New York Times:

John Strassburger, the president of Ursinus College, a small liberal arts institution here in the eastern Pennsylvania countryside, vividly remembers the day that the chairman of the board of trustees told him the college was losing applicants because of its tuition.

It was too low.

So early in 2000 the board voted to raise tuition and fees 17.6 percent, to $23,460 (and to include a laptop for every incoming student to help soften the blow). Then it waited to see what would happen.

Ursinus received nearly 200 more applications than the year before. Within four years the size of the freshman class had risen 35 percent, to 454 students. Applicants had apparently concluded that if the college cost more, it must be better.

“It’s bizarre and it’s embarrassing, but it’s probably true,” Dr. Strassburger said.

Ursinus also did something more: it raised student aid by nearly 20 percent, to just under $12.9 million, meaning that a majority of its students paid less than half price.

And the best example of twisted logic:

It can be argued that everyone studying at a private liberal arts college is getting a discount. At institution after institution, officials say they offer an education costing tens of thousands of dollars more than even the college’s “sticker price.”

Take Swarthmore, the elite college half an hour’s drive from Ursinus. With an annual budget of $106 million to educate just under 1,500 undergraduates, Swarthmore spends about $73,690 a student. But its tuition, room, board and fees in the last academic year were little more than $41,000.

“The half of our student body whose families are paying the full sticker price are paying $41,000 for something that costs $73,000,” said Suzanne P. Welsh, the treasurer. “So they’re getting a great discount.”

The other students receive a bigger subsidy: on average, aid totaling more than $28,500, most of it from the college itself. (Swarthmore limits its aid to students with financial need, but that can mean those from families earning $150,000 a year if, for instance, there are circumstances like having multiple children in college.)

What makes it all work is Swarthmore’s $1.3 billion endowment, which throws off enough income to cover 43 percent of the operating budget.