(Source: Allegheny College)The Ivies and potted ivies such as Amherst and Williams don't have to worry about filling their classes, and filling them with the best students. Neither do Stanford and Caltech and MIT. But many private colleges, especially those with small endowments and limited prestige, are competing with each other and less-expensive public institutions in a race to win students and balance budgets.



To do so, colleges engage in tuition discounting, which essentially means they're returning tuition dollars in the form of aid. Some of that aid addresses students' financial need, but increasingly scholarships are based on some form of merit. In other words, colleges are buying classes, often at the expense of campus improvements and other key investments.

Here's a passage from the New York Times:

Squeezed on one side by state universities, whose tuition is a tiny fraction of what private colleges charge, and on the other by elite private institutions like Yale, Princeton or Amherst, private liberal arts colleges like Allegheny are routinely offering merit aid to students these days. Such scholarships are particularly pervasive in the Midwest, where many liberal arts colleges award them to as many as half or even three-quarters of their students.

The grants are not based on the traditional rationale of a family's financial need, but on academic achievement and the desire of colleges that are not among the nation's most prestigious to recruit high-achieving students. Sometimes, too, less elite colleges award merit aid simply to fill their Freshman classes.

The result is a college pricing system that can feel as varied, or even mysterious, as buying airplane seats, with students sometimes shopping for the best deal. University officials, defending the era of $30,000-a-year tuitions, speak of a "sticker price" and "discount price" and note that many students do not pay close to the full costs of tuition.

You can read the rest here.