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New Tuition Discounting Study Shows All-Time High Discount Rates and Net Revenue Losses

March 31, 2010

Results from the 2009 NACUBO Tuition Discounting Study show that the average tuition discount rate for first-time, full-time freshmen for Fall 2008 was 42 percent. The results are based on the 355 independent institutions that responded to the survey in November 2009. The greater demand for aid, due to the effects of the current economic crisis on families in an already highly competitive environment, led to an all-time high average tuition discount rate.

This result came at a high price for schools. Many independent institutions had to implement salary freezes, hiring freezes, staff reductions, and other cost-cutting measures. At the same time, net tuition revenue fell 2.5 percent from 2007 to 2008 due to an increase in grant aid awarded by institutions.

The percentage of first-time, full-time freshmen receiving institutional grants has also increased. On average, 82.3 percent of freshmen at the responding institutions in Fall 2008 received an institutionally funded grant award, slightly higher than the share in 2007 (81.7 percent) but a substantial increase from 78.8 percent in 2000. For students who received these grants, the reported average award covered more than half (53.5 percent) of the Fall 2008 tuition and fee "sticker" price, compared with 49.2 percent in 2007.

On average across all survey participants, 12 percent of institutional grant aid was reported as funded by endowment income. The study found a positive relationship between endowment levels and the percentage of aid funded by endowments; that is, the higher the endowment level, the higher the percentage of grant aid funded by endowment earnings.

The study also found that: about 36 percent of the institutional grant aid distributed by independent institutions in Fall 2008 was awarded based entirely on students' demonstrated financial need; 41.5 percent was awarded based entirely on non-need criteria (such as academic merit); and 22.5 percent was based on a combination of need- and non-need criteria. On average, about 58 percent of all institutional grants were awarded based at least partially on students' demonstrated financial need.

The full report on the 2009 NACUBO Tuition Discounting Study is now available for purchase on the NACUBO website.