Tuition Discounts Increase at Private Colleges

Good news: according to the National Association of College and University Business Officers, tuition discounting hit an all-time high in 2014, with many believing it is a trend likely to continue. A survey of 411 private, non-profit institutions showed that the average discount rate* for first-time, full-time freshmen hit 48% in the 2014-2015 school year, and was over 41% for all undergraduates. The survey also showed approximately 89% of freshmen receiving some form of institutional grant aid; the average covered more than 54% of tuition.

Larger endowments correlated with more institutional aid, too, according to the survey: those with endowments in excess of $1 billion covered 32.3% of institutional grant aid with endowment funds, whereas those with endowments of $25 million or less covered only 6.5% of institutional grant aid with endowment funds.

Perhaps more interestingly, college business officers seem to recognize that high sticker prices are keeping students away: Many of these same schools report declining enrollments, and chief business officers cite “price sensitivity” as the reason. Those that have not seen decreases in enrollment cited increases in financial aid among the reasons for enrollment growth.

While this is generally good news, it’s worth unpacking the details. The main one is this: the discounting only applies to tuition and fees, not all costs. That means that although it brings private school costs down considerably, they would likely remain higher than in-state public schools. For example, Baylor University (a NACUBO member school) charges $20,369 per semester in tuition and fees. Discounting that by 48% is significant, but end result ($10,592 per semester) is still considerably higher than the approximately $5,200 per semester charged by the University of Texas or the $4,933 tuition per semester at Texas Tech.

To summarize the key takeaways:

  • Private schools may cost considerably less than you think they would once institutional aid is factored in
  • Larger endowments currently appear to correlate with more grant aid

*NACUBO defines the average discount rate as “institutional grant dollars as a percentage of gross tuition and fee revenue.” Read the full release here.

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