TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, March 31, 2010

Private Colleges Give 53.5% Discount Off Advertised Tuition Rate

Inside Higher Ed, Slashing Prices:

Tuition discounting reached record high levels at private colleges and universities in 2008, and the largest share of that aid was awarded without consideration of students’ financial need, according to a report released Tuesday the National Association of College and University Business Officers (NACUBO).

The average discount rate for full-time freshmen increased from 39% in fall 2007 to 42% in fall 2008, and the average award covered more than half – 53.5% – of the “sticker price.” The discount rate represents the share of tuition and fee revenues colleges use to award institutionally funded aid.

Despite lamentations from some college presidents, tuition discounting has become an increasingly common practice at private institutions. Standard discounting involves placing the sticker price of attendance beyond the reach of many families, only to effectively slash that price by offering institutionally funded financial aid to many or, more typically, most students. Critics say it steers too much aid toward students without financial need, and it also forces high-tuition colleges to defend sticker prices students seldom actually pay.

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They are worse than the car dealerships.

Posted by: Dave | Mar 31, 2010 6:43:48 AM

For several decades college administrators have enjoyed their ability to redistribute income by raising sticker prices, in effect taxing higher-income families and transferring that money to lower-income families. The problem with this form of taxation is that it's voluntary. Fewer high-income families are willing to pay this tax as college education, especially in liberal arts, appears to be an increasingly poor investment.

Will college tuition be the next bubble to burst? Possibly, if entrepreneurs decide to offer solid education at a modest mark-up over its actual cost, free of wasteful practices such as tenure and publish or perish. In my opinion, college professors and administrators are like real estate agents in that their long-protected compensation packages are endangered by market forces.

Posted by: AMTbuff | Mar 31, 2010 10:51:52 AM