> And again, because humans and humans, colleges, which in America have little government oversight as to pricing, raise their pricing. Why? Because people will still pay it. For whatever reason, colleges are able to bank on their prestige and identity, on the promise of access to important social circles, and so pure pressure for price is diluted
Harvard could double its price, and still have no trouble filling every available seat. Same goes for the rest of the Ivy League, and also MIT, Stanford, Caltech, and other top non-public schools. How do your theories explain their costs being so much lower than what the market would bear?
Furthermore, these schools have been increasingly replacing loans with grants. Stanford has gone so far as to waive tuition for students whose families have income under $100k, and to also waive room and board for those whose families make under $60k. If you theories were correct, wouldn't Stanford be telling those students to get loans? That would make more money for Stanford.
Top tier institution get a significant amount of their funding from alumni donations. Their motivation is to identify top tier students, provide them with a network of other top tier students, who when they graduate will become leaders in their respective fields.
Many of these top tier universities have endowments large enough that they don't need to collect tuition from the students. In fact, many of these universities allow free or reduced tuitions for low income students. (http://www.admissionsconsultants.com/college/ivy_league_fina...)
Here's the top 5 (per student)
University Endowment / Student Endowment Total Enrollment
1 Princeton University $1,857,040 $14.05 billion 7,567
2 Yale University $1,436,384 $16.65 billion 11,593
3 Harvard University $1,304,492 $27.56 billion 21,125
4 Franklin W. Olin College of Engineering $1,096,595 $335.6 million 306
5 Pomona College $942,490 $1.46 billion 1,548
The motivation for alumni to contribute to the endowment after graduation is that the value of their degree is correlated to the ranking/reputation of the university. By contributing to the university, you not only help the university by help yourself.
So the economics for top tier universities are not similar to the rest of the colleges.
> How do your theories explain their costs being so much lower than what the market would bear?
All those schools could surely fill their seats entirely if they doubled price tomorrow. But there would be a social backlash. They still consistently raise prices faster than inflation.
How many of Stanford's class of 2018 qualifies for that free room-and-board because the families are in the bottom half of families? Since financial aid is just price-discrimination, Stanford isn't leaving that much money on the table.
Universities are run by people driven by a mixture of economic and ideological goals. I'm not saying they're purely in it for the money. I'm sure there are a lot of people involved who are genuinely passionate and excited about education.
But most people have a hard time saying no to a fancier car, house, and more holidays.
Alternatively, if you can get as much money out of your rich students/the government as possible, that's more money for grants for superstars from poor backgrounds.
Harvard could double its price, and still have no trouble filling every available seat. Same goes for the rest of the Ivy League, and also MIT, Stanford, Caltech, and other top non-public schools. How do your theories explain their costs being so much lower than what the market would bear?
Furthermore, these schools have been increasingly replacing loans with grants. Stanford has gone so far as to waive tuition for students whose families have income under $100k, and to also waive room and board for those whose families make under $60k. If you theories were correct, wouldn't Stanford be telling those students to get loans? That would make more money for Stanford.