Last month, four Republicans from the House and Senate sent letters to the presidents of Ivy League schools demanding years of data about how they decide what to charge.

These institutions, the letters said, “establish the industry standard for tuition pricing, creating an umbrella effect for all colleges and universities to justify higher tuition costs than they could otherwise charge in a competitive market.”

In fact, no more than a few dozen other schools can command Ivy League prices from a high percentage of their students and their families. Every other private institution — and most public ones — compete brutally on price up until the May 1 reply date each year (and sometimes afterward). The average tuition discount among private colleges is now over 56% for first-time, full-time students.

Those discounts — which often come in the form of merit scholarships — can make a six-figure difference in what families pay over four years. This aid is different and often less predictable than the need-based kind that depends on a family’s income and assets.

The driving force behind college pricing is not some evil genius at Harvard or Penn. Instead, it’s a series of algorithms developed quietly over decades by consulting firms operating just out of sight. The two biggest — EAB and Ruffalo Noel Levitz, or RNL — are owned by private equity firms.

To understand how all this happened — and how things really work today, for families and the financiers hoping to make money off this opaque system — we need to turn the clock back 50 years.

Leveraging teenagers

Jack Maguire attended Boston College as an undergraduate and stuck around for a doctorate in physics. Not long after earning the degree, he took up a post as an assistant professor in 1968.

Today, Boston College has a $4.1 billion endowment and rejects 87.5% of applicants. But when Maguire started working there, it was a struggling commuter school running a deficit.

A young physics professor was an unlikely person to turn to when the college was having trouble finding a new dean of admission. Still, the school asked Maguire, now 85, to take a look. “They couldn’t find anyone else,” he said in a recent interview.

When Maguire examined the college’s data, he smelled opportunity. What if the school gave out precision-guided discounts based on the quality of the applicant even more than it did based on what students could afford? Turns out, when you do that, more of the above-average students say yes to the offer.

Word of Maguire’s results spread quickly in the clubby world of admissions. In 1983, having helped turn Boston College around, he and his wife, Linda Cox Maguire — then the director of admissions at nearby Simmons College, now Simmons University — started their own consulting firm.

Maguire Associates never grew anywhere near as big as EAB and Ruffalo Noel Levitz, and those two juggernauts have not been shy about the zealousness with which they made their industry more like the Wall Street firms that invest in them.

“I actually think of financial aid optimization as a form of arbitrage,” Madeleine Rhyneer, whom EAB refers to as its “dean” of enrollment management, said on a company podcast about how admissions offices “actually” work. “Really, it is. It’s like working in the financial markets.”

It’s the thing that raises parental eyebrows the highest.

Politicians have noticed, too. Those letters last month suggested that “nonpublic algorithms for admissions and financial aid” could indicate that the schools are able to “engage in algorithmic collusion.”

Financial aid arbitrage

The optimization process begins with the hoovering up of more data about teenagers and their families than one might think possible.

Once a school has a good-sized target list, the pitches begin.

If the targeted individuals show interest, then the consultants offer colleges tools to track teenagers’ digital interactions with clients in real time.The output from the data gathering often manifests as a matrix, according to Brad Pochard, a former vice president of enrollment management at Furman University who is now an adviser to Moore College Data, which helps colleges sort and view large amounts of information.

There might be 40 or more “cells” in the matrix, with a different price for each one.

So a school makes an opening bid.

For lower-income families, it might refer to the discount off the school’s list price as need-based aid. Or for a more affluent family, it could call the discount a “presidential scholarship” — or anything, really, that it thinks will get in a student’s head and sway their decision.

But it is only an opening bid, and each year, more families realize that and delay coming to a decision until days before the deadline, when they ask for a better deal. Often, they get one.

How it works

At College of Charleston, a public university in South Carolina, just 12% of admitted students to the Class of 2028 said yes to its offers of admission.

Larger public schools in the state, like the University of South Carolina and Clemson, have big rah-rah energy and are fearsome competitors. But they can lack intimacy, and they’re not in one of the most beautiful cities in America.

College of Charleston brought in EAB to help market those advantages. It has paid the firm roughly $500,000 per year for its help (and for all the names on its prospect lists).One of the best ways for a public school to maximize revenue is to attract more students paying out-of-state tuition. The playbook goes something like this:

1) Buy a pile of names of students from appropriately affluent ZIP codes and pitch them relentlessly with a gripping case for going far from home.

2) Upgrade the admissions staff, adding people with corporate sales experience, as the College of Charleston did.

3) Set a high tuition price, creating the perception of value.

4) To make prospects feel especially exalted, offer a fat academic scholarship — but not so much that they aren’t still paying more than in-state students.

In the space of five years, the school has gone from having three outside states each send it 75 or more first-year students to nine outside states doing so.

According to the school’s 2024-25 common data set, the statistic-stuffed form that colleges and universities send to U.S. News & World Report and other such entities, 1,127 of the 1,249 students in the first-year class who could afford to pay the full price (including both in-state and out-of-state students), received grants. The average annual amount was $12,572.

In other words, College of Charleston has good reason to believe that the vast majority of its most affluent students wouldn’t come without a hefty discount.

A slippery slope

Eileen K. O’Leary spent 34 years in the financial aid trenches at Stonehill College, outside of Boston, before retiring in 2017. There, she purchased consulting services from Zucker.

Over time, she felt a growing amount of pressure to offer bigger discounts to more people who didn’t need them. After all, there were usually competitors down the road with a different consultant whispering in their ears, urging them to cut the price further. Then, more families realized they could play schools against one another.

“I was old school, and I thought financial aid was for improving access, but it no longer was,” she said. “It was a business model.”