The Real Story Behind the Rising Cost of College

For years I have wanted to pop into a college freshmen English class and ask: What are you paying this year to attend this university?

“The annual NACUBO Tuition Discounting Study, reveals that the estimated average tuition-discount rate for first-time undergraduates at private colleges was 54.5 percent in the 2021-22 academic year. For all undergraduates, the average tuition-discount rate was 49 percent.”

So how would you begin to unpack the inequities that inherently exist with tuition discounting?

For my friends in enrollment management. You know how the discount game works. And you can stop reading. For the general public, I’d like to explain tuition discounting and financial aid leveraging. This topic doesn’t get enough scrutiny in the rising college tuition conversation.

So, What is Tuition Discounting?

College athletics is a great starting point. For the NAIA schools, and the NCAA DII and DIII institutions, student athletes comprise a large percentage of their enrollment. All schools can use their allotted athletic scholarship funds as they please within their appropriate divisional guidelines. Although the athletic division will determine the number of full-ride scholarships by sport, the individual school can decide on an award strategy. This may mean giving less $$ to more students, giving just a few full rides, no full rides, etc.

If you eliminated student athletes, many tier 3 colleges would lose 30% of their enrollment.

So, if you want to use a broad brush, it’s safe to assume that almost every student athlete is getting at least a small scholarship. Translation: Discounted tuition.

Now let’s talk about stacking awards. Here’s an example. Coach Smith has a soccer star she wants badly to recruit. Her scholarship dollars only go so far, and she has decided that she wants to award more athletes and spread her money around. But she really wants Jane Doe and knows she needs to sweeten her deal. So she stops into the admissions office (pretty sure this happened to Dr. Jean Norris when she was VP of Enrollment Management at an NAIA college). The coach pleads her case and grovels for admissions to give Jane a “leadership

award.” It’s a nebulous category and completely discretionary. The admissions director is on the fence and questions the ethics. But then the coach reminds her that she’s always at the open houses and willingly jumps in to help admissions whenever they need a faculty speaker, etc. So the admissions director caves in and now the student athlete has 2 scholarships. Her original athletic award and her new leadership award. That’s stacking.

What about shaping your class? Many colleges put a lot of effort into having the proper mix of students. And have goals around diversity, gender, academic ability, financial need, in-state/out-of-state, and domestic versus international. It’s not unusual to have a sophisticated matrix to guide the awards. Here’s what that might look like:

First generation, non-Caucasian, high academic achievement, female engineering student = $$$$

Caucasian, male, average academic ability, business student = $

International student, no financial need, medium academic ability = 0 (they can pay cash!)

Depending on the complexity of the matrix, you may have 20 or 30 cells. That means 20 or 30 scholarship strategies and awards. This is primarily institutional money and not federal financial aid. I don’t think anyone has ever questioned if it’s an endowed scholarship – which means those monies are on deposit in the college foundation and the college is allowed to
spend the interest.

But what if it’s a reduction in tuition? If you are a student or parent, you really don’t care what the source is. If the college offers to reduce your cost of attendance you are going to say yes.

The Real Problem with Discounting

So cut to the chase: If the average discount rate is 49% then some students are paying full freight, while others are paying nothing. Is it fair? Is it right? Can you even use ethical and higher education in the same sentence?

Not sure how I feel about this whole situation. Students with the ability to pay, and relatively low academic ability will pay full tuition. Students with less ability to pay, and with higher academic ability will be granted some kind of real or manufactured scholarship. As a result, they pay only a portion of published tuition.

Do All Colleges Discount?

No. If the college was accredited by the Accrediting Commission for Career Colleges and Schools (ACCSC) – one of the leading accrediting agencies for vocational schools, they would not be permitted to use a discount strategy at all. Every student would be charged the same. No exceptions.

Here’s a section below of the ACCSC Standards that clearly prohibits the type of discounting in play at traditional college and universities:

As a result, schools like Tulsa Welding School and Lincoln Tech don’t have a discount rate.

The Conclusion

Makes me think the evil for-profits as portrayed by many regulators, legislators (I’m talking to you Dick Durbin) and reporters aren’t so evil after all. In fact, I could argue that for-profit schools are more truthful, transparent, and ethical in their pricing policies than their private, not-for-profit counterparts.

Sources:

https://www.accsc.org/UploadedDocuments/standards%20and%20alerts/ACCSC-Standards-of-Accreditation-and-Bylaws-070122.pdf

https://www.chronicle.com/article/tuition-discount-rates-continued-to-climb-at-private-colleges