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TOPIC: Tuition Discount Rates / Wall Street Journal

Tuition Discount Rates / Wall Street Journal 6 months 1 week ago #283467

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Private Colleges Dole Out Scholarships to Boost Enrollment, but It Isn’t Working

Tuition discount rates have risen to a record 49.9% for freshmen



By Melissa Korn / Wall Street Journal

April 30, 2018 12:01 a.m.

Private colleges have been aggressively discounting tuition in an effort to boost enrollment, a risky strategy that now may be backfiring as students aren’t signing up in droves, even at sale prices.

Tuition discount rates, or the share of gross tuition and fee revenue that schools shell out as grants and scholarships, increased to a record 49.9% for full-time freshmen at private colleges this academic year, according to a preliminary report by the National Association of College and University Business Officers. That is up from a then-record 48.2% in the 2016-17 school year.

Put simply, these schools bring in only about half of their published sticker price.

Overall tuition discount rates for undergraduates hit a record 44.8%, up from 43.2% last year, based on survey responses from 404 private schools. That figure is generally lower than it is for freshmen, as some schools front-load scholarship offers and others set flat per-year awards even as sticker prices increase.

Discount rates for schools with fewer than 4,000 students—institutions that are generally reliant on tuition dollars and for whom a small enrollment shift can hit hard—reached 51.7% this year for freshmen, and 46.1% overall.

Schools often use tuition discounts with the aim of boosting their academic profiles or luring more families to enroll. Even at a lower per-student price, if enrollment increases enough, the school’s net tuition revenue can grow.

That has been the case at Albion College in Albion, Mich. The school has a discount rate of around 70%—and slightly higher for freshmen—and just “a handful” of students pay full sticker price, says President Mauri Ditzler.

But with enrollment growing by 24% since 2014, to 1,568 total this year, the school is increasing its net tuition revenue. Dr. Ditzler also noted that even when students pay relatively little for tuition, the school still makes money on dorm rooms.

Albion may be an outlier, as enrollments at private, nonprofit schools nationwide have fallen for each of the last three years.





Student Debt in America and the Hope of Affordable Education

Student debt in the U.S. has reached record levels, making higher education out of reach for many people. In New York City, a program called ASAP is gaining national attention for helping students earn a college degree and escape the burden of loans they would struggle to repay.

The financial impact of declining enrollment is being compounded now by the fact that schools are earning less from each student who does come to campus. On a per-student basis, net tuition revenue for freshmen fell by 0.1% this year at schools surveyed by NACUBO, the first decline since the 2011-12 academic year. Small schools reported a decline of 1.1%.

While there is no single number that indicates a tipping point to becoming unsustainable, said Ken Redd, senior director of research and policy analysis at NACUBO, “It’s becoming more and more of a strain on schools.”

Since private, nonprofit schools get more than a third of their total funding from net tuition revenue, the NACUBO report warned, continued declines in that pool of money “may limit institutions’ ability to fulfill their educational and public service missions.” The authors added, “The situation for small institutions appears even more precarious.”

The source of financial aid dollars is another cause for concern. Schools in the study reported that, on average, 10.7% of total undergraduate institutional aid was funded by endowments; there is no dedicated revenue source covering the rest.

At Bucknell University in Lewisburg, Pa., 17% of financial aid expenditures come from endowment funds.

“We have a long way to go,” said President John Bravman, explaining that he wants to fund more financial aid with endowment money, rather than from less predictable operating budgets. At the same time, the school is looking to increase its discount rate to around 37% from 31%, to compete with peers dangling discounts of their own.

Write to Melissa Korn at melissa.korn@wsj.com

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