The several recent threads on college admissions got me thinking about something that has bothered me for a while. Why do colleges even bother having a set tuition when the price someone actually pays at most schools is dependent upon their individual circumstances?
It’s admirable that college (and society) recognize the price-sensitivity of applicants, but quoting a tuition, one that only the rich pay, caps the upside. If we are gonna have price discrimination, why not do it in a more effective manner. Especially since education costs per student often exceed even sticker tuition prices. Because of that, colleges are leaving lots of money on the table that would come from the least cost-sensitive group of applicants. This NYT article talks about the growing number of Chinese students attending the University of Delaware.
The article goes on to discuss some of the added costs and qualification discrepancies some schools find with some Chinese students, but I think the larger takeaway is that there is a large number of people willing to pay sticker price for an American education. Yet, that sticker price is not based on what they can and will pay, it’s based on what they have been asked to pay. That price function as a signal of quality, not a market signal.
We have a situation where the sticker price of universities is neither tied to the cost of education (due to endowment distribution, grants, scholarships, and state subsidies), or market forces. Why don’t we try a better way of dealing with the scarcity.
I propose universities should/should be allowed to auction 10% of their student admission slots to the highest bidder. The upside would be that those students would likely cover the real costs of their own education, and might even help subsidize their less fortunate peers. People, willing and able to pay, would be paying an amount closer to the value of the admission, rather than being implicitly subsidized by society. Additionally, since you would only be auctioning spots, the winners would still have to compete with traditional students, sinking or swimming gradewise.
Another reason I support a more transparent system such as this is because I believe such a system exists anyway. Not only via granting preference to legacy students, but also by recognizing most of the family member of those who donate tons of money to a school will likely have no problem being admitted. The chances that Gordon Moore’s kin have any trouble getting into CalTech (he donated 600MM to the school) is basically zero. Since we already have an unorganized system like this operating in the shadows, why not just formalize it?
My system would function as follows:
Each school would auction off 10% of spots before any other applicants were evaluated. This way, you would not be able to hedge your bets by applying through traditional means first.
The winners would pay a one-time fee for a slot in that class. This would be done to ensure that there was no ongoing financial incentive on the part of the university to keep those students if they didn’t have the academic chops.
Any funds above and beyond the costs of their actual education would go towards subsidizing their peers, and mitigating any future tuition hikes, and establishing an open, online feeder school that would used to identify talented people without pre-filters.
What would be the problem with a system such as this?