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Tuition Discounts Are Driving Up the Cost of College Says New Report

September 17, 2014

Tuition discounting may be diminishing access for underserved students. That's the conclusion of The Progress of Education Reform: A Hidden Cause of Rising Tuition, a new report by the Education Commission of the States. ECS supports a viewpoint that tuition discounting limits affordability by driving college costs upward and awarding smaller discounts to more students with low financial need instead of granting one large award to a single student with high financial need because institutions generate greater net tuition revenue from making several smaller awards.

Following NACUBO tuition discounting definitions and using data from the National Center for Higher Education Management Systems (NCHEMS), the report found the average tuition discount rate for first-time students at public institutions increased from 21 percent in 2002-03 to 27 percent by 2011-12. There is great variety in tuition discount rates by type of public institutions. Public two-year colleges' average discount rate in 2011-12 was 5.92 percent while public research institutions had an average discount rate of 32.89 percent.

By contrast, the 2013 NACUBO Tuition Discounting Study which examines private, nonprofit institutions shows that the average discount rate from 2002-03 to 2011-12 for first-time full-time freshmen spanned 38.4 percent to 44.3 percent, a 5.9 percentage point increase which is nearly equivalent to the growth in the discount rates calculated by ECS for the same time period. This statistic demonstrates that private, nonprofit and public institutions increased their respective discount rates by the same proportion over the decade which may suggest that both sectors are dealing with similar affordability and enrollment management environments.

The ECS report points to four states (New York, Colorado, Virginia and Iowa) that have frozen tuition or placed caps on tuition growth each year as one way to limit the growth of tuition discounting practices.

Details about the NCHEMS data used to calculate the public institutions' discount rates were not provided.

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Natalie Pullaro Davis
Manager, Research and Policy Analysis
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