Wednesday, June 17, 2020

Some colleges respond to market forces

A NY Times op-ed complains:
In recent decades, many institutions of higher education have increasingly been awarding money to students who do not need that aid to afford college. More than half of the 339 public universities sampled in a paper published by New America at least doubled the amount they spent on so-called merit aid from 2001 to 2017; more than 25 percent quadrupled the amount. About two out of every five dollars these schools provided in institutional aid went to students the government deemed able to afford college without need-based aid. The schools do it because well-to-do families, overall, bring the institutions more tuition dollars than their lower income peers.
So colleges offer discounts to recruit paying students. Why is that bad?

Next they will be complaining: "Car dealerships have been caught giving discounts to customers who can afford cars."
Generally, ever since the U.S. v. Brown University decision by the Third Circuit of the United States Court of Appeals in 1993 — which ruled that the efforts of M.I.T. and Ivy League schools to collectively determine the amount of aid they would award was an antitrust violation — higher education aid policies that rely on interschool cooperation have been discouraged. It’s a viewpoint supported by written guidance from the Federal Trade Commission and the Department of Justice. In 2013, after the Council of Independent Colleges merely raised the elimination of merit aid at its members’ meeting, the Department of Justice under President Barack Obama opened an investigation.

While these laws make sense for other institutions, Congress should carve out an exception for schools. Inaction will mean furthering inequality.
It is called price-fixing. The law forbids competitors from making secret agreements to fix prices. Colleges used to do that. Now colleges are supposed to compete for students.

The op-ed is opposed to that.

Now that the colleges have shut down, they have discovered that their services are overpriced, and they will have to adapt to compete.

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