← WSJ Your Money Briefing
WSJ Your Money Briefing
Want to Get a Lower College Tuition? Try Asking.
00:09:43
Colleges and universities are increasingly willing to negotiate discounts for tuition and room-and-board expenses in hopes of getting maximum payment from a student without driving them away to a rival campus. Reporter Josh Mitchell explains. J.R. Whalen hosts.
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Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit del.com WSJ.
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Here's your money briefing for Thursday, July 2nd. I'm J.R. whalen for the Wall Street Journal. Over the past three decades, the cost of college tuition has skyrocketed, growing at double or even triple the inflation rate. For many students and families, that puts an education at a top university out of reach unless they can get a break on expenses. Financial aid is one way of lowering the cost, but what about just asking?
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There's this bargaining, haggling process. It's kind of like when you're buying a car, when you're buying a house, you know, you have one initial offer, then you do a counteroffer and this can go on for a while.
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B
So who's got the upper hand during the pandemic? And how big a discount could you conceivably get? Our reporter Josh Mitchell will explain after the break. You can haggle over the cost of lots of things, a car, a house, even hotel rates, but college tuition? Turns out universities often are willing to sit down with students and families to reach an affordable price. Our reporter Josh Mitchell is here to discuss. So, Josh, is this something new, being able to negotiate with colleges? No.
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C
This has been going on to some extent for years now, at least since the 80s or 1990s. It's just been happening more and more among families as they, as they become more aware of this process.
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B
So how's the pandemic factoring into this?
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Prior to the pandemic, there had already been a shift in leverage from schools to families in terms of this negotiation process. This pandemic has accelerated that trend. There are a couple things going on here. Schools themselves are worried about what enrollment is going to be next fall. Are families going to be too scared to send their children back to campus? Will schools be allowed to open their campuses? Number two, how willing are students going to be to travel out of their home states? Some families might be more willing now to have their students attend in state schools or schools closer to home, rather than sending them across the country, given this pandemic. Or maybe they'll go to a campus that is not located in an urban area where contagion is higher risk. So on top of that, you have the highest unemployment rate or near the highest unemployment rate since the Great Depression, which means a lot of parents have either lost their jobs, have had their hours scaled back, they've either lost wealth, maybe through the stock market, that the stock market has recovered a lot of what it lost. But maybe they have businesses that have been harmed by this. Maybe they're worried that if the student goes to school, what's the labor market going to be like when they come out of school? So they're doing this whole reassessment of the value proposition of college. How much should we pay is $70,000 a year in tuition? Does that still make sense in this pandemic torn world that we're in now?
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The schools are trying to generate revenue, but it seems like the schools are walking a delicate line and trying to maximize payments from students.
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C
The schools number one cost is their personnel. So unless they lay off their workers, which they've done, they've laid off some of their workers. But, you know, a lot of them are retail workers, like cafeteria workers. They have their own expenses that they have to meet. And so if you are a professor that has to deliver a lecture online versus in person, you still have to pay that professor. So schools are trying to figure out, how can we continue to pay our bills while also meeting the families where they are in terms of their ability to pay. It's a tough environment right now.
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How big of a discount have some students gotten?
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It really varies by school. One family I talk to, the son, his name is Ian, he got a 41% discount off of tuition. So that was about $30,000 in terms of the school that he ended up going to. He, you know, so I talked to one consultant. You know, what's interesting is that. So the schools have their consultants that are helping them determine what price they should charge. And then increasingly, families are hiring their own consultants that are determining what price they should pay. And so this one consultant I talked to who works with families, said that in an average year, you know, about half of her clients get about a $3,000 discount after they ask for one. This year post pandemic, she said that almost all of her clients are getting a discount and that the discounts instead of $3,000, are more like 5,000 doll. So we're seeing more families get discounts, and the discounts themselves are bigger than they were in prior years.
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Okay, so what about families with higher incomes? Do they have a shot at getting any kind of a discount?
