Thomas Lifson makes some of the best points made about this topic.
"At the same time, the industry engages in unconscionable practices, including rampant price discrimination —— charging different prices to different customers, based on management's preferences for certain kinds of customers over others. If a car dealer, steel producer, or grocery store gave massive discounts to some groups of customers, based on demographic and wealth characteristics, they would quickly encounter public outrage and legal consequences. But by calling its price discrimination 'financial aid,' the higher education industry cloaks its actions in the garb of charity.
Make no mistake: higher education is one of the biggest industries in the United States, and its economic practices have a massive impact on the economy, and on the personal financial welfare of most American families. An undiscounted 'rack rate' four year run at one of the first tier private colleges or universities will set back family wealth about $200,000, when you figure in the incidentals. Yet parents eagerly compete for the chance to write four figure checks twice a year, if the payee has a brand name like Harvard or Swarthmore, based on the assumption that the brand luster will attach itself to their beloved offspring, providing an extra boost in the job market, and a set of personal connections that will pay off over a lifetime.
College and university administrators have mastered the techniques of poor—mouthing, portraying themselves as the victims of unrelenting 'cost pressures' (mostly comprising salaries to themselves and their faculty constituents), and in need of an increasing stream of subsidies from the public purse. In addition to the tax exemption protecting their massive property wealth and (in the most elite institutions) financial endowments, they benefit hugely from public subsidies in the form of tuition 'aid' in the form of grants and loans. Although portrayed as being directed to worthy youngsters, these taxpayer—funded financial flows actually go to the colleges themselves, enabling the price—raisers to blithely continue to jack—up their charges much faster than inflation. One of the cornerstones of John Kerry's campaign so far is his promise to massively increase the flow of public monies to higher education.
Oh, in case you haven't noticed, the higher education industry is one of the cornerstones of the left wing in the United States. Checking the public voter registration rolls for college faculties (except in a handful of explicityly conservative institutions) routinely uncovers ratios of Democrats to Republicans on the order of ten to one.
In order to understand how pernicious the price scam is, let us consider the nature of 'financial aid' or 'scholarships,' putting aside the question of a college's endowment income. In fact, all but the top hundred or so private colleges and universities do not enjoy substantial endowment income, and rely on tuition for the funds to keep operating. Greatly simplifying, let us hypothesize two groups of students. The 'A group' come from an upper middle class families, and pay the full $36,000 per year in tuition. The 'B group' comprise various racial minorities, athletes, residents of underrepresented regions, exceptionally—intelligent youngsters, or those possessed of some other attribute prized by the management. The B group gets a $10,000 discount, euphemistically called a 'scholarship.'"
"In the long run, the halls of academia will pay a price for their arrogant exploitation of their own prestige. In tandem with the increasing cost of college, a yawning gap has opened between the concerns of ordinary Americans and the motivations of higher education insiders. While academia blithely imposes an agenda of 'multiculturalism,' 'queer studies,' and PoMo (post—modern, post—colonialist) studies, the rest of the country realizes that we live in brutally—competitive world, where Chinese, Indian, or Korean producers will happily under—price and outperform us in global markets, if we allow ourselves the unaffordable luxury of an increasingly irrelevant and overly expensive system of higher education."