With apologies to Charles Dickens, the spring of senior year in high school, full of college acceptances and rejections, can be the best of times and the worst of times.
If you or your child is in the former camp, congratulations—especially if a college's "yes" has come with a financial aid offer.
Some lucky students will even have a handful of acceptances and financial aid offers to choose among and may be thinking of playing one college off the other, particularly with offers of merit aid. But if you are considering a round of haggling, think again.
Experts say parents who play that game can help fuel an arms race: The more aid a college shells out, the more it has to make up the difference somewhere else—quite possibly in the tuition levels your younger children face.
"If you think of a college as beginning from a need for a certain amount of revenue, then any discounting it does, whether need based or merit based, if it wants to hit a particular revenue target, then it has to push up list price tuition," said David Feldman, a professor of economics at the College of William and Mary and co-author of "Why Does College Cost So Much?"
Feldman and co-author Robert Archibald analyzed the effect of financial aid offers, or tuition discounts, on tuition between the 1994–1995 and 2003–2004 school years. The average grant to students at public four-year institutions more than doubled over that time, and the two economists calculated that the extra discounting pushed up tuition an extra 4.5 percent. Put another way, the extra discounting accounted for 6.7 percent of the 72 percent tuition increase.
The change was significantly more dramatic at private four-year institutions. Average aid grants to students more than doubled at these schools as well, and the economists found that increased discounting pushed up list-price tuition by 14.5 percent. That represented 30.7 percent of the 62 percent tuition increase over the period.
(Read more: Which students have the highest debt?)