Tuition Discounting Hits Record High at Private Institutions, NACUBO Reports

By Allie Bidwell, NASFAA Senior Reporter

The upward trend in tuition discounts provided at private colleges and universities continued its upward trend in 2018-19, reaching a new record high, according to an annual study by the National Association of College and University Business Officers (NACUBO).

The 2018 NACUBO Tuition Discounting Study, released last Thursday, found that the gap between the tuition sticker price at many private institutions and what students actually pay has continued to grow over the last several years. The tuition discount rate for 2018-19 topped the previous year’s record highs. The average discount rate was 52.5% for for first-time, full-time freshmen and 46.3% for all undergraduates. By comparison, the discount rate for first-time, full-time freshmen was 39.9% a decade ago in 2008-09, and 46.4% five years ago in 2013-14.

The increase for first-time, full-time freshmen represents about a 4% increase over the previous year. The increase for all undergraduates represents about a 3.8% increase over the previous year.

Over the past decade, the report found, these institutions increased average institutional grant aid for first-time freshmen by 91%, from $10,586 to $20,255. The report also found that more than three-quarters of institutional grant dollars awarded in 2017-18 were need-based.

“Understanding the concept of ‘net price’ is more important now than ever,” said Ken Redd, NACUBO’s senior director of research and policy analysis, in a statement. “Recent polls show that many Americans consider higher education unaffordable, but the private institutions that participate in our survey are providing substantial financial aid to most of their students, year after year, which significantly reduces the actual price students and their families have to pay and may put a college education in reach.”

Many institutions also gave even higher tuition discounts, the report said. About one-quarter of the 405 surveyed had a freshmen discount rate of 57.5% or higher. Another quarter of institutions had discount rates 40.3% or lower.

The increase in tuition discounting has, unsurprisingly, resulted in a loss in net tuition revenue on average, the report said. In 2017-18, institutions saw an average 0.8% decline in net tuition revenue from freshmen, which translates to a 3.6% drop when adjusted for inflation.

“These numbers indicate that institutions may be finding efficiencies and ways to manage with less tuition revenue,” said Matthew Hamill, senior vice president of advocacy, communications, and research, in a statement.

About three-quarters of institutions surveyed said they changed recruitment strategies as a way to cope with slower growth in tuition revenue. Sixty-nine percent said they focused on retention strategies, and 66% said they used new financial aid strategies, “such as making substantial changes in financial aid packages,” the report said.

“Considered together, these factors—increasing discount rates, strained growth in net tuition revenue, and relatively little reliance on endowments for funding institutional aid expenses—warrant questions about whether tuition discounting practices are sustainable,” the report said. “Given the trends revealed by this year’s [report], many chief business officers and other campus leaders will have to balance their institutions’ missions of providing access to a quality postsecondary education at an affordable price with the need to increase tuition revenue. How these challenges are addressed will vary from campus to campus.”

 

Publication Date: 5/13/2019


David S | 5/13/2019 9:57:33 AM

The good news: to some universal extent, perhaps aid is keeping up with rising tuition.

The bad news: that's just on the surface, and many of these spiraling tuition/spiraling discount rate models are quick fixes. They're largely unsustainable, because they rely on a population of full-payers. The higher tuition rises, especially at schools that aren't selective, name-brand, high profile schools, the fewer and fewer students and families will be willing or able to pay full price. I fear that the recent increase in the number of schools abandoning need-blind admissions may be as a result of too much raising tuition and raising the discount rate try to keep up with it.

Answer is lower your tuition, lower your discount rate...maybe just (or at least mostly) make your institutional aid what is generated by gifts and endowment. You may be able to arrive at the same net revenue amount. Because how much longer can what we're seeing keep going?

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