May 31, 2011

HIGHER EDUCATION BUBBLE UPDATE: College merit aid produces bidding wars. “It is becoming a common scenario post-recession: Affluent applicants, shocked by college sticker prices and leery of debt, are choosing a school not because it is the first choice but because it is the best deal. Students are using their academic credentials to leverage generous merit awards from second- or third-choice schools looking to boost their own academic profiles. Colleges are responding with record sums of merit aid, transforming the admissions process into a polite bidding war. . . . Price has always been a concern in choosing a college. But experts say there is a tradition among many upper-middle-class families — those with six-figure incomes and little hope for need-based aid — of finding the money to attend the most selective school that offers admission, whatever the price. That is changing, admissions counselors say. Today, even privileged families are questioning the wisdom of paying $50,000 a year for college, especially on an institution that lacks the pedigree of a Harvard or Yale.”

And note this: “Shevach said she chose the Delaware school for the sake of her parents. ‘They said that they would have paid for Penn State,’ she said. ‘But I didn’t want them to be $160,000 in debt. You need to think about the investment you’re making: Are you going to get that $160,000 back?’”

All is proceeding as I have foreseen.