Friday, May 19, 2017

College Tuition Discounts Hit New High By Jonathan D. Glater

It is the “sticker price” of a college education, or the publicly reported tuition and fees and, sometimes, room and board, that typically gets all the press attention.  Yet as with so many other products, the asking price is just the start of a negotiation, and the latest report from the National Association of College and University Business Officers (NACUBO) reminds us that education is no different, at least in this respect.

Of every dollar in gross tuition revenue from first-year students, colleges and universities used nearly half for grant-based financial aid, according to the summary of NACUBO’s annual Tuition Discounting Study. The institutional “discount rate,” 49 percent, is the highest the organization has ever reported.

The summary of the report by NACUBO, whose members are college and university administrative and financial officers, is available here; the full report costs money.  The findings are based on a survey of 411 private, nonprofit institutions.

The steady increase in the discount rate illustrates how colleges are managing the impact of increases in reported tuition: by cutting the price for students. Further evidence of the impact of rising costs is the share of students receiving grant aid: more than 87 percent of first-year students, NACUBO found.  More than three-fourths of the aid money was awarded on the basis of need

The summary identified two other, potentially worrisome trends from the survey.  First, surveyed institutions reported a decline in the rate of growth in net tuition revenue, to 0.4 percent.  Second, nearly 40 percent of surveyed institutions reported that the number of students they enrolled had declined, both for their first-year classes and their total student body. 

If fewer students are enrolling and limits to the ability of institutions to pass on costs to students are becoming apparent, all but the wealthiest colleges and universities may face some difficult choices in the years ahead.

Private, nonprofit institutions face a powerful incentive to keep raising the sticker price, in an effort to procure revenue from that shrinking sliver of the college-going population that is able to pay, even as they must offer ever more financial aid to everyone else.  Or, if they reduce aid, they will push private higher education further out of reach of a growing number of potential students.

This is another insidious manifestation of inequality.

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