advocacy.collegeboard.org Tuition Discounting Report Finds Discounting Continues to Increase at Private Colleges, but Levels Off at Public Institutions
Despite an environment in which the cost of attending college is rising while family incomes are not, a significant portion of tuition discounts is being awarded to students who do not have financial need, according to Tuition Discounting: Institution Aid Patterns at Public and Private Colleges and Universities, 2000-01 to 2008-09.
The study, released on Sept. 15 by the College Board’s Advocacy & Policy Center, examined undergraduate institutional aid patterns in public two-year and four-year public colleges, as well as private not-for-profit four-year colleges and universities, from 2000-01 through 2007-08 and, where possible, 2008-09.
The authors — Sandy Baum, professor emerita at Skidmore College and an independent policy analyst for the College Board, Lucie Lapovsky, principal at Lapovsky Consulting, and Jennifer Ma, independent policy analyst for the College Board — confirmed that discounting is pervasive in higher education. While the proportion of aid that meets financial need has increased in recent years at both public and private institutions, many dollars are still directed at shaping classes and increasing revenues, rather than assisting needy students.
Institutional grant aid, which is a discount from the published price, makes it possible for students to enroll in colleges and universities that they could not otherwise afford. The study found that, on average, institutional grants and tuition waivers reduced net prices to about 10 percent below the published price at public two-year colleges, about 20 percent below the published price at public four-year institutions, and about 33 percent below the published price at private not-for-profit four-year colleges and universities.
The aid also brings a number of advantages for institutions, the study said. Schools can charge different prices to selected students depending on their financial circumstances or the academic, athletic or other characteristics that make them particularly attractive to the institution.
But, said the authors: “It is arguably both equitable and efficient to target subsidies specifically at those with inadequate financial means.”
The study found that at public four-year colleges and universities, subsidies given to students who could afford to enroll without that assistance amounted to about 5 to 6 percent of gross tuition revenues, compared to 7 to 8 percent devoted to meeting need. (An additional 6 percent went to a combination of athletic awards and tuition waivers.)
At private not-for-profit four-year institutions, subsidies for students who could afford college amounted to about 8 percent of gross tuition revenues, compared with 20 to 21 percent devoted to meeting need. About 4 percent went to athletic awards.
At private colleges with low tuitions or endowments, however, a larger proportion of grant aid went to purposes beyond the financial needs of students. Those schools, which enrolled greater percentages of low- and moderate-income students, tended to devote significant resources to enrolling athletes and students without financial need, likely leaving higher levels of unmet need among other students.
The study recommended that in the public sector, policymakers “give serious consideration to reducing the awarding of characteristic-based aid to students without financial need."
In addition to bringing college within reach for more low- and moderate-income students, such a strategy could result in net prices at colleges and universities being more predictable, providing students with better information up front about the prices they will pay at schools they are considering.
Also, said the authors: “Whether the funds are from public or private sources, their allocation helps to determine the profile of the student body and the effective mission of public higher education. In an era of unusually constrained finances, it is particularly important to ensure that available dollars are distributed both equitably and efficiently.”
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