October 6, 2014 / 2:16 PM / in 3 years

College is now a buyer's market

5 Min Read

Graduates celebrate receiving a Masters in Business Administration from Columbia University during the year's commencement ceremony in New York in this May 18, 2005 file photo.Chip East/Files

LOS ANGELES (Reuters) - Colleges are increasingly worried about getting enough enrollments, and students can use the situation to their advantage.

A survey of college admissions directors by news website Inside Higher Ed found that 79 percent were either very or moderately concerned about not meeting their enrollment goals this year, up from 76 percent last year. Anxiety was particularly high among private nonprofit colleges, with 48 percent admitting to being very concerned, compared with 43 percent in the 2013 survey.

The increasing competition for students has created a buyer's market at most schools, said college consultant Lynn O'Shaughnessy, author of the book "The College Solution."

Families willing to look beyond the most selective colleges should have plenty of options for both admission and financial aid, she said.

"If you believe the media reports, it looks like everyone's getting turned away," said O'Shaughnessy, who offers online classes on college admissions to financial advisors and parents. "This is not the reality ... most schools are feeling petrified that they're not going to fill their classes."

The colleges struggling the most are what Scott Jaschik, editor of Inside Higher Ed, called "the non-famous privates," schools that do not have big endowments and that rely almost totally on tuition to pay the bills.

Among private nonprofit colleges, 65 percent failed to meet their enrollment targets by May 1, compared with 56 percent a year earlier. Seven out of 10 private undergraduate colleges missed their targets this year, compared to six out of 10 last year.

"People hear 'private college' and they think 'Harvard,' but that's the one percent," said Jaschik. "Most colleges are not competitive in admissions. Most colleges need students."

In recent years, some private colleges struggling with declining revenue have laid off faculty, eliminated programs or pursued mergers with other institutions. Several have had their credit ratings downgraded.

A smaller pool of high school students is partly to blame, college admissions officials said, and more families are balking at the price of higher education, particularly at more-expensive private colleges.

Private colleges also are experiencing increasing competition from public universities, which are adding faculty and enrollment slots as states begin to restore some of the funding slashed during the recession, Jaschik said.

Eighty-nine percent of private college admissions directors said they were losing potential applicants because of concerns about accumulating student loan debt, while 64 percent of public college admissions directors said the same.

Heavy discounting has also backfired on some of these colleges, Jaschik said. Offering bigger bargains has left some colleges with more students to educate but lower overall revenue, Jaschik said.

Gallup, which conducted the Inside Higher Ed poll, collected 406 surveys representing 187 public colleges, 192 private institutions, and 16 for-profit schools.

Most colleges, public and private, plan to increase their efforts to recruit beyond their states, respondents said. At public colleges, these students typically pay higher tuition than in-state residents, Jaschik said, while private schools want them simply to fill seats.

Most private nonprofit colleges said they would also woo more applicants who do not need financial aid. At the same time, a majority of public and private schools said they would continue using merit aid as a recruitment tool. This somewhat controversial form of aid, not based on need, is often used to woo desirable candidates away from other schools.

A recent report by the New America Foundation charged that many schools divert institutional funds that should be going to needier applicants and instead use it to attract students from wealthier families.

Understanding these trends can help families negotiate better financial aid offers, O'Shaughnessy said. Colleges that need students, particularly private colleges, may be willing to offer bigger discounts or to match competing schools' offers of financial aid, she said.

"You shouldn't assume the first offer you get is the last one," she said.

Follow us @ReutersMoney or here; Editing by Beth Pinsker and James Dalgleish

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