Paul L. Caron
Dean


Wednesday, August 21, 2019

NY Times: More Private Colleges Cut Tuition As Discount Rate Hits All-Time High Of 52%

Following up on my previous post, Private College Tuition Discount Rate Hits All-Time High Of 52%: New York Times, More Private Colleges Are Cutting Tuition, but Don’t Expect to Pay Less:

[A] small but rising number of mostly private liberal arts colleges ... are cutting their tuition prices. But what they’re actually doing is reducing their advertised rates, which only the wealthiest students usually pay. At the same time, the colleges are also reducing the heavy discounts they offer to everyone else. The result is a new sticker price that more closely reflects what students already pay.

Institutions are making the change out of economic necessity: As college costs have soared, expensive smaller schools risk being bypassed as applicants seek more affordable options.

NY Times

The colleges hope the truth in advertising will attract more applicants, including transfer students, and increase retention rates.

The number of colleges “resetting” their tuition rose sharply starting in 2012 to an average of 10 a year, according to an analysisby Mark Kantrowitz, publisher and vice president of research at  , who looked at resets through the 2018-19 academic year. From 1987 through 2011, the average was one annually. Last year, the total surged to 18. So far for 2019-20, five private colleges have trimmed their tuition prices, by 16 to 57 percent, Mr. Kantrowitz said. ...

High prices, even with discounting, are often most painful for students in the middle — those who cannot afford the full price but do not qualify for as much need-based aid as lower-income students. It also begins to warp the calculus of distributing resources, Mr. Kanelos said, as schools are tempted to recruit wealthier students who can pay the list price, taking spaces from lower-earning applicants. ...

Public colleges are also turning to similar tactics, in some cases promising to charge out-of-state students the lower in-state rate, or at least extend special discounts to applicants who live within a certain radius. Others are simply cutting their sticker prices, while some are freezing tuition. ...

The high-tuition, high-discount model may have been more effective in years past, when it gave parents bragging rights about the generous merit scholarships (read: discounts) their children had earned. Families were once more likely to accept the notion that higher price also connoted high quality. But that idea is no longer as compelling, particularly as student loan debt tops $1.3 trillion and college affordability is recognized as a national problem.

And the so-called merit packages have become commonplace. Nearly 90 percent of full-time freshmen at private colleges received institutional grants in 2017-18, according to a study by the National Association of College and University Business Officers, and the size of these discounts continue to rise. When tuition discounts rise faster than an institution’s sticker price, they eat away at the revenue it ultimately collects (known as net tuition revenue).

https://taxprof.typepad.com/taxprof_blog/2019/08/ny-times-more-private-colleges-cut-tuition-as-discount-rate-hits-all-time-high-of-52.html

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Comments

Who couldn't see this coming. It's one thing to pay for your own kid to go to college, but its quite another to pay for your kid and someone else's kid. No wonder people are getting frustrated. Upper class parents did get that status by being stupid. Some schools may be worth paying this "tax" such as elite and quasi-elite (e.g. USC, Emory, Rice, Tufts), but anything under that and the kids are going to public school.

I can guarantee that this pattern is going to get way worse in the near future as many parents poised to send their kids to college will not have paid off their own student debt. They will be very attuned to education fees, and have much less tolerance for the higher ed racket.

Posted by: JM | Aug 22, 2019 6:47:25 AM