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Forbes Money Personal Finance Discount Rates At Colleges Continue To Increase As Colleges Explore Alternate Pricing Strategies Lucie Lapovsky Contributor Opinions expressed by Forbes Contributors are their own. I write about strategic financial issues in higher education. Following Jun 6, 2023, 05:15am EDT | Press play to listen to this article! Got it! Share to Facebook Share to Twitter Share to Linkedin College is on sale; apply and see how large a discount you will get AFP via Getty Images As private colleges and universities struggle to increase their enrollment and improve their financial situation, they continue to increase their tuition while also increasing the amount that they discount the price. The latest report from the National Association of College and University Business Officers (NACUBO) indicates that 91% of new full-time freshmen receive institutional financial aid and that the average award is equal to 62% of the institution’s tuition. Overall, institutions are receiving only 44 cents on each dollar charged from new freshmen while receiving 49 cents on each dollar charged from continuing students. The difference between the average paid by new students vs. continuing students is accounted for by the fact that most schools hold the aid that they award to students’ constant throughout their time at the college while increasing the published tuition each year. Thus, as schools increase their tuition, the returning students pay the full increase often amounting to increases of 6 to 10 percent or more per student each year rather than the average 3% or so announced tuition increase. This practice certainly contributes to the low graduation rate from many colleges; the average six-year graduation rate from private colleges and universities is only 68% and finances are the most commonly given reason for dropping out of college. We find that the weaker schools, defined as those with acceptance rates of 51% and above are discounting significantly more than the selective/highly selective schools, defined as those schools which are accepting fewer than 51% of their applicants. The less selective schools are using discounting to persuade more of their applicants to choose to attend their institution as they are valiantly trying to fill up their classes. The selective/highly selective schools receive a median net tuition of $29,429 per student compared with the less selective schools which receive only about $17,500 per student. Furthermore, the selective/highly selective institutions award significantly more of their financial aid based on student financial need compared with the less selective institutions which tend to award most of their institutional financial aid based on merit and other student characteristics beyond need. In addition, the selective/highly selective institutions tend to have significantly larger endowments than the other private institutions further dividing the resources available to these institutions and truly bifurcating the industry between the “haves” and the “have nots.” Schools reduce their published price to increase the number of leads and prospects that they can ...
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