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Tuition Discounting Rates Hit a New Record High

May 15, 2017

The latest edition of NACUBO’s study on tuition discounting shows that private nonprofit colleges and universities continue to offer substantial discounts to most students they enroll as growth net tuition revenue growth slows further.

The 2016 NACUBO Tuition Discounting Study (TDS) measures the institutional discount rates and other indicators of institutional grant awards to undergraduates who attend four-year, private nonprofit higher education institutions in the United States. Results of the 2016 TDS are based on survey responses from 411 independent colleges and universities that were members of NACUBO as of September 2016.  The latest survey collected final institutional grant awards and other data for academic year 2015-16, as of fall 2015, and preliminary estimates for 2016-17, as of fall 2016.

The 2016 TDS survey results show that the average institutional tuition discount rate–defined as total institutional grant dollars awarded to undergraduates as a percentage of gross tuition and fee revenue–continues to rise.  The average institutional discount rate for first-time, full-time freshmen reached 48 percent in 2015-16 and an estimated 49.1 percent in 2016-17–the highest level recorded in the TDS history. The rising discount rate means nearly half the tuition and fee revenue that private nonprofit colleges collected from first-time freshmen in 2016-17 went to awarding institution-based financial aid to that cohort of students. The estimated institutional discount rate for all undergraduates in 2016-17 rose to 44.2 percent, also a new all-time high. 

Institutional discount rates have risen, in part, because a greater share of students have received institutional grant awards, and the average grant award covers a larger share of the average tuition price. About 88 percent of first-time freshmen received institutional grants in 2016-17, and the average grant award covered roughly 56.3 percent of the tuition and fee list price.

These rising institutional tuition discount rates have led to much slower growth in net tuition revenue. The average growth in net tuition revenue per first-time, full-time freshmen is expected to be just 0.4 percent in 2016-17, compared with 1.5 percent a year earlier.  Inflation, as measured by the Higher Education Price Index (HEPI), increased by 1.8 percent in FY16; thus, in real (inflation-adjusted) value, net tuition revenue appears to be declining at most private nonprofit institutions that participated in the TDS.

Given the slower growth in net tuition revenue, the TDS survey asked participants to describe the strategies their institutions used or implemented in FY16 to increase net tuition revenue. A majority of institutions focused on recruitment strategies (71 percent), retention strategies (69 percent), and/or financial aid strategies (63 percent).

A press release on the study is available, and the final report may be purchased from the NACUBO online bookstore.

Contact

Ken Redd
Director, Research and Policy Analysis
202.861.2527
E-mail

Lindsay Wayt
Assistant Director, Research and Policy Analysis
202.861.2531
E-mail