In a previous life, I worked in sales. But not just your everyday, run-of-the-mill brand of sales: I worked in a sleazy industry that championed predatory lending practices and distorted the pricing of its lackluster product, which often sent my clients spiraling down a rabbit hole of debt. And to make matters worse, this entire enterprise was buoyed by your tax dollars, so—regardless of macroeconomic patterns—this dubious marketplace remains untouchable.

What was this ethically questionable industry? I worked in higher education.

Higher Education
jarmoluk / Pixabay
Higher Education

More specifically, I worked in college admissions and financial aid. Many of my former admissions colleagues and peers—all of whom I consider to be good friends—probably take offense to how I characterized their livelihood, but I would have too back in the day, when I was in the thick of it.

After a few years, I came to the realization that I was no better than a car salesman.

I took my pride in my work, but it was taxing (pun unintended). I spent nearly one-fourth of my year on the road—living in hotels, visiting high schools, attending college fairs, and pitching my school as the place to be for unsuspecting 17-year-olds.

The gig was not only physically exhausting, but also morally. What once seemed like an altruistic mission—helping the young people of today become the leaders of tomorrow—transformed into a much more realpolitik mindset. Slowly, I realized my job wasn’t to empower young people, but to get them and their parents to commit to paying a very large sum of money—either by cash or credit—for a little piece of paper that continues to diminish in value.

The markup on tuition is astronomically higher than the markup on a car.

I always considered myself to be on the up-and-up with the families with whom I worked. I never lied to my students or their families. I always represented my institution truthfully. I always worked hard to get them the most “bang for their buck.”

However, it didn’t matter how ethical I behaved as an admissions counselor; the entire system is broken. Moral hazard has run amok in the college system.

After a few years, I came to the unfortunate realization that I was no better than a car salesman.

What follows are just a few reasons why car lots behave more ethically than colleges and universities.

Markups

The markup on college tuition is astronomically higher than the markup on a car.

Product pricing always comes with a little fudge room. Many refer to it as markup. This is just a given in the world of sales and retail. That wiggle room allows sales reps the ability to offer “one time deals,” which serve as an effective call-to-action when closing the deal.

In the higher-ed world, we refer to this wiggle room as “discounting.” Discounting is the act of advertising an astonishingly high rate of tuition, then bargaining with scholarships, grants, loans, and other forms of financial aid until the buyer finds a less painful price point that is still astonishingly high, but still lower than before.

Sticker shock is a very real thing in the college admissions gig. During my tenure in higher education, annual tuition at my college was roughly $30,000 per year. But it didn’t stop there: cost of living also included $4,000 for room, $4,000 for board, $750 for books, and $2,500 for other residual expenses (insurance, vehicle maintenance, etc.) that families should include in their annual budget. When it was all said and done, that annual amount exceeded the $40,000 waterline—and this was only for one year.

American higher education is caught in a vicious cycle of robbing Sophomore Peter to pay Freshmen Paul.

Plus, to make matters worse, tuition always rises as if it is Newton’s lesser-known “fourth law” of motion. On average, colleges jack up tuition roughly 5 percent per year. The board of trustees at my college, for example, was committed to “generous increases” that didn’t exceed two percent.

“But don’t worry,” I told parents. “Nobody ever pays the full price.” The discount rate varied for each student, but it was easy to cut tuition in half through discounting so that it didn’t seem as bad.

A car dealer’s markup is roughly five percent above the manufacturer’s suggested retail price (MSRP). For my college, that markup was 115 percent! Sadly, this markup is average across all of the higher-ed industry.

My college was not unique in this upcharge. The institutional discount rate is universal in the higher-ed world and has steadily increased nationwide. A 2015-2016 report by the National Association of College and University Business Officers (NACUBO) estimated that institutional discount rates peaked at 48.6 percent that year—a trend they deemed to be “not sustainable.”

Car dealerships don’t require a tax return to determine how much to charge you for that car.

While some schools rely upon hefty endowments, the majority of schools are classified as “tuition-driven.” The same NACUBO study reported that only 10.8 percent of institutional grants were funded by endowments in 2015-2016. This means that the dollars received from incoming students are then recycled as scholarships for future students.

American higher education is caught in a vicious cycle of robbing Sophomore Peter to pay Freshmen Paul. But most families feel like they are getting the deal of the century thanks to tuition discounting.

“Discounts”

Car dealerships don’t require a tax return to determine how much to charge you for that car.

The discount rate is the result of the backward math that takes place during financial aid season.  

All families seeking financial aid must first complete a Free Application for Federal Student Aid, also known as the “FAFSA.” Hopefully, the irony of the word “free” isn’t lost on everybody.

For those who have not had the “pleasure” of applying for financial aid, consider it the equivalent of filling out your tax return— again. The FAFSA requires a detailed accounting of a family’s financial situation before any financial aid is allocated.

The auto industry was only bailed out once; higher-ed makes it an annual tradition.

Once a FAFSA is completed, a family’s estimated family contribution (EFC) is determined. This is the end result of a convoluted algorithm that determines a family’s ability to pay for college. Colleges and universities subtract the EFC from the cost of attendance (tuition, room, board, books, etc.) to determine “need.”

As many families will attest, the EFC overestimates a family’s ability to pay for college. It is a one-size-fits-all metric that does not take into account regional cost of living, utilized outdated budgeting estimates, makes many illogical assumptions, and ignores situational expenses (for example, large medical bills). There are some means to appeal and adjust mitigating circumstances, but it does little shave points off the EFC.

But name any other product or service that evaluates your ability

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