Why aren’t colleges reducing tuition when classes are on-line instead of on-campus?

There are a number of reasons why college costs have been doubling decade after decade even though inflation has been in the two to three percent range for decades.

One of the primary causes was the greatly reduced investment by the federal government in post-secondary education, which shifted those costs to the states and the colleges themselves. Almost all of the states and colleges responded by shifting those costs to the students in the form of student loans.

The colleges soon discovered that very few students were price sensitive, perhaps because they were getting the immediate reward of moving out of their parents’ homes and into a fun and exciting environment for years and that the price for that wouldn’t hit them until after that.

Then, the colleges discovered was that students typically selected schools based not so much on the quality of education but more so on how enjoyable it would be to attend the school, which led those schools to build new residence halls, athletic facilities, stadiums, and more. That, of course, increased the costs to the schools even more, which then led to even more upward pressure on pricing and even greater debt incurred by students. 

This year, with most students attending class largely and sometimes completely online and few students living on- or even near campus, the fun and exciting atmosphere of attending college will vanish but the costs remain. Without the fun and excitement, students are starting to look more closely at the costs they’re incurring and they aren’t happy. We’re starting to see rebellions against the costs with a sizeable minority electing to take a gap year or even attending far less expensive schools. In short, what we’re seeing is a recoupling of the cost of education with the actual, long-term value of the education itself. Students won’t get the benefits of the fancy new residence halls, athletic facilities, stadiums, and more and so they’re no longer going to be willing to pay for them.

The result won’t be felt much by the elite schools as there are many, many more students who would be willing to attend those schools at the prices they’re charging. But as some of the students who would have attended a second tier school instead attend a first tier school, there will be some price pressure on those second tier schools. Where we see the biggest fallout, however, are the third tier schools which were struggling to get as many acceptances as they had slots. They’re now going to have even fewer accept and even more empty seats, which will lead some of them to simply close their doors or pivot in how they deliver education. Instead of operating primarily as physical campuses, look for some of them to pivot to online schools.