The latest on tuition discounting from NACUBO

NACUBO has just published its 2009 Tuition Discount Study.  It contains further sobering information regarding difficulties in the current cost/price model of higher education:

After several years of stability, the results from the NACUBO 2009 TDS show that the average tuition discount rate for first-time, full-time freshmen has jumped dramatically. The average discount rate increased from 39 percent in Fall 2007 to 42 percent in Fall 2008. 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.  Due in part to the increases in tuition discount rates and institutional grant awards as a percentage of tuition and fees, net tuition revenue fell 2 percent from 2007 to 2008.

Preliminary results for 2009 are also reported.  Average discount rate took another jump for Fall 2009, going from 2008’s 41.8% to 2009’s 42.3%. The percentage of freshmen receiving financial aid also continued its multi -year march upward, having gone from 78.8% in 2000 to 82.3% in 2008, jumping to 84.3% in 2009. Average award stayed flat in 2009 at the very impressive value of 53.5% of tuition.  The good news seems to be that net tuition revenue rose from 2008 to 2009 by 1.9%. 

But how did net tuition go up when the discount rate went up and the number of freshmen getting grants went up? Simple.  Raise tuition a really large amount.  Indeed, average tuition was raised 6.6% above inflation going from 2008 to 2009! (see: Perspectives on the elephant of college pricing. ) So the really bad news is that simply increasing tuition 2%-3% above inflation as has been the practice for the past several decades is not sufficient to keep the cost/price model in balance.  The growth in discount rate and in percentage of freshmen getting aid grants has upset the balance.  The $64 question is whether this growth is a short-term anomaly produced by the current unusually bad economic conditions, or is the new normal resulting from the 3 decades of higher-than-inflation growth of tuition that has left more and more families financially stretched to the limit.

Any bets?

 

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