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Many private colleges offer tuition discounts

Posted by Leslie Anderson  December 3, 2013 12:19 PM

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(c.2013 Houston Chronicle)

Selecting a college these days is a lot like buying a car. The sticker price parents and students see in the brochure often isn’t what they'll pay.

Many public and private colleges and universities use tuition discounts to woo students who are unable or unwilling to pay the full price. These discounts come in the form of institutional grants and scholarships that offset published tuition and fees. As a result, students at the same institution can end up paying different amounts depending on their financial situation, academic standing or athletic ability.

College affordability is just one of the motives behind discounting, which began with private schools in the 1970s. Depending on their mission, some institutions use it to attract specific students, to shape their incoming class in terms of demographics, or to boost enrollment.

''We discount because we have a commitment to affordability and to diversity in income and background,’’ said Kathy Collins, Rice’s vice president of finance. ‘‘Students may think we’re too expensive, when we’re less expensive than a state school because of how generous we are.’’

Private institutions like Rice generally are more generous with tuition discounts than public ones. Last year, the average tuition discount rate for full-time freshmen at private schools climbed to an all-time high of 45 percent, marking the sixth consecutive annual rate increase, according to a survey released earlier this year by the National Association of College and University Business Officers.

The discount rate is slightly higher at private institutions in the Houston area. At Rice University, it’s about 48 percent, while the University of St. Thomas and Houston Baptist University are at roughly 50 percent. The rates represent slight increases over last year.

At Rice, for example, the sticker price this year is $38,941. When the average tuition discount is applied, a student would pay $18,691.

As institutional aid has grown over the past five years, increases in the average published tuition and fee rates at private institutions have slowed. This year, private institutions had the lowest published tuition and fee rate increase, 3.6 percent, in four decades, according to a survey by the National Association of Independent Colleges and Universities.

However, net prices at private schools have gone up about 8 percent this year, to an estimated $12,460 from $11,550 in 2011-12, according to the 2013 Trends in College Pricing study by the College Board.

Public institutions have experienced a similar trend. This year, public schools posted the smallest published price increase - 2.9 percent - in three decades, the College Board study said.

The net price, however, has increased by 60 percent - from $1,940 in 2009-10 to about $3,120 as federal aid has declined. The study used different time frames for public and private institutions.

Rice, a competitive school, awards institutional aid to 58 percent of its freshmen. The university has a need-blind admission policy, meaning it doesn’t consider an applicant’s financial situation for admission.

Rice officials determine what the family and student can contribute, then subtract that amount from the full cost of attendance to calculate the unmet need. The university covers 100 percent of the unmet need with a combination of institutional grant aid, federal and state aid, subsidized loans and work-study (loans and work study are not included in tuition discounts).

For families with incomes less than $80,000, the university provides institutional grants rather than loans. This year, about 80 percent of Rice freshmen with family incomes less than $80,000 received institutional aid.

But many independent institutions also see tuition discounts as a way to stay competitive, particularly with public universities, which have considerably lower tuition.

Houston Baptist University, for example, is a fairly diverse campus with a large number of first-generation and low-income students, many of whom might have chosen to attend a less expensive public school if the private university had not put its best offer on the table, said James Steen, vice president of enrollment management.

''We want to give them a chance to have the opportunity to come to (Houston Baptist University) to fulfill their desire to go to college,’’ Steen said. ‘‘We have to put a competitive offer out there.’’

The university offers discounts to students at all academic levels. Academic high-achievers receive the best discounts, while average students receive less generous packages. In addition, the students receive a percentage of institutional aid based on financial need. About 98 percent of its freshmen receive institutional aid based on need, merit or both.

At the University of St. Thomas, designated by the federal government as a Hispanic-serving institution, about 95 percent of this year’s freshman class received tuition discounts, said Vickie Alleman, vice president of enrollment management. The university uses discounts to help students afford college and to attract top students, she said.

Managing the tuition discount rate is complicated and includes variables including family income and enrollment. Since the recession, family incomes, including those at the top, haven’t kept pace with inflation, and enrollments have grown rapidly except for a slight decline between fall 2011 and 2012, said Kathy Payea, a policy analyst with the College Board.

At the same time, more parents and students are expecting a price break and are using tuition discounts to determine where they'll go to school, college officials said.
“It’s a precarious time for institutions,’’ Payea said.

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About College Bound

College Bound offers news and advice on preparing, applying, and ultimately heading off to college. Send your ideas and questions to Leslie.Anderson@globe.com. More »
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