The Current Practice of College Tuition Discounting is Not Sustainable

In my last blog, I wrote about the practice of tuition discounting, and how college presidents have a very different understanding of how applicants and their families view tuition than they actually do. Tuition discounting is the widespread practice of setting the “sticker price” of tuition at a high level, but then offering financial aid to discount what people actually pay.  Hardly anyone pays full price. The average discount is about half the price in private colleges and universities.

And the rate at which schools discount is increasing every year. In the last ten years, it has increased about a percentage point a year, from 38.6% in 2006-2007 to 49.1% in 2016-2017 (figures are from the very well done NACUBO Tuition Discounting Study).

Economically, this annual increase is a disaster for colleges and universities, since it means less tuition revenue per student.

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The schools know this. In a survey that I created and conducted with The Chronicle of Higher Education, we found that four out of five college presidents and chief financial officers (CFOs) thought that the practice of tuition discounting was unsustainable. At private institutions, we found that among CFOs, the people most knowledgeable about institutional finances, 70% thought that tuition discounting was not sustainable at their own institution.

Clearly, something needs to change.

For more results on the College Pricing Survey, get the report from the Chronicle’s website.