Friday, April 11, 2014

The Price is Right

I am not good at, nor do I care for, haggling over price.  That may be why I look forward to buying a car the way I look forward to going to the dentist.  I know that I will leave the dealership with a new vehicle but also a clear suspicion that I have been taken advantage of.

There is only one time when I bought a new car that I knew I had gotten a good deal.  It was the end of the month, and the salesman needed to sell a car more than I needed to buy one.  I wasn’t trading in my car, I was focused on the bottom line rather than the monthly payment, and I negotiated to the point where my wife, who is far more a bargain hunter than am I, was kicking me under the table.  Our “final” offers were within $125, at which point I suggested we split the difference, and we made the deal, after which the salesman told me they were ready to let me walk.  What convinced me that I had done a good job, though, was that my sister and her husband had bought the exact same model from the same dealer several months before and paid $1000 more, and I had gotten air conditioning included.

Recently the mother of a senior called to ask whether we had sent transcripts to two colleges.  The answer was no, because we weren’t aware he was applying to those schools.  That in itself wasn’t surprising. Strother Martin’s quote from the movie Cool Hand Luke, “What we’ve got here is failure to communicate” certainly applies to many families, and anyone who thinks gender differences aren’t real need only to observe mothers and sons going through the college process together—and separately.  There is a Ph.D dissertation waiting to be written on that subject.

What was surprising was that the son had already told us that he had been accepted and deposited at his first-choice school.  In following up we learned that the parents wanted him to apply to the other schools as a negotiating strategy so they might get more financial aid from the first-choice.  We suspected the strategy was futile, given that the other two institutions were similar in cost and student profile.

I have always discouraged parents from asking for additional financial aid unless there is a compelling change in circumstances. A recent New York Times article, though, suggested that many private colleges give additional aid to more than half the families who appeal their financial aid package.   So is my advice outdated, and what are the ethics and etiquette of appealing financial aid awards in 2014?

The answer, I suspect, is that the landscape is changing similar to other changes in the way college admissions and counseling are conducted.  That’s true for all parties.  I have seen finances be a bigger factor in the final college choices made by my students and their families in the past two years than ever before, and if it’s happening in my population it reflects a much larger trend. 

I saw a statistic several years ago that suggested that college tuitions have risen faster over the past quarter century than health care costs.  Ever since the beginning of my career, 35 years ago, there have been predictions that there is a limit to how high college tuitions can go before the public balks, and it hasn’t happened yet.  But is the template of raising tuition and providing more tuition discounts sustainable? With families taking on more student loan debt, without the guarantee that the investment in higher education will pay off with the kind of jobs that have traditionally been available to graduates, have we reached the threshold where the cost of higher education has exceeded the perceived value of higher education?

A related issue is the psychological impact of the increase in the use of “merit” aid.  Several years ago, one of my students attended an accepted student program at a university he was very interested in attending.  During an information session, he and his parents learned that 90% of the students admitted to the university received merit aid.  Unfortunately he was one of the 10% who didn’t.  His parents returned upset because my office hadn’t secured a merit scholarship for him, something he and they had never identified as important in his search process.  It had become important not because he needed the money, but because he wanted to feel wanted.  How meaningful is “merit” when everyone has it, and at what point do merit scholarships become entitlement scholarships?

My advice against trying to negotiate financial aid offers is predicated on the assumption that the financial aid analysis process is rational and fair, but that train may have left the station long ago.  It is true that any need analysis methodology rewards certain things and penalizes others, but financial aid has become less about need or ability to pay and more about willingness to pay.  Today colleges and universities hire consultants who employ a sophisticated calculus to determine what combination of price points will fill the class and maximize revenue.  In such a business environment is there anything wrong with advising consumers to haggle over price?

I don’t want my students and their families to think that appealing aid offers should be common practice, but there are three circumstances where I think it’s a mistake not to appeal.  A family should appeal if there has been a major change in their financial circumstances since they applied for aid, they are justified in appealing if they have an offer from another institution with a more generous interpretation of their financial need, and if finances are an impediment in a student’s attending his or her first-choice college, I would want the college to know that, understanding that the college may be unable or unwilling to sweeten the aid offer.

I hope that choosing a college never resembles buying a car.  But given the cost of a college education and the fact that student loan debt may impact an individual’s ability to make other important life choices ranging from choosing a career to getting married to buying a house,  price is likely to become a greater consideration.  Bob Barker would be proud.


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