Is that a college-tuition price war?

Kim Clark

TEXT OF STORY

TESS VIGELAND: It is that time of year when high school seniors keep their fingers and toes crossed 24-7, awaiting the arrival -- hopefully -- of a fat envelope from their college of choice. The sticker shock won't set in until bills start to arrive. But several universities recently announced big increases in financial aid. Commentator Kim Clark says it looks like things may be starting to turn in students' favor.


KIM CLARK: Colleges insist they've had to raise their prices because they've absorbed new costs like counseling, remedial classes and technology while governments have cut support. But there's also another factor: They've been raising prices because they could.

In the past decade, the number of high school seniors has risen by half a million, increasing demand. And then there's the "Chivas Regal effect." That's consumers' assumption that things with higher prices must be more desirable.

It works for whiskey. And colleges. Back in 2000, Clemson, the public university in South Carolina, collected fewer than 10,000 applications a year and charged less than $5,000 in tuition. Then the school decided to raise its profile and prices. It more than doubled tuition and spent more money on things like financial aid and top professors. Applications have jumped more than 50 percent.

But no tree grows to the sky. In fact, even the best colleges may soon see applications drop. A baby bust in the early 1990s means the number of high school seniors is about to decline. And maybe private colleges which now cost more than $50,000 a year have finally reached the limits of the Chivas Regal effect.

In the last several weeks, the competition seems to have switched from how much, to how little colleges can charge. Harvard made a splash by promising to charge no more than 10 percent of the income of families earning up to $180,000 a year. That was followed by promises of more aid from several other expensive schools including Swarthmore, Pomona and Tufts. California Lutheran University, for example, recently promised to match the tuition of UCLA for students who get into both schools.

What's that? Matching a lower price? That sure sounds like an old-fashioned price war. If so, that's something that every parent can celebrate. It might even be worth breaking out that Chivas Regal!

VIGELAND: Kim Clark covers money for U.S. News and World Report.

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