Private colleges can be incredibly expensive. According to the College Board, the average cost of tuition and fees for the 2016-2017 school year at a private college was $33,480; but in reality, nobody pays that price.
Reason for the discount
One of the main reasons why private colleges have been offering discounted tuition is because of the Great Recession as well as relatively stagnant wages; both factors make it difficult for numerous families to afford private colleges. Also, many private colleges have been competing for the declining number of high school graduates to help meet enrollment goals.
This need to make private colleges more attractive and affordable for families has led to the tuition discount rates to reach an all-time high.
Understanding the numbers
The institutional discount rate recently hit an estimated high of 49.1 percent, and despite the discounts, private colleges still have their eye on the students who are relatively wealthy. Students from a wealthy background usually end up paying a fairly high tuition price, so they can give colleges a boost in ranking, as well as bring in more revenue.
Although private colleges are giving out tuition discounts with the intention of attracting more students, the discounts don’t seem to be helping enrollment numbers as much as expected.
Going downhill
Last year, the NACUBO Tuition Discounting Study reported that 37.5 percent of respondents saw declining enrollments within their first-year class and total student body. This year, that number is up to 39.1 percent. The same study also found that four out of 10 study respondents felt that their current tuition discounting strategies are “either unsustainable or are sustainable for only the short-term.” This suggests that numerous private nonprofit schools are experiencing financial strain partially because of the money they spend on financial aid. Another reason why many colleges are struggling is because of the decreasing number of college graduates, which leads to decreasing numbers of of prospective students.
Disregarding the numbers, private colleges most likely will continue to offer more aid for numerous reasons.
Holding on to hope
Discounted tuition has the potential to increase total net tuition even if net tuition per student fails; however nothing is guaranteed. The hope is that discounted tuition will bring in more students, but the problem occurs when colleges continue to offer discounted tuition but don’t see an increase in enrollment. This would cause net revenue per student as well as total net revenue to decline.
Takeaway
Discounted tuition is a strategy that private colleges have been trying to perfect so that they can make more money. Unfortunately, the results aren’t guaranteed, so many private colleges are scrambling to find other ways to boost enrollment numbers.
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