How Private College Is Like a New Car

In both cases, few people ever pay the sticker price.

A new College Board report on colleges’ tuition price-setting strategies reports that in the 2008-2009 academic year, the last year for which data is available, private colleges only collected about 67 percent of the tuition they would have received if they charged everybody their advertised prices.

Whereas, on average, students get a 33% discount on tuition today—the “discount” comes primarily via scholarships—in 2000, the average student paid 28.6% less than the full “sticker price” tuition.

One of the College Board’s authors is quoted voicing her concern that colleges are being viewed similarly to “car dealerships, where you’d have to be a lunatic to pay full price.”

So why don’t colleges simply lower their tuition costs instead of playing the discount-scholarship game? For one thing, unlike car shoppers, plenty of students actually are willing to pay full price. Also, colleges aren’t above “anchoring” and other marketing strategies, which make a product—or an education—seem more valuable when a high reference point price is presented, then immediately followed by a discounted price. In other words, a student who pays less than the full tuition price feels like he or she is getting a deal.

If trends continue, however, students will be more aware that marked-down tuition is only slightly more special than a dime-a-dozen marked-down new vehicle.