"It's not just what you're buying, it's what you're buying into."
That's the takeaway in a new Starbucks ad campaign, which offers as much a lesson to higher education as it does to coffee drinkers.
The ad reminds us that part of what we're paying for when we buy that pricey skim Venti is a cup of coffee made from a better quality bean from a company that believes its corporate obligation includes providing its workers with health insurance.
Compare that value-for-the-money message to the offers pouring out of some colleges this spring, some of which have a car-commercial vibe.
Drexel University is giving laid-off workers a 50-percent discount on tuition at its new graduate campus in California. Davis & Elkins College, already a tuition bargain, slashed its price by nearly $15,000 for residents from its home county and six surrounding ones to match the tuition of the state's flagship West Virginia University. And Southern Illinois University at Carbondale will now charge incoming freshmen from Arkansas, Indiana, Kentucky, Missouri, and Tennessee the same in-state rate that Illinois residents pay, a price cut of about $10,000.
It's tempting to dismiss these tuition-discounting strategies as the latest examples of the opportunistic come-ons so many colleges offer these days, gimmicks that institutions use, in the words of critics, to "buy their class."
But Reed K. Holden, a consultant on pricing to the corporate sector who normally preaches against discounting as "the crack cocaine of business," says this may be a year that all bets are off.
In this economy, he says, "the niceties of a value-based approach should go out the window because you have to survive."
Tuition discounting can help colleges add to their revenues and support their mission, says Stephen L. DesJardins, an associate professor of higher education at the University of Michigan at Ann Arbor who studies tuition discounting and other enrollment-management techniques. That's especially true if the colleges have unused capacity, as is the case at Davis & Elkins and Southern Illinois.
But many colleges don't do it right.
For one, colleges can discount themselves into financial trouble. And according to newly released figures from the "2007 Tuition Discounting Survey Report" from the National Association of College and University Business Officers, the freshman discount rates at four-year private colleges continue to creep upward, averaging 39.8 percent for the 135 institutions that have answered the survey for the past 10 years. Nacubo says the freshman rate, which was 37.1 percent for that group in 1998, is considered the best reflection of colleges' aid policies and their reaction to competitive pressures.
(The discount rate is the percentage of gross tuition the institution spends on student aid.)
The average rate for all undergraduates among all 253 respondents in 2007 was 34.7 percent, a figure that brushes awfully close to the 35-percent threshold many experts consider an indicator of financial risk.
Even when the discounting doesn't create a financial hole, it can be misused. Some colleges use their myriad presidential scholarships, dean's scholarships, and similar sorts of merit awards to lure students for whom the college may not be a great fit. Sometimes they do so because they think the students they nab will help them move up in the rankings. Sometimes they think the aid offer will help them draw more students who can pay the difference.
As the financial-aid expert Sandy Baum is quick to remind, some discounts and scholarships aren't really any measure of an institution's new commitment to a particular class of students but merely a repackaging of the tuition aid the college had been offering all along.
(For the record, Drexel's Sacramento dean says the discount offer there will cost the college in the short run but could help build goodwill in the community and give prospective students the confidence to enroll. And Davis & Elkins, which says its main motivation was to help nearby residents, has deposits for next fall's freshman class from 57 locals, versus 29 the previous year, providing it with added revenue that it might otherwise not have gotten.)
Perhaps all's fair in love and college marketing. Still, it's hard not to wonder whether these kinds of strategies are doing much good for the overall endeavor of higher education. Discounts can be a quick-fix response to affordability concerns, but they don't get at the expense structures that really drive costs. And dDoes the sector really benefit from a proliferation of practices and gamesmanship that make its pricing structures even more confusing to students? Shouldn't colleges compete on the merits of their programs, not pricing ploys?
"Transparency is better than gimmickry," says David A. Longanecker, a former state and federal higher-education policy maker who is now president of the Western Interstate Commission on Higher Education.
Purists share his disdain. Jonathan Burdick, dean of admissions and financial aid at the University of Rochester, which once offered scholarships to all New York State residents but no longer does, calls the guaranteed scholarships and similar strategies "snake oil" recruiting techniques that contribute to the commodification of higher education.
Strong words. But when a company that is actually selling a commodity decides it can make its pitch on value, couldn't colleges do the same? Something to ponder over your next cup of steaming latte.
