Tuition Discounting: Is It a Good Idea?
Over the years, tuition discounting has emerged as a common practice. Though it’s a simple concept, its effects and influences are multifaceted. Colleges offer discounted tuition to some chosen students through scholarships and grant money, which let them attend at a cheaper rate than the actual price. Theoretically, such discounts should boost enrollment, thus making the university enjoy increased total tuition revenue on the whole. Thus, tuition discounting seems to be advantageous for all the concerned parties.
While the deserving students from a low-income background get access to an otherwise expensive college education, the colleges can fill their classes with the type of students they want and require. However, analysts have recently brought to light some prospective problems with discounted tuition, which is increasingly becoming the norm at universities. They have found the practice affecting the institution’s financial health.
Playing the Numbers Game
Universities run a risk by providing students with discounted tuition as they believe it’ll increase their enrollments. Contrary to their belief, if enrollments stay constant, or worse, decrease, discounted tuition can cause an overall loss of revenue. That happens because tuition discounts reduce the net tuition revenue per student, which means colleges