Tuition revenue per student continued to climb this year—by an estimated 5 percent at private colleges and 4 percent at public institutions—but tuition discounts grew as well, according to a report Moody’s Investors Service released on Wednesday.
The report, the third annual analysis of tuition revenue by Moody’s, is based on responses from 257 of the institutions whose creditworthiness Moody’s rates. It says that nearly 54 percent of the private colleges increased their discount levels between the fall of 2010 and the fall of 2011, and that at 22 percent of the institutions, the discount rate grew by more than 2 percent. But nearly a third of private colleges—typically, those with stronger reputations, the report says—reported lowering their discount rates.
More and more public institutions are following the private colleges’ lead on discounting, the report says, noting that discounts “are becoming increasingly important in attracting and retaining students in light of growing pricing sensitivity.” About 42 percent of public universities increased their discount rates this year, while 38 percent cut them, the survey found. The median discount rate at public institutions declined slightly from 2010 to 2011, however, dropping from 32.4 percent to 30.4 percent.
Moody’s says the median tuition revenue per student at private institutions is projected to grow at what it calls a “healthy” 5-percent rate, to $21,207. The projected rise of 4 percent at public colleges will bring the median for those institutions to $8,665. “Given continued constraints on state funding for higher education and the relatively low cost of public higher education, we expect public universities to continue to increase tuition at a healthy pace,” the report says.
The report also predicts that weaker private institutions—including those with “smaller enrollments,” regional markets, and less endowment revenue to devote to financial aid—will face “significant competition from lower-priced public higher-education alternatives” that will limit their ability to increase tuition revenue.
Moody’s notes that while enrollment remained steady at the institutions it surveyed, graduate and professional programs saw slight enrollment decreases this year. “While long-term demand for higher education remains strong, prolonged elevated unemployment and economic uncertainty have hampered historically more robust countercyclical enrollment trends” in such programs, the report concludes.
The report is for Moody’s subscribers only. Nonsubscribers may purchase a copy at the Moody’s Web site.
