NACUBO: Tuition discount rates 'not sustainable'

For every tuition dollar received, colleges award 48 cents

Tuition discount rates at private, nonprofit colleges again hit an all-time high in 2014, according to preliminary findings from an annual survey by the National Association of College and University Business Officers (NACUBO).

On average, institutions awarded first-time freshmen 48 cents for every tuition and fee dollar collected—a strategy the report calls unsustainable. Eighty-nine percent of first-time, full-time students received some level of discount, according to the report.

The survey of 411 private universities and colleges found that the 48% discount rate exceeded the 46.6% from 2013. And the average freshman received an institutional grant covering 54.3% of a school's sticker price, up from 53.1% the year before.

Even as tuition revenues fall, institutions continue to use tuition discounts to increase enrollments. Yet almost half of respondent institutions reported flat or declined freshmen enrollments from 2013 to 2014, and 63% of business officers at those schools cited price sensitivity as a contributing factor.

"While the economy has improved, many families are still struggling," says Ken Rudd, director of NACUBO's research and policy analysis. "There's an increased inability [for needy students to go to college] and an unwillingness to pay even if you did have the money."

The projected average net tuition revenue for full-time freshmen grew by just 0.4% in 2014—which is actually a drop of 2.5% once factoring in inflation.

"Independent colleges and universities receive one-third of their operating revenue from net tuition revenue, on average" and "such losses could limit schools' ability to meet their educational and public service missions," according to the report.

"The real decline in net tuition revenue suggests to us that tuition discounting, at the levels they are currently at, is just not sustainable," Redd says.

Still 31% of institutions queried maintained or decreased their tuition discount rates from 2013 to 2014. Many turned to other recruitment strategies instead, such as freezing tuition, becoming more selective, or increasing marketing efforts (Supiano, Chronicle of Higher Education, 8/25; Woodhouse, Inside Higher Education, 8/25).

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