Tuition discounting is a growing trend in higher education, with private colleges and universities providing more financial aid to students than ever before. The gap between the published tuition and the net price, which is the price students actually pay, continues to widen. The National Association of College and University Business Officers found that on average, students only pay 44% of the published price, meaning that institutions are discounting tuition by 56% for new freshmen. This figure only takes into account aid provided by the institution, and students also frequently receive aid from federal and state governments, as well as private organizations.
Most first-time students receive financial aid from their schools, with over 90% of students receiving aid. A majority of families eliminate colleges based on tuition price alone, with many high-income families opting for public institutions over private schools due to the perception that their student won’t qualify for aid. This leads to the counterintuitive result that the average family income of students at public institutions is higher than at private schools.
The high tuition at many colleges not only deters students from applying, but also negatively impacts retention rates. As schools continue to increase tuition while holding institutional aid constant for continuing students, students may face substantial tuition increases over their college careers. This pricing strategy, known as high price/high aid, has led to an average discount rate of 51.9% for all students, with new students receiving even higher discounts.
Many institutions are beginning to realize that the high price/high aid strategy is ineffective, particularly as more schools are successfully implementing tuition resets to decrease the gap between published and net prices. A high discount rate is often a sign of institutional weakness, with many high discount schools struggling to fill their classes without offering significant aid. The average discount rate at non-profit colleges that have announced plans to close in the coming years is 65%, with 98% of students receiving institutional aid.
It is clear that the current pricing strategies in higher education are unsustainable and in need of serious reconsideration. As more students base their college decisions on net price rather than published tuition, schools must adapt their financial aid models to provide a more transparent and affordable education for students. It is time for colleges and universities to reevaluate their pricing strategies to ensure the long-term viability of their institutions and improve accessibility for all students.
