Tuition Discounts Rise Again, but Their Effectiveness Lags

Tuition discounting may be losing its effectiveness as a way of luring students to colleges, a survey of 400 private institutions by the National Association of College and University Business Officers has found.

The survey, conducted last fall, collected final data for the 2010-11 academic year and preliminary data for the current year. It found that institutional discount rates—the share of gross undergraduate tuition and fee revenue given back to students in scholarships, fellowships, and other grants—continued to rise, but in spite of big price breaks for students, 45 percent of institutions saw overall enrollment remain flat or drop. And more than half—53.2 percent—saw a decline or no change in the number of freshmen they enrolled.

In better news for the colleges, however, the survey found that a variety of factors had allowed net tuition revenue to increase 5.4 percent between 2009-10 and 2010-11—a big improvement over anemic performances in the previous two years. But institutions responding to the survey said they expected net revenue to increase by only 3 percent in the current year.

The average institutional discount rate for freshmen among the colleges surveyed rose to 42 percent in 2010-11 from 41.6 percent the year before, the survey found, and is predicted to hit 42.8 percent this year. The discount rate for all undergraduates climbed to 36.4 percent last year from 36.1 percent in 2009-10. It is forecast to reach 37.2 percent in the current year.

Meanwhile, the average grant to first-year students reached 51 percent of the tuition-and-fee “sticker price” in the current academic year, up from 49.8 percent, and 85.5 percent of those students got grants, down from 85.7 percent in 2010-11.

A report on the survey is available from the association for $55 for members and $200 for nonmembers.