The 2013 Tuition Discounting Study

By Betsy Prueter

The tuition discount rate (institutional grant dollars as a share of gross tuition and fee revenue) for first year students at private, non-profit, four-year institutions has increased to 44.8% for the 2012-2013 academic year and is predicted to rise to over 46% in 2013-14, according to a recent report from the National Association of College and University Business Officers. Colleges and universities use tuition discounting strategies as a way to aid students who might otherwise be unable to pay the “sticker price” to attend. Tuition discounting is also a strategy that is used to increase enrollment and attract talented students. It has recently become especially important as 17% of institutions saw a drop of more than 10% in their freshmen enrollment from Fall 2012 to Fall 2013.

Among the report’s other noteworthy findings: – 87.7% of freshmen received an institutional grant in 2012-13, a figure that is projected to grow to 88.9% in 2013-14. The average institutional grant in 2013-14 is projected to cover over half of tuition and fees. 80% of institutional aid is going directly to help meet students’ demonstrated financial need. – Due to high discount rates, the average growth in tuition revenue per freshman has only grown 1.7% in 2012 and is expected to decrease -0.5% in 2013 (both numbers adjusted for inflation). Over the last 13 years, institutions as a whole have experienced relatively flat net tuition revenue (0.4%) which according to the report, means that gross tuition revenue and other fees have primarily gone back to students in the form of aid. – Among the institutions who responded to the survey (over 400), undergraduate enrollment had decreased at half of them. Reasons cited include families and students having a higher price sensitivity, colleges dealing with increasing competition from other institutions and the decreasing pool of traditional students. Institutions with increases in enrollment cited better marketing and recruitment strategies as keys to their success.