Eighty-nine percent of Niche survey respondents said a college’s tuition price affects whether they will apply or inquire about the school.
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With the Americans struggling again repay $1.6 trillion in student debt (second only to mortgage debt), high school seniors (and their parents) are becoming increasingly price-sensitive in their college search. For private colleges that have long relied on a combination of high sticker prices offset by large financial aid packages, that could be a problem.
In a new overview of current high school seniors registered with the college search and evaluation website Niche.com, 89% said a school’s published price would influence the likelihood they would apply or inquire about that school, up from 76% of last year’s seniors who said that. (Although the survey is a self-selected sample, it is large, with 24,000 teens completing the survey this year.)
Even more dramatic: 59% of the 89% who described themselves as price sensitive—in other words, 53% of all seniors—said they wouldn’t consider a school that costs more than $40,000 a year in total. Private colleges, on average, charged $41,540 in tuition alone for the 2023-24 academic year, up 4 percent from the previous year, according to the most recent numbers from the College Board. The price concern comes with growing doubts among Niche users that they’ll be able to pay for college—less than a quarter now say they’re confident they can afford college.
Very, very few students pay the listed tuition price at the private college they attend. Instead, colleges offer students financial aid packages that significantly reduce tuition through merit- and need-based institutional scholarships. As tuition increases, so does financial aid. in the 2022-23 academic year, students paid an average of only 49% of a college’s published price, according to numbers from the National College and University Business Association;
But the list price is posted on the college’s website, and that number can scare off prospective students who don’t know how the opaque pricing structure of private colleges works. “The list price matters, especially for students who are studying with limited resources [high] schools where college counseling can be hit or miss,” says Bob Massa, principal and co-founder of Enrollment Intelligence Now, a college consulting firm. Forty-eight percent of Niche survey respondents said they prefer to get information from their school or college counselor, and this was even more true for traditionally underserved students. If their high school counselor doesn’t know (or doesn’t have time to explain) the average net price, the student can be left in the dark.
Private college officials are quick to brush aside the sticker price and direct students instead to the institutions’ net price calculators, which allow prospective applicants to get an estimate of their actual out-of-pocket costs. Colleges whose students receive federal financial aid are required to offer such computers. But the sticker price is what shows up in a quick Google search, and a student’s estimated net worth is hidden behind a form that requires students to enter information they may not even know, including their parents’ salaries, cash in their bank accounts and sometimes even their mortgage and 401(k) balances. Some tools also ask for a student’s grade point average and standardized test scores to be considered for potential merit scholarships.
“Colleges tend to shy away from promoting net price because the average grant or scholarship is just that — an average. A person could receive more or less than that amount – there is no hard and fast number for the price a particular person will pay,” says Massa. “It takes time to explain the net price to students and parents — time that schools simply don’t have” if prospective students don’t even research an expensive college. He recommends colleges promote the net worth computer in all their marketing to prospective students. “A ‘Can you afford X University’ campaign based on the net price paid by different groups of students would help land applications from those scared off by the list price,” he adds.
Some private colleges have instituted tuition resets through which they publicly lower their sticker price (and quietly lower their financial aid packages to match) in order to attract students who would otherwise turn them away as too expensive. For example, Bridgewater College, a liberal arts school in Virginia with about 1,400 undergraduates, cut tuition by 62 percent in August, from $40,300 to $15,000.
“The original purpose of the tuition discount was to make higher education affordable for low-income students,” Bridgewater President David W. Bushman said in a statement. Press release explaining the dramatic change. “But over time, the practice has resulted in higher and higher sticker tuition prices that bear little resemblance to the actual cost of education. Now we are discouraging the many students and families the system was designed to attract. Worse, nationally, we’re undermining the idea that a college education is worth the price.”
Wartburg College in Waverly, Iowa, also raised its tuition price in August, from $48,490 to $25,000. Colby-Sawyer College in New Hampshire, Fairleigh Dickinson University in New Jersey (ranked #461 in Forbes’ Top Colleges list) and Washington & Jefferson College in Pennsylvania (ranked #351) are among the many colleges that have tried to lower their prices to attract wary students. For colleges that recruit most of their students regionally and lack national name recognition, tuition resets lead to an increase in applications over five years, according to research by Kennedy & Companya higher education consulting firm, which looked at the effects of tuition resets at 72 colleges between 2012 and 2019.
That said, reinstatements don’t make sense for every college. A school is unlikely to significantly reduce tuition if it enrolls a significant number of full-price students, Massa says. “Especially if universities have more than a few ‘full payers’ who do not receive institutional financial aid, the tuition reduction will have a significant negative impact on net income,” he adds. That’s why you probably won’t see colleges with bloated applicant pools and strong name recognition—think Ivy League schools, Amherst College, Stanford University, the University of Southern California—lowering their list prices anytime soon.
Additionally, many students and parents, particularly from affluent families, are still susceptible to “prestige pricing,” a marketing idea that if a product, service, or college costs more, it must be of higher quality or reputation. Four in ten college students say brand or name recognition of a college matters in their decision making, according to Niche research. Affluent students were even more likely to say this. “I think a good brand is imperative to getting a high-quality job,” said one survey respondent.
The high-price model, combined with heavy discounts, dominates private colleges for decades. It is unclear how many schools may follow the few that have abandoned this model.
