A handful of schools are 'resetting tuition.' Is the strategy working?

One school last week announced 43% tuition cut

At least a dozen schools in recent years have dramatically cut their tuition price, in hopes of luring more students, Danielle Douglas-Gabriel writes for the Washington Post.

The schools include New York's Utica College, Ohio's Ashland University in Ohio, and South Carolina's Converse College. Last week, Philadelphia's Rosemont College joined the movement: School president Sharon Hirsh announced a 43% cut in tuition price for the 2016-2017 academic year, from $32,620 to $18,500. (Hirsh also announced a 14% cut to room and board costs, too.)

Many small private schools in recent years have gone the other way, Douglas-Gabriel writes: They have hiked their tuition price, while offering more need-blind scholarships, in hopes of simultaneously preserving revenue and luring top students. But the tactic has often backfired. According to Moody's, many smaller schools have seen flat net-tuition revenue as enrollment stagnates and families grow concerned about affordability.

And at schools that have reset their tuition, the "new" price is closer to what students would be paying after assorted discounts, Douglas-Gabriel writes.

The strategy to reset tuition works best when the school cuts its discount rate and ramps up its advertising, consultant Lucie Lapovsky tells the Post. For instance, Ohio's Muskingum University—which sliced tuition from $14,000 to $10,000 in 1996—saw a steady increase in enrollment, partly because the price cut attracted more students. (Meanwhile, the strategy makes less sense for elite schools like Harvard or Yale, which have large endowments to offset need-blind scholarships and have seen applications skyrocket in recent years.)

NACUBO: Tuition discount rates are 'not sustainable'

"The concern that some schools have is that people associate price with quality," Lapovsky said. "But many students won't even look at a school with a sticker price higher than what they think they can afford … so schools may be lowering their potential demand."

Ultimately, the decision to reset tuition is just a sign of the bigger challenge facing college economics, according to Douglas-Gabriel.

"Cutting sticker prices won't solve the problem of rising costs, and there's no guarantee that lower costs will attract more students," she writes. "But the status quo is not sustainable" (Douglas-Gabriel, "Grade Point," Washington Post, 9/16).

Thoughts on the story? Tweet us at @eab_daily and let us know.

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