Discounting and Access

By Deborah Frankle, Research Analyst Tuition discounting is the practice of using institutional aid to adjust tuition levels to best match what students and families are willing to pay, a widespread trend that is tracked by annual reports from the College Board. We recently used publicly-available federal data to get a sense of the phenomenon at private four-year institutions, and were surprised to find that almost half of private, four-year institutions with at least 1,000 students provide discounts to 90% or more of their students. Four out of five colleges (83%) provided discounts to at least half of their students. In many cases, the average discount was quite large. What does this mean? Actual discounting strategies vary dramatically between colleges, and the numbers above do not distinguish between need-based and merit-based aid. Some colleges use their institutional aid to help meet the financial need of low-income students, increasing access; others use it to attract students with less or no need who serve to maximize the prestige of the institution. Because we cannot distinguish between pricing and aid strategies at individual colleges, we cannot say for sure. But one recent analysis suggests that the overall picture is troubling: institutional aid, a larger source of financial aid than state and federal aid combined, goes to higher-income students at rates far exceeding those of federal and state aid. For dependent students, 46% of institutional need-based grant funding went to those with family income above the median, compared to 3% of federal aid. Why is this interesting? These issues bring up a number of questions: • When institutional aid ($10 billion) far outweighs federal and state aid combined ($7 billion), what does it mean for college access that institutional aid tilts to those with higher incomes? (NPSAS, dependent students only) • What does 'need-based' aid mean when it’s almost evenly distributed across all income levels? • What is the point of tuition increases when almost all students receive a discount? Does the "sticker shock" of high tuition scare low-income students away before they learn about available discounts? • Should detailed institution-level data on discounting practices be made public? Other resources on this topic: Tuition Discounting, Not Just a Private College Practice, College Board Tuition Discounting and Prudent Enrollment Management, Association of Governing Boards

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