Anchors Aweigh

The Spawn took another shot at the ACT yesterday, although she has already been admitted to her college of choice, and although her already strong scores surpass those she’s heard from her classmates at Mondoville High. You see, if they come up a bit more, she becomes eligible for an even larger scholarship than those for which she has already qualified.

She’s very conscientious about wanting to minimize the financial bite for Mrs. M and me, while still wanting to go to school away from home (although an easy drive away, as it happens.) Mr. M and I, meanwhile, are blessed enough (we think) to get her through the next few years without reducing ourselves to penury. In particular, we’re trying to get her through her education without forcing her into taking on debt. The fact that she’s going to Flagship U helps in that regard, of course — in-state fees are lower.

Meanwhile, as a citizen of academia myself, I look at some of the factors that drive the climbing prices of a four-year degree. For example, I’ve mentioned administrative bloat in the past (although to be fair, a significant portion of that is driven by unfunded mandates from various governmental and accrediting bodies.) But another factor is the rise of what some of my friends and I call the “cruise ship” version of college, which emphasizes a luxurious, resort-like experience, with an education thrown in. This is the higher ed of climbing walls and posh, apartment-style dormitories (a term that has itself been replaced by the more “lifestyle”-focused “residence halls”), the version that includes paeans to the institution’s fitness center, which may be run by an Office of Campus Recreation. Oddly, I managed to find ways to pass the time as an undergrad without too much direction. Go figure.

But I suspect all this is linked to another phenomenon — the marketing of college as a luxury good. One aspect of this is what a New York Times report on George Washington U (actually an excerpt from a new book by Kevin Carey) describes as the “Absolut Rolex” strategy:

[Former GWU head Stephen Joel Trachtenberg], however, understood something crucial about the modern university. It had come to inhabit a market for luxury goods. People don’t buy Gucci bags merely for their beauty and functionality. They buy them because other people will know they can afford the price of purchase. The great virtue of a luxury good, from the manufacturer’s standpoint, isn’t just that people will pay extra money for the feeling associated with a name brand. It’s that the high price is, in and of itself, a crucial part of what people are buying.

Mr. Trachtenberg convinced people that George Washington was worth a lot more money by charging a lot more money. Unlike most college presidents, he was surprisingly candid about his strategy. College is like vodka, he liked to explain. Vodka is by definition a flavorless beverage. It all tastes the same. But people will spend $30 for a bottle of Absolut because of the brand. A Timex watch costs $20, a Rolex $10,000. They both tell the same time.

The Absolut Rolex plan worked. The number of applicants surged from some 6,000 to 20,000, the average SAT score of students rose by nearly 200 points, and the endowment jumped from $200 million to almost $1 billion.

The end point of this — call it the Grey Goose Patek Philippe plan? — is manifested at High Point U in North Carolina. Colleges charge luxury good prices, and turn the campus into a luxury good, and then the feedback cycle continues.

Now, Flagship isn’t High Point, and Mondoville College even less so — in fact, we’ve taken steps in recent years to keep prices stable. Still, one can find occasional whiffs of the cruise ship, like the fitness center I mentioned earlier.

And the bubble grows a little more.

A tip of the Mondo Mortarboard to Margaret Soltan, who alerted us to the NYT piece, despite (or because of) the fact that GWU is the hand that feeds her. It’s that sort of intellectual honesty that makes her blog required reading.

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About profmondo

Dad, husband, mostly free individual, medievalist, writer, and drummer. "Gladly wolde he lerne and gladly teche."
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4 Responses to Anchors Aweigh

  1. Andrew Stevens says:

    Agree with this.

    I’ll give you the same advice I would give to all parents in your situation. Helping your kids is great, but don’t endanger your own retirement to avoid loans for your children. The Spawn has many working years ahead of her and will almost certainly be able to afford to pay off a reasonable amount of loans. Nobody will give you a loan to fund your retirement (well, a reverse mortgage, I suppose, but that’s more like selling an asset than taking out a loan). Moreover, there are many more options for students to obtain deferrals or forbearance on loans if that is eventually necessary than there is for parents. I very, very strongly advise parents not to take on debt themselves or even cosign loans in order to pay for a child’s education. (I should say that I don’t really understand the retirement plans most college professors have, so there’s a good chance this advice isn’t necessary for you, but I offer it all the same.) It won’t do the Spawn any good if she’s doing great, but her parents are struggling to pay the bills.

    However, it sounds to me like you, Mrs. M, and the Spawn really have it together, so I’m sure you and your terrific family will be just fine. I’m mostly mentioning it because it’s a piece of personal finance advice which isn’t disseminated enough.

  2. dave.s. says:

    We have told our kids that it’s our intention that they go in-state, partly because we are so old that we’d never recover from paying private tuition before a reduced-circumstances retirement. We are in what I will call the sour spot of college finance: we make too much for aid, and too little to easily pay $40k per kid per year x 3 kids x 4 years – not to mention the likelihood that they will need to do some sort of graduate work. It’s daunting.

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