of what a business passenger pays for a last-minute ticket bought at the airline counter. Over the last decade, colleges have gotten very good at price discrimination, with the aid of expensive consultants who employ the same kinds of algorithms the airlines use. That’s why real-dollar “spending” on institutional aid has almost doubledover the last 10 years. (I put “spending” in quotation marks here because it’s very strange to think of revenue nominally foregone in pursuit of revenue maximization as anexpense; the net result is more money, not less. I’m pretty sure airlines don’t allege in their accounting books that every dollar they charge less than the highest ticket price on a flight constitutes spending.)

The bottom line is that for many purposes the most important number to look at is total spending per student. If total spending per student is at a manageably low level, then it shouldn't be an enormous fiscal challenge to provide the level of subsidy needed for everyone to be able to easily afford an education. But if per student spending grows faster than average incomes, then the family-level affordability challenge gets more severe every year. And if per student spending grows faster than the overall economy, then the government's ability to afford adequate subsidies gets more questionable every year.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



Smash and Grab

Will competitive Senate contests in Kansas and South Dakota lead to more late-breaking races in future elections?

Stop Panicking. America Is Now in Very Good Shape to Respond to the Ebola Crisis.

The 2014 Kansas City Royals Show the Value of Building a Mediocre Baseball Team

The GOP Won’t Win Any Black Votes With Its New “Willie Horton” Ad

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?


Forget Oculus Rift

This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.

One of Putin’s Favorite Oligarchs Wants to Start an Orthodox Christian Fox News

These Companies in Japan Are More Than 1,000 Years Old

Trending News Channel
Oct. 20 2014 6:17 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Oct. 20 2014 8:14 PM You Should Be Optimistic About Ebola Don’t panic. Here are all the signs that the U.S. is containing the disease.
Oct. 20 2014 7:23 PM Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing
Oct. 20 2014 3:16 PM The Catholic Church Is Changing, and Celibate Gays Are Leading the Way
  Double X
The XX Factor
Oct. 20 2014 6:17 PM I Am 25. I Don't Work at Facebook. My Doctors Want Me to Freeze My Eggs.
  Slate Plus
Tv Club
Oct. 20 2014 7:15 AM The Slate Doctor Who Podcast: Episode 9 A spoiler-filled discussion of "Flatline."
Brow Beat
Oct. 20 2014 9:13 PM The Smart, Talented, and Utterly Hilarious Leslie Jones Is SNL’s Newest Cast Member
Oct. 20 2014 11:36 PM Forget Oculus Rift This $25 cardboard box turns your phone into an incredibly fun virtual-reality experience.
  Health & Science
Medical Examiner
Oct. 20 2014 11:46 AM Is Anybody Watching My Do-Gooding? The difference between being a hero and being an altruist.
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.