What’s wrong with financial aid in America?

A lot, for sure, but one of the common responses when critics complain about the high cost of college in America is that colleges also offer quite generous financial aid packages to students. We discount everything in America when we sell it. Why should college be any different?

But that’s a problem, argues Sara Goldrick-Rab, associate professor of educational policy studies and sociology at the University of Wisconsin, Madison. As she puts it:

…Comparing discounting in higher education to discounting at…a clothing store… is both inaccurate and tone-deaf. The cost of the “mirage” — posting one price and offering another- is not very high in a clothing store (e.g. poor people don’t suffer from not wearing [nice] …clothes) but the cost of this complex discounting scheme in higher education is that it scares off prospective students. The impacts of sticker price are difficult to estimate because they affect people far distant from the actual college application decision- it affects their very thinking about whether college is possible at all.

It’s not just that it scares students off; it also just confuses them, by leading them to think particular colleges are a good deal when the reality is such schools could put them in debt forever. Financial aid makes it easy to lie to students about college cost.

Goldrick-Rab goes on to suggest that some of this might be deliberate. Reacting to a New York Times piece arguing that we are exaggerating the price of college attendance, she writes:

The real function… is to support an industry of expensive colleges and universities that want to continue to profit from a culture in which families conflate cost and quality, and treat a college education as a consumption good.

I’m not sure if this is entirely appropriate. We’ve been doing financial aid based tuition discounting for decades now and it’s just sort of standard operating procedure at this point. No one’s trying to deceive students. Colleges just don’t care much if students are confused about pricing; they’ll keep paying anyway.

The problem with education “pricing” is that obscures the real cost. And if one goes with this “parents and students as consumers” theory, obscuring the price deceives the consumer, and makes it hard for him to make rational, responsible decisions.

What’s more, this pricing confusion takes place at colleges that receive extensive public funding. It’s a government-subsidized service. Shouldn’t it have a relatively straightforward pricing structure?

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer