Threat of anti-trust investigation leads colleges to compete more for students

See Colleges Agree to Allow Increased Competition for Applicants: An agreement between college counselors and the Justice Department should free up colleges to woo early-decision applicants with financial aid by Erica L. Green of The NY Times.

Financial aid amounts to basically charging different students different prices based on their ability and willingness to pay. Economists call this price discrimination. These changes might bring price competition in the form of more financial aid. One of my earlier posts linked below goes into this more.

Excerpts from the article:

"The financial aid stranglehold on students who commit to colleges may be broken.

In a proposed agreement announced this month to answer Justice Department antitrust accusations, the National Association for College Admission Counseling said it would allow its member college and university counselors to recruit students even after they have committed to another school and would permit members to encourage students to transfer after they have already enrolled.

Colleges and universities have been heavily criticized for encouraging potential students to enter into agreements, particularly for early admissions, with the understanding that an accepted applicant could not then turn to another school. That understanding, which was not legally binding but was widely followed, prevented universities from competing for applicants by offering more enticing financial aid packages. 

Now, colleges will be free to offer perks, like special scholarships or priority in course selection, to early-decision applicants, students who are less likely to need tuition assistance and use the process to secure a spot at their first-choice schools. For many selective colleges, more than half of an incoming freshman class will have been accepted through early admission.

Institutions will also be able to continue recruiting students beyond a widely applied May 1 deadline that is typically imposed for students who have applied through a regular decision process and are considering offers based, at least in part, on financial aid packages." 

"while allowing some students to benefit from competitive financial aid packages, or even bargain for assistance right up until they walk onto a campus.

The agreement brings to a close a two-year investigation into the association’s code of ethics by the Justice Department’s antitrust division, which enforces laws governing fair consumer and competitive market practices. In a complaint, the Justice Department maintained that the organization’s recruitment standards violated antitrust laws because they “substantially reduced competition among colleges for college applicants and potential transfer students and deprived these consumers of the benefits.”"

"The Justice Department took issue with three provisions: Schools should not offer incentives, like prime housing, to persuade students to apply early decision; colleges should not knowingly recruit or offer enrollment incentives to students who are already enrolled, registered or have submitted their deposits to other institutions; and members must not initiate contact with students to lure them into transferring."

"In the early 1990s, the antitrust division investigated the eight colleges and universities in the Ivy League, which used “overlap meetings” to share information and collaborate on financial aid offers.

Last year, the Justice Department began investigating whether colleges and universities were violating antitrust laws by exchanging information about prospective students who make early decision commitments."

Related posts:

Why Are Some Private Colleges And Universities So Expensive?

Are The Forces Of Supply And Demand Slowing College Tuition Increases?

As college costs rise, sticker shock eased by student aid


Are College Costs Actually Falling?

Is It Getting Too Expensive To Go College?