Private colleges’ tuition discount rates continue to hit record highs

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Dive Brief:

• The average tuition discount rate for full-time first year students attending private nonprofit colleges reached a record high of 56.2% in the 2022-23 academic year, the National Association of College and University Business Officers said Monday.
• This represents a more than 2 percentage point increase year over year. Average tuition discount rates for all private college undergraduate students also continued to rise, reaching another record high, 50.9%, that year, NACUBO said in its newly released annual report.
• After adjusting for inflation, private colleges’ net tuition and fee revenue fell by 5.4% per first-time undergraduate and by 5.9% across all undergraduates, NACUBO found.

Dive Insight:

Colleges often rely on grants or scholarships to attract students and help them pay for college.

One method of providing financial aid is reducing tuition from sticker price, a strategy that is closely monitored, given widespread and bipartisan concerns over the cost of college and students and families’ return on investment.

Discount rates are particularly important to private nonprofit colleges, whose business models and revenues are often tuition dependent. NACUBO’s new study is based on responses from 341 of those institutions.

The data shows how prevalent the practice is. 

More than 90% of first-time undergraduates received institutional grants, which covered an average of about 62% of published tuition and fees. Nearly 83% of all undergraduates received grant aid covering an average of 57.6% of sticker price.

“Discounting tuition is a key way independent colleges and universities make education affordable for students — many of whom are paying significantly less than their school’s published prices,” Ken Redd, NACUBO’s senior director of research and policy analysis, said in a statement. “At the same time, leaders remain mindful of the impact institutional grant expenses may have on their school’s overall finances.”  

These private colleges drew on various income sources to finance grants. More than half of grant money came from undedicated revenue, like unbudgeted general funds, while almost 30% came from institutional reserves. Less than 11% was funded by endowment earnings and withdrawals. This data was from the 2021-22 academic year, the most recently available.

Highly selective institutions — those that admit less than 51% of applicants — tend to discount tuition less. Those colleges’ median discount rates for first-time undergraduates was 46.8%, almost 12 percentage points lower than the overall median rate of 58.7%.