In order to maximize net tuition revenue, higher education employs a high-price, high-discount model. But just as trees don’t grow to the sky, this strategy can’t work forever—the U.S. is running out of students who can pay full tuition. Students are tapped out: in the 2014-15 school year, 86 percent of first-time full-time freshmen received financial aid.

This means that when schools increase tuition, only the remaining 14 percent of students can actually afford to pay more, creating a disconnect between raising tuition and actually getting more cash in the door. Tuition rose by 4.8 percent per year between 2006...

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About the Author:

Alana Dunagan leads the Christensen Institute’s higher education research and works to find solutions for a more affordable system that better serves both students and employers. In this role, Dunagan analyzes disruptive forces changing the higher education landscape.