While you're still feeling the euphoria of a desired college offering admission to your child, opening up the financial aid letter can be a sobering experience.
So imagine the excitement when you open that letter to find out that your child received the Deans scholarship or the Presidential scholarship, and their “stretch” college was ONLY going to cost $50,000 a year instead of $80,000 because of that scholarship!
Financially, you may have no business at all spending $50,000 plus per year on college for your child. You might be lucky to afford $20,000. But this is their top choice school. This could be the ticket to a wonderful future for your child. AND you’re getting a 35% discount!!! Plus the college clearly recognized what a desirable student your child is, otherwise, they wouldn't have offered them such a big scholarship!
Certainly there are many colleges that reward strong high school academics. But there are also many colleges that use this methodology above to market what they call a tuition discount. Many colleges have embraced this high retail/ high discount model as a way of marketing to families.
Here's the reasoning behind it. Colleges recognize that we equate price with quality. They know that we look at a college with a $80,000 to $90,000 retail price and make the assumption that it must be a high-quality institution. Then, if your child is offered acceptance along with a generous financial aid package, sometimes wrapped in the big bow of a glamorous name of an exclusive scholarship, parents and students are more likely to take the bait.
These discounts are usually structured with some contingency of maintaining a grade point average above a certain level such as 3.0. That furthers the perception of it being tied into good academics in the past. By using websites like www.collegedata.com, you can get an idea of the prevalence of these kind of price reductions in advance.
How big are these reductions typically? In the 2022-2023 academic year, the average tuition discount for schools that engage in this was 56.2%![1] Definitely enough to get your attention!
What's the moral of this story? Have a strategy and plan in advance. Know what it is you can realistically spend and/or borrow. Communicate that with your student so that they have realistic expectations as well. That way when these discounts come along, you'll have a way of measuring whether it's enough of a discount to make a difference.
[1]https://www.nasfaa.org/newsitem/30555/Average_Tuition_Discounting_Rates_at_Private_Institutions_Hit_New_Record_High_NACUBO_Report_Finds
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