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What does this term “tuition discounting” really mean?

July 27, 2020

According to the association of government boards of universities and colleges, tuition discounting is defined as “the process by which the institution offsets its published tuition price (sticker price) with institutional grant aid for enrolling students”.  Since the students are not paying the full sticker price, tuition is then discounted. 

Unfortunately, that’s not a really helpful definition when it comes to the reality of paying for college. Tuition discounting is also the result of this practice of charging more for tuition to give the perception of a school having a high-quality product, then offering to the students that are the most desirable large discounts in the form of what they might label as merit aid. 

Not every college does this. When we look at some of the higher echelon private colleges, nearly all of them will engage solely in the practice of awarding need-based aid.  However, in today’s competitive economic environment, it’s not uncommon for the rest of the private school universe and some state universities to engage in this practice. 

How big of discount are we talking about? The average discount rate for first time full-time freshman at private nonprofit for your institutions is in excess of 50%, according to a new survey by the National Association of College and University Business Officers. 

Why is it that colleges do this?  Why don’t they just lower the tuition for everyone and illuminate the need for tuition discounting?  Well, some colleges actually have started doing just that. But others don’t because many have discovered that families preferred the high cost high discount approach.   

From a purely sales point of view, they have found it’s more appealing to the consumer to get a discount off the retail price, while labeling the discount as a reward for good academic performance.  They have found that parents are more than willing to write a check for the difference when it is presented to them in that fashion. 

If you want to get a sense of how much of a discount money most students are receiving, go to the website called College Navigator, from the National Center For Education Statistics. Look in the net price section for your chosen college, and you will see statistics of what people in various income bands are actually paying as a net price.