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It depends. So there's multiple variables that will affect how much of a discount you get. There's a lot of overlap between families from high incomes who also have the academic credentials that schools are looking at that certain schools really want. And what I mean by that is high SAT scores and high GPAs. You know, let's just think of a family who is very wealthy, sends their kids to private schools, has tutors, has every single resource that that student needs to have. Really high SAT scores, high GPAs, they're wealthy. They also have really high academic credentials. So because of the high academic credentials, they're likely going to have multiple offers, which means that if you go to one school, that school is going to figure, you know, we need to offer that person a bigger discount if we want to prevent them from going to a rival school. That's what we call merit aid, where the family doesn't need the aid per se because they have a lot of money, but yet they're still getting a discount because the school wants to ensure that they choose them over other schools. Now, if it's a wealthy family where the student does not have good academic credentials, they might not get any aid because it doesn't really serve the purposes of the school trying to make money. However, in some ways it might be if that family is more likely to give them alumni donations down the road, then they might calculate that into how much of a discount they're offering. So there's a lot of different variables that the school is considering when it determines how big of a discount it wants to offer each student.
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Now, in addition to these negotiations, are there more traditional methods like filling out a financial aid form? Are those available?
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C
Yeah, you still fill out a financial aid form, although a lot of families don't do that. They're either too scared to, they're intimidated by the amount of paperwork that's involved. But in general, if you want financial aid, you have to fill out this form, the Federal Application for Student Financial Aid. You still do that. So what happens is you fill out that form, the college looks at that form, they decide whether, number one, they want to accept you, and then they decide how much of a discount are they going to give you. Then once they make that offer, it's called an award letter that each family gets, they say, look, here's our sticker price. We're gonna offer you a discount of X. And then, so this is the net price, this is the out of pocket price you're gonna pay with this discount. Then what happens is the families have an opportunity to appeal and say, wait a minute, I like the fact that you gave me a discount, but it's not quite as big as I thought it would be. Can you give me an even bigger one? And so then sometimes the schools come back as they did With a lot of the families that I talked to and said, okay, yes, sure, we'll give you another discount. And even then the family can haggle a little more and say, okay, why don't you lower it a little more? So there's this bargaining, haggling process. It's kind of like when you're buying a car, when you're buying a house. You know, you, you sort of, you have one initial offer, then you, you do a counteroffer, and this can go on for a while.
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What about college enrollment targets? How do they play a role in this?
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They are really in the dark in terms of what their enrollment targets are. They have a goal, but they really don't know whether they're going to be able to meet that goal in terms of the number of freshmen that are in their class. I was talking to one college enrollment vice president who was telling me that during the last downTurn, back in 2008, they were really worri enrollment was going to decline and it actually rose. And so they actually ended up admitting too many students who then accepted the offer. And they had a crunch on campus in terms of the amount of housing that they had. And so it's always a lot of guesswork involved. You know, some campuses, some schools are worried that enrollment's going to drop and so they're having to maybe lower their prices through bigger discounts to get more customers to come to them, to get more students to come to them than to go to rival schools. So it really is a big question mark and they're really trying to figure out how to prevent a huge decline in the money that they're earning from tuition.
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The pandemic has no doubt had a devastating effect on the current economy, but do people you've spoken with feel it has rewritten the negotiating rules for the long term?
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I wouldn't say long term because again, I think that this was a trend that was already happening and so this has sort of accelerated what was a preexisting trend. I think what this has done is people are worried about what the economy is going to look like in the medium term. So if unemployment is going to be in the double digits for the next couple years, do you really spend six figures in tuition not knowing whether that student is going to land a job in that environment that's going to enable that person to pay it off? Now there are programs that the government offers called income based repayment where you can tie your monthly bills to your income. But that being said, I think people again are doing this value proposition. And so I think what we saw before the pandemic, families were already becoming more price sensitive, more price conscious, the cost of college. Now they're even more so.
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All right. That's Wall Street Journal reporter Josh Mitchell. Josh, thanks for coming on the show.
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C
Sure. Thank you.
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And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.
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Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery. And deal plugs into what you already use. Workday, SAP, NetSuite, operate like a local everywhere. Visit d e l.com WSJ that's d e-l.com WSJ.