Buyer Beware: Lower Tuition Doesn’t Mean Lower Prices

by Michael Pacitti

When you’re out shopping and you see something on sale for 40 % off, the first thought that comes to mind is, “Wow! What a great deal!” However, when you look closer you can find that the original sticker price was exorbitantly high and the discount actually made it an average priced item. This method of pricing is deceptive, tricking buyers into thinking they’re saving money when actually they’re paying full price. Unfortunately this scheme doesn’t end at your local strip mall.

Private colleges are now using the traditionally high sticker price of tuition to their advantage. With some schools cutting their tuition price as much as 43%, prospective students can get lured into thinking that means a 43% savings in out-of-pocket costs. For example, Converse College has cut their tuition from $29,000 to $16,500 (43% discount), but the average student paid just over $17,000 in 2012. Rather than saving money, students actually end up paying the same price as before (and in Converse’s case, paid more than the sticker price of tuition).

Our next logical question is, “how does that happen?” With a lower sticker price, schools do not have to give out as much financial aid because families can “afford” the lower price. Take Converse for example. Before cuts, tuition was $29,000 but that price was mitigated by financial aid to an actual out-of-pocket cost of around $17,000. However, with a new price of $16,500, Converse no longer has to offer financial aid because it’s considered a “true cost”.

This pricing method in theory sounds honest. It tells the student exactly what they will be paying for college rather than an inflated price. However, when the true cost doesn’t change even after a price cut of nearly 43%, what’s the point? It seems as though these schools are trying to lure students into attending simply because the sticker price is lower.

The next time you go shopping and see a great discount, make sure you check the price tag and see what you’re actually paying.

 

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