Chapter 4
Striving to be one of the top is a goal for most colleges in the United States. However, the day of the larges bankruptcy filed by the Lehman Brothers in 2008 “marked the beginning of the end of a decade of remarkable excess” in American higher education (p56).
Why was this bankruptcy so significant?
-The collapse of the Wall Street investment firm led to huge economic crisis and the US economy went into deep recession. This not only changed the stock market and home pries but also led to great loss of endowments and massive deficits that caused huge budget cuts. The Admissions officer had to decide whether to boost their discount rates to maintain enrollments. Each year, the colleges increased the tuition to keep pace with the discount rate. Although this strategy kept the enrollment steady, there was no change in their revenue.
Unfortunately, bad decisions made by the college were exacerbated by the economic downturn because they had a difficult time to catch up to the expenses that are quickly growing to cover them.
So why not just increase the tuition without the increasing discount rate?
-Net tuition per student is important because that would be the cash flow into the institution. However, if tuition is raised or less aid is given, the college wouldn’t be able to attract as many students and its enrollment rate would decrease. Discount rate is their marketing strategy
So why not choose students who are willing to go to its college and can pay for the tuition?
-Usually in that case, the student is below the desired standards of the college. The schools don’t want to lower their standards that they’ve worked so hard to maintain and increase. It is important to remember that one of their main goals is to be at the top.
-Since the 2008 crisis, the number of graduating high school students in the Northeast decreased which affects the colleges in the region. Experts predict “a drop in the number of affluent, well-prepared high school graduates- the type of students that every college is after” (p68). Therefore this once again leads to competition amongst the colleges. How to they stand out in the competition? By once again offering scholarship or discount rate to that out standing student.
Why can’t we count on the government/state anymore?
-The states too are facing difficulties and their budgets are running low. Since they cant make prisoners to pay for their room and food, they are asking the students to pay for the increased tuition. States have been disinvesting in higher education and if this trend continues, colleges would have to run by “shrinking share of full-paying students” (p64).
