Incite -- (v) 1: give an incentive; 2: provoke or stir up; "incite a riot"; 3: urge on; cause to act |
Sunday, July 11, 2004
Written by: AnonymousA follow up on Beck's post, and subsequent comments, regarding tuition hikes. Sicilian: The price elasticity of college tuition is a lot lower than you would think. One of the greatest tricks played by schools is the financial-aid game -- it all comes back to monthly payments that don't start in years, will be paid with that amazing, yet undefined, post-graduation salary, and are financed at extremely artificially low rates (the credit quality of underclassmen ranks with mine and they find financing at levels reserved for government agencies). While scores of would-be students do not for a moment consider certain classes of schools due to tuition rates, I believe you would be hard pressed to find prospective students actively engaged in pursuing a certain school to "fall off the bid" should they witness even sizeable tuition hikes -- this doesn't even begin to speak of the current students who would have almost prohibitive switching costs should they be forced to absorb large hikes while in school. The school where I just recently finished my grad work is one of the nine private institutions that Moody's has assigned its highest credit rating-Aaa. The chief reason this school has this rating is because of its operating margin, which is published at 19%. (The reason I have this information, which you would correctly imagine is held under lock and howitzer, is because I got the chance to be involved with their recent $250MM bond offering.) Interesting to note that an organization can sustain a 19% operating margin and still find classification as "non-profit". I have heard people within the sphere of academia claim that actual tuition costs for a school are about twice the tuition rates listed, that is, if true costs were to be absorbed exclusively by students, rates would be 200% of what they are now. While I have been presented zero evidence of this, it seems to me to be reasonable to assume that students are not asked to incur the full costs of their studies.
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