Tuition Discounts at Private Colleges Reach New Record High

By Allie Bidwell, Communications Staff

Tuition discounting at private colleges and universities continued its upward trend this year, reaching a new high, even as endowment returns fall and revenue growth slows, according to an annual study by the National Association of College and University Business Officers (NACUBO).

The 2015 NACUBO Tuition Discounting Study, released today, 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 2015-16 topped the previous year’s record highs. The average discount rate – which the study defines as the percentage of tuition and fee revenue redistributed to students in the form of grants – was 48.6 percent for for first-time, full-time freshmen and 42.5 percent for all undergraduates. By comparison, the discount rate for first-time, full-time freshmen was 38 percent 10 years ago in 2005-06, and 42 percent five years ago in 2010-11.

What’s more, NACUBO’s study found that institutions with the largest endowments – those more than $1 billion – more frequently used those funds to provide financial aid to students. Institutions with the largest endowments, according to the study, funded about one-third of their scholarships with endowment funds.

“Even in a year of lower endowment investment returns, colleges and universities spent substantially more from their endowments,” said NACUBO President and CEO John Walda, in a statement. “It is not surprising to see higher discount rates as many institutions are directing endowment spending to student financial aid.”

Many wealthy colleges and universities have come under attack by lawmakers pressuring them to leverage their endowment funds to make college more affordable to students. Last month, Harvard University, Yale University, and Princeton University responded to criticism from federal lawmakers with similar messages – that endowment funds are used for a variety of purposes, and that a portion of that money already goes toward supporting students through aiding teaching, funding campus facilities and resources, and providing financial aid.

Although tuition discounting is often used as a strategy to entice students who are not able or willing to pay the full price, more than half (51.2 percent) of the schools that reported enrollment data for 2014-15 and 2015-16 experienced declines in total undergraduate enrollment, more than half (53.5 percent) reported declines in freshmen enrollment, and 37.5 percent experienced declines in both total and freshmen enrollment, the study said.

Chief business officers at institutions, though, cited price sensitivity as the primary factor contributing to freshmen enrollment declines. Increased competition, changing demographics, and a decrease in “traditional” aged college students (18-24) in the region could have also contributed to students’ enrollment decisions, they said.

The trends emerging from the study suggest that chief business officers at private nonprofit institutions will face “a wide variety of difficult challenges,” the study said.

“How CBOs and other higher education leaders navigate through these challenges will have broad implications for many private nonprofit colleges and universities in the future,” the report said.


Publication Date: 5/16/2016

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