Data gathered from 401 private, nonprofit four-year colleges and universities participating in the 2013 NACUBO Tuition Discounting Study (TDS) indicate the tuition discount rate for first-time, full-time freshmen grew slightly to 44.8 percent in the 2012-13 academic year and is estimated to reach 46.4 percent in 2013-14. The figures represent a continual upswing in tuition discount rate and are the highest recorded in the history of the study. (See chart below.)
The tuition discount rate -measured as institutional grant dollars as a share of gross tuition and fee revenue -fundamentally quantifies how much of the gross tuition and fee revenue is foregone by an institution.
"The data indicate that private institutions are continuing to respond to a dynamic student recruitment environment. Changing student demographics, increased competition and cost sensitivity are factors which drive the trend in tuition discounting," notes
Under tuition discounting strategies, colleges and universities use their institutional grants to aid students who might otherwise be unable or unwilling to pay the full tuition and fee "sticker" price to attend a particular college or university. Many four-year private, nonprofit colleges and universities use tuition discounting as a strategy to increase their undergraduate enrollments.
Competition for incoming freshmen has put pressure on a number of colleges and universities to become more strategic with their aid packages. From fall 2012 to fall 2013, 17.2 percent of institutions participating in the study experienced a loss of more than 10 percent in their freshmen enrollment.
Chief Business Officers (CBOs) at institutions who have lost freshmen enrollment over the last four years (from fall 2010 to fall 2013) cite price sensitivity as one reason for falling enrollment. Other perceived reasons include increased competition from private and public institutions, changing demographics, and a decrease in the 18- to 24-year-old population. CBOs at institutions with gains in freshmen enrollment over the same time frame cite improved recruitment and/or marketing strategies, growing demand for their institutions, and increases in institutional financial aid as reasons for the growth.
Other Key Findings:
According to the NACUBO study, on average, 87.7 percent of freshmen received an institutional grant in academic year 2012-13, and that figure is projected to grow to 88.9 percent in 2013-14. For freshman institutional grant recipients in fall 2013, the average grant is estimated to cover 53.5 percent of tuition and fees. The study also shows that 80.4 percent of grant dollars awarded by private, four-year institutions met students' financial need in 2012-13.
"With four out of
Net Tuition Revenue and Inflation's Impact
Because of high institutional discount rates and large percentages of students receiving grants that cover a substantial portion of tuition and fees, average growth in net tuition revenue per freshman has been limited in recent years, growing 3.4 percent in 2012 and expected to grow only 1.1 percent in 2013. But when adjusted for inflation, these year-to-year gains shrink to 1.7 percent in 2012 and -0.5 percent estimated for 2013. (See chart below.)
In fact, over the last 13 years, institutions have had flat net tuition revenue (0.4%), demonstrating that increased gross tuition and fee revenue has been given back to students in the form of aid, rather than put back into the institution.
The 2013 NACUBO Tuition Discounting Study is available for purchase on the NACUBO Web site (http://www.nacubo.org/Products/Online_Research_Products.html).
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