Tuition discounts at private colleges and universities hit record high

Higher education institutions are offering ever-greater tuition discounts in their quest to stabilize enrollment and reduce barriers to education, Inside Higher Ed reports.

The average tuition discount rate for full-time, first-year students at private nonprofit colleges hit a record high of 56.2% in the 2022-23 academic year, increasing more than 2 percentage points from the previous year, according to a new study released this week by the National Association of College and University Business Officers (NACUBO), Higher Ed Dive reports. 

NACUBO defines institutional tuition discount rate as “the total institutional grant aid awarded to undergraduates…as a percentage of the gross tuition and fee revenue the institution would collect if all students paid the full tuition and sticker price,” according to Inside Higher Ed. When accounting for all undergraduates, average tuition discounts at private nonprofit colleges also rose, reaching a record high of 50.9%. 

Related: GAO highlights opportunities to improve accuracy, transparency in financial aid packages >

The study, which included data from 341 private nonprofit colleges and universities from the 2021-22 academic year and preliminary estimates for 2022-23, showed that the vast majority of undergraduates received tuition discounts. This academic year, 90.9% of first-time students at these schools received grant aid, which covered an average of 62.1% of published tuition and fees, according to the NACUBO press release. Across all undergraduates included in the study, 82.9% were awarded grant aid, which covered an average 57.6% of the published price.

“By providing grants, fellowships, and scholarships, these institutions forgo more than half the revenue they otherwise would collect if they charged all students the tuition and fee sticker price,” the NACUBO press release says.

Related: Report: Colleges increasingly unaffordable for Pell Grant recipients >

Selective and highly selective private nonprofit colleges and universities—or those that offer admission to less than 51% of applicants—discounted tuition less than other schools. The median institutional discount rate for first-time undergraduates at the most selective colleges in the 2022-23 year was 46.8%, while the overall median discount rate at non-selective institutions was nearly 12 points higher at 58.7%.

Vying for students

Colleges and universities have long used tuition discounts to reduce financial barriers to higher education for students from low-income families, especially as sticker prices have risen. In addition, as the college applicant pool has contracted, schools struggling with enrollment are increasingly foregoing revenue and using grants to vie for students.

Related: Financial aid shifting from lower-income students to higher-income students, analysis finds >

While competitive schools have posted a record number of applications, pandemic-era enrollment declines at many non-selective institutions and regional public universities have left many institutions using institutional aid to attract students. Some families are getting more hands-on with the process, too. A class of consultants has recently emerged to sell families advice on how to negotiate for thousands of dollars in merit aid from non-selective schools, The Wall Street Journal reports. Entrepreneurs and parents are also creating websites to help families understand how much students and their families might need to pay out-of-pocket so that they have the tools to appeal financial aid decisions. According to a 2022 survey from Sallie Mae, 40% of students appealed their aid package.

The result, experts say, has been a shifting of aid at some colleges and universities away from lower-income students to higher-income students. “What has happened over the course of probably the last 15 years is more of that money has been directed toward upper-income families rather than lower-income families, as a means of staying competitive in what has been a highly competitive environment,” Bill Hall, founder and president of the consulting firm Applied Policy Research Inc., tells Inside Higher Ed.

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