Do colleges collude on price?
by Adam Levy
I’ve been reading a lot about college education these days—in part, because newspaper financial sections seem full of articles on the topic. In addition, I recently became an official college tuition payer and will drop my freshman off at college next week.
What am I reading? Well, there’s a healthy debate about whether college education is worth the high cost. The New York Times coverage has been sobering and slanting it seems to the sobering mountain of debt that is crushing so many students and recent graduates.
I also recently read in the Wall Street Journal about clever ways I should (and should have) futzed with my income to heighten my chance of getting financial aid. I better read that stuff more closely, as in addition to a rising college freshman I also have a high school senior targeting some pricey schools.
The article I want to read: “Do colleges collude on price?” I was talking with a smart client (who has a high school junior) and he raised the point that they must. After all, can it really cost almost exactly the same to educate a young man or woman in New York City, Philadelphia, Palo Alto, or Georgetown as it does to educate a student in Lewiston, Maine, Gambier, Ohio, and Annandale-on-Hudson, New York.
I don’t want to name my client here, but here’s his take: “If this was a business – any business – there’d be inquiries into price collusion. My guess is no one wants to take this on because that might kill the chance for some Justice Department attorney to get his son into Brown.”
Well, I’m not so sure about that.
But it is interesting to look at the costs. If you Google “most expensive colleges in USA” you’ll find lots of lists. Private colleges tuition plus room and board is now at or above $55,000 for the top 20 most expensive schools (Sara Lawrence seems to top many lists, hovering at $60,000). Of course, the school that just deposited my first tuition payment billed me for $60,000 and it doesn’t rank in the top 20 of most of these lists – so I wonder about the accuracy of these lists).
What is revealing is that there’s a relatively narrow range for the top 50 most expensive universities – maybe a difference of a few thousand dollars between the top and bottom of the list. And these schools are a mix of rural schools with small faculties and facilities and large universities with a range of amenities that make me wish I was in my son’s shoes.
I see a lot of stories in the business press about price collusion. The DOJ is suing Apple for colluding to fix e-book prices. And, a quick internet search reveals an article in The Independent from last year that shows the European Commission slapping fines totaling a steep $315.2 million euros on Unilever and Procter & Gamble for fixing washing machine detergent. While washing machine detergent is indeed important, so is a college education.
I’d like to read an intrepid reporter tackle the collusion angle on something that is saddling our youth with tens if not hundreds of thousands of dollars in debt and costs a whole lot more than a bottle of Tide.