“Based on my experience as the vice president for finance and administration at a prominent college in the early 2000s, I suggest that the answer is simple: Top private institutions charge what they do because a substantial number of people will pay it.”
Here, some more of the disturbing truth about constantly rising college tuitions, from Andrew Manshel, writing an op-ed in the WSJ:
… at the beginning of my tenure as an elite school’s chief financial officer, I was surprised to learn from my colleagues that tuition and fees were not set by analyzing budget projections. Instead they were set by looking at a chart of the prior year’s tuition charges at comparable schools and then trying to predict their increases for the next year. The goal was to maintain the college’s position in the pecking order of total charges…
Given the nonprofit, tax-exempt status of colleges and universities, and the powerlessness of the market to control higher-education costs due to limited supply, it is incumbent upon the fiduciaries of the institutions with the largest endowments, their presidents and trustees, to focus on the higher social obligations of the schools that they lead. Our most prestigious colleges and universities are not simply corporations operated to exploit their pricing power for the financial benefit of their senior faculty and staff, and to build monuments to their alumni. Their leaders need to take a sharp pencil to their cost structures; raise their endowment payouts; end annual cost increases in excess of inflation; and rededicate themselves to providing opportunity to the talented regardless of means, enhancing social mobility and fostering the production of knowledge.
Related:
Is College a Bad Investment?