For university-bound students planning to study in the U.S., the only thing more shocking about a school’s sticker price is the discovery that it may not represent the cost of school at all.
That’s because “tuition discounting,” the practice by which selected students are offered a reduced cost for attending, has become a potent tool used by schools to entice the students they want, and ensure the class size and characteristics they need.
Tuition discounting normally takes the form of an outright grant provided to a student together with an offer of admission. It’s financed using a school’s institutional funds, not with federal monies earmarked for need-based financial aid. Universities discount at their discretion, and an offer can amount to a few thousand dollars or a substantial share of tuition.
An annual study just published by the National Association of College and University Business Officers shows just how prevalent the practice is. The survey of 361 nonprofit U.S. colleges and universities found that the average tuition discount rate for first-time undergraduates for the 2020-2021 academic year reached an all-time high of 53.9%. In other words, for every $100.00 of posted tuition costs, freshmen at these schools, on average, were not charged $53.90. Uncertainties in enrollment resulting from the COVID-19 pandemic drove some of the aggressive discounting this year, which surpassed the rate of 51.2% for the previous two years, 50% for the 2017-2018 academic year, and 39% in 2007-2008.
The savings for families and students is potentially considerable. Is the practice sustainable for universities and colleges? The growing consensus is no, since, albeit to differing degrees, schools depend on tuition revenue to fill their budgets and fund their operations. At a certain point, discounts are destabilizing. However, discounting helps entice students and fulfill admissions targets, which is necessary if enrollment, revenue, reputational, and other institutional goals are to be met. So there’s a dilemma.
Is it ethical? Tuition discounting can help make university more affordable for families that don’t qualify for needs-based assistance, but it is not financial aid. It’s a tool used by schools to incentivize enrollment, not to increase access. Recipients of the largesse may not be those students who need it most.
Discounting is also flagrant evidence of the lack of transparency in college costs and the deep subjectivity of university admissions decisions. The practice is, arguably, an institution’s rightful prerogative, but it may also be a source of divisiveness on college campuses.
Demographic shifts and pandemic-related disruptions in the U.S. have increased competition among universities for undergraduates, and, along with it, the likelihood that tuition discounting will continue. The benefits may be short-lived for everyone.
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