American policy gave us the higher-education bubble: large numbers of students going to college who have little interest in or preparation for advanced study just because everyone else was going to college. The feds made that happen with easy funding for college. Get your essential degree now and don’t worry about the later cost because college grads earn so much more than high-school grads do.
Such bubbles can’t last, and we are now seeing a deflation in progress. In today’s Martin Center article, Chris Corrigan, a veteran college chief financial officer, looks at the trend of increasing tuition discounts. He writes: “The National Association of College and University Business Officers (NACUBO) released its biennial tuition-discounting survey in April. The results indicate that increasing discounts may be the canary in the coal mine for serious financial difficulties looming for private colleges.”
The institutions that are being hit the hardest are the mid- and lower-tier private institutions. Discounting tuition to keep up the student numbers eats into their operating revenues.
Corrigan continues: “Just like airlines with a fixed number of seats, colleges are incentivized to discount their tuition to fill otherwise empty slots rather than letting them go empty. Colleges often employ staff and consultants to determine the optimal price point for each student. This effort, begun in earnest in the early 2000s, has probably reached the point of diminishing returns, and further discounting won’t yield higher net tuition or better students.”
For colleges to survive, they will have to cut their operating costs. Maybe a good place to start would be with “diversity” staff.