Remember how stressful car shopping used to be? Every auto, new and used alike, had a sticker price, but hardly anyone actually paid that price. Instead, every car sale involved intense negotiations, where the salesperson would endeavor to upsell while the customer haggled the cost downwards. In the end, someone lost the negotiation, either paying too much for a car or sacrificing too much commission. No wonder most car dealerships have adopted no-haggle pricing!
No buyers like to spend more–sometimes tens of thousands more–than they have to. The rational model of economic decision making assumes that people make choices that maximize benefits and minimize any costs, but that model also assumes that a buyer or seller has full and perfect information on which to base a choice. Yet, every college applicant acts with very incomplete information, and nearly every college student forks over more in tuition than necessary. Why?
While nobody would ever describe college choice as entirely rational, the least understood aspect of the admissions process appears, at face value, to be the most objective. Every college and university lists tuition rates for every category of student. These prices–the ones that applicants consider in their rational decision making process–seem entirely definitive. However, hardly anyone pays that sticker price. In fact, you won’t know what you’ll have to pay to a school until after you’ve been admitted and receive your award letter. Crazy!
Obviously, buyers can negotiate cost of college just as they would the price of a car or house, but they usually act with much less information about how much of a discount they can ask for. The opacity of the process definitely benefits colleges and disadvantages students and their families.
What is the answer to understanding the massive discrepancies between college sticker price and actual price? One solution is price transparency, meaning accessible data on the specific offers in every applicant’s award letter from every single school. Of course, considering how fragmented and protected that information is, such a database sounds impossible.
Nonetheless, compiling such a database is exactly what one organization aspires to do. I had the pleasure to speak at length with Dr. Mark Salisbury, co-founder of TuitionFit, on the Tests and the Rest podcast. Our wide-ranging conversation covered everything having to do with college price transparency, from why undergraduate financial offers arrive too late to the effectiveness of standard Net Price Calculators. Mark’s contribution to a solution is the free online TuitionFit platform:
“…We can solve this debacle all by ourselves. Because the actual prices that colleges ask individual students to pay aren’t hidden away in a vault somewhere. Every year, colleges and universities send out millions of acceptance packets that include a financial award and an actual price to millions of students. If we shared all of those individual prices and organize them by the student characteristics that schools use to determine those prices, any individual could find out what price any school would offer them. This information would dramatically simplify the search for an affordable college option.”
Most people buying cars, real estate, or basically anything at an outdoor market enter into negotiations believing that only suckers pay list price. Maybe that philosophy holds true for shopping colleges as well. As someone who has worked for over 25 years with countless families on the road to college and a parent who will have to contend with this problem myself, I love the idea of aggregating real pricing information to promote better decisions before applications are submitted rather than afterwards. The college admissions process could benefit from a bit more rationality, right? Check out TuitionFit and share your observations or experiences in the comments below.