The amount private nonprofit colleges discount their tuition and fees reached new record highs of 49% for all undergraduates and 54.5% for first-time, full-time undergraduates, according to data from this year’s National Association of College and University Business Officers (NACUBO) Tuition Discounting Study. By offering students grants, scholarships, and fellowships, private institutions are waiving at least half of the revenue they would collect if they charged all students full tuition and fees.
Looking at data from the 2021-22 academic year for 350 private, nonprofit colleges and universities, NACUBO found that 82.5% of undergraduates received grant aid. That aid covered 60.7% of those students’ published tuition and fees for first-time undergraduates and 55.7% for all undergraduates. Although the share of students receiving aid was almost the same as last year, the aid awards were the largest they’ve ever been, according to a press release.
These record-breaking discount rates are part of a decade-long trend of private nonprofit colleges and universities steadily increasing tuition discounts as part of a business model to encourage enrollment, The Chronicle of Higher Education reports. While some access advocates say the reliance on discounting makes it difficult for families to understand how much college truly costs, others say the growing discounts signal that colleges and universities are prioritizing access and affordability. Ultimately, experts expect these discounts to continue to grow.
Smaller discounts at more selective colleges
Selective and highly selective institutions, which admit less than 51% of their applicants, offered fewer tuition discounts compared to all other colleges and universities, NACUBO says. The median discount rate for selective and highly selective colleges and universities was 44.8%, 13 percentage points lower than the median discount rate for institutions overall.
At moderately and minimally selective universities, those that accept 51%-74.9% of applicants and 75% or more applicants, respectively, the median tuition discount rate was around 60%. The more moderate tuition discounts at selective and highly selective institutions indicate that “these schools do not rely on tuition discounting as an enrollment strategy to the same extent as other institutions,” Ken Redd, senior director of research and policy analysis at NACUBO explains. In contrast, less selective institutions may feel they need to offer more tuition discounts but have smaller endowments and fewer resources to do so, Redd explains to Higher Ed Dive.
Tuition discounts reach elite public colleges
While the new NACUBO report focuses on private colleges, flagship public institutions are also adopting the pricing strategy, according to The Hechinger Report. Economists Emily Cook of Tulane University and Sarah Turner of University of Virginia have found that, even as tuition climbs at elite public institutions, the amount lower-income students actually pay has decreased, with students from wealthier families subsidizing those discounts. According to Cook and Turner’s research, the tuition paid by families making less than $110,000 a year fell between 2008 and 2018, even as the published sticker prices at those same colleges and universities for in-state students rose 34%.
Cook and Turner say these tuition discounts have helped encourage students from low-income families to enroll at elite public institutions. The share of undergraduate students from low-income families (those making less than $48,000 a year) at elite public institutions rose from 20% in 2008 to 23% in 2018. Those students’ net tuition bill was $0, with grants for room and board growing to more than $3,900.
Still, even with those gains, students who pay full tuition without applying for financial aid still make up the largest group of students on campus: 46% in 2018, down slightly from 49% in 2008.
Redd says he hopes that more families will take advantage of discounts available at elite private and public colleges, even if the initial sticker price seems unaffordable. “Families should not take for granted that they won’t qualify for financial aid, certainly institution-based financial aid,” given how discounts continue to grow, Redd tells Inside Higher Ed.