On May 15, 2017, the National Association of Colleges and University Business Officers (NACUBO) released its annual Tuition Discounting Study (TDS) for 2016. According to the study, the tuition discount rate for private institutions of higher education surpassed all previous predictions, rising to an estimated 49.1% for the 2016-17 academic year for first-time full-time students, increasing from a previous high of 48% in the prior year. Since 2009, the average tuition discount rate has increased not only for students of private institutions, but for all first-time full-time students at a staggering rate of nearly 10% over the last eight years. Further examination of the NACUBO study yielded insight into multiple factors driving the increase, contributing to what has become a complex environment in which the tuition discount rate is unlikely to fall.
The NACUBO Tuition Discounting Study released for 2016 resulted in predictions consistent with the pattern of rising rates that has been seen over the last decade. According to the results of the study, the average institutional tuition discount rate for all undergraduate students (compared to first-time full-time students) increased to an estimated 44.2 %, which constitutes an all-time record high compared to the previous high of 43% for the same group of students in the prior year. The tuition discount rate itself is calculated in terms of grants and scholarship dollars as a percentage of gross tuition and fees, meaning that for 2016, 44.2% of the tuition billed to students will be designated as financial aid and will not factored into net tuition revenue by institutions for the year. Essentially, over 40% of the tuition billed by institutions never truly becomes income because it continues to be supplemented by the grants and scholarship support extended by such institutions. NACUBO continued by asserting that the observed tuition discount rates are even higher among small private institutions, noting a tuition discount rate of 45.1% for private university undergraduates—nearly 1% above the overall institutional average. As such, institutions of all types are seeing similar trends in tuition discounting.
According to NACUBO, it is not an unrealistic expectation that the tuition discount rates for first-time full-time students may soon rise to surpass an average of 50% for all institutions of higher education. This trend continues to be of importance, because as the average tuition discount rate continues to grow, it means that net revenue also continues to fall, and that institutions as a result will face even greater challenges of sustainability going forward. Consequently, the decisions of institutions and strategic planning will become increasingly important when it comes to their sustainability and overall success within higher education as a whole. As the strategies and experience of colleges and universities continues to develop and improve, more tools and new methods by which to combat the rise in tuition discounting will become available to institutions in addressing the challenges they face. Furthermore, despite the prediction that tuition discount rates will continue to increase, institutions of higher education are collectively finding and managing ways to mitigate this increase every day, including changing the ways financial aid is granted and finding new revenue streams to fund operations.
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