The "best" students, those most likely to be successful within the school and after school, become walking advertisements. They're also more likely to be happy alumni who donate to the school.

I wonder what the data would show if you compared the money invested in admissions to that invested in alumni affairs & development, and how much is brought in by tuition and fees and how much is brought in as donations. From what I've seen, development is definitely an area that operates on the "you have to spend money to make money" principle.

We hit "peak university" in 2011. [1] In 2017 there were 1.25 million fewer enrolled students than in 2010. But this [2] is the zinger: in that same time frame, more than 300 new degree granting institutions opened up! It's becoming a hyper-competitive business. Good students not only are likely to stay on for the entire term of the institution, but also increase the prestige of your school which means more students, higher fees, and more profit.

I think a big issue is that the regulations on loans are removing any and all notion of supply and demand, so costs just keep getting crazier and crazier. Living on campus at an average private nonprofit university now will run you more than $50k a year. [3] Spending $2,357 for what may likely be $200k+ for 4 years is a phenomenal return on investment.

As usual, non-profit in practice and non-profit in connotation really don't mean the same thing. I attended a top 10 university only to see them constantly tear down perfectly functional buildings just to replace them with more aesthetically pleasing buildings that otherwise functioned just about identically. In some cases the new buildings had less room than the older ones. All it seemed to achieve was to 'Amazon' their profit figures. I don't really understand why they seem determined to waste so much money. The cynic in me imagines it's easier to justify a million dollar administrative salary when that's a much smaller fraction of your gross, and a "non-profit" institution would have difficulty justifying constant cost increases if they're showing a massive profit margin.

[1] - https://nces.ed.gov/programs/digest/d18/tables/dt18_105.30.a...

[2] - https://nces.ed.gov/fastfacts/display.asp?id=84

[3] - https://nces.ed.gov/programs/coe/indicator_cua.asp

They are trying to get students who can:

1) Pay 2) Stay the full 4 years

So yes, the "best" students (the ones who will pay full price for 8 semesters) are very profitable for them.

I think there is a demographic and/or preference shift occurring.

The small liberal arts college I attended recently had a year where it could only fill 600 out of 700 potential seats. The college filled out all 700 seats the next year, but redoubled their targeting and recruiting and used more waitlist admits than usual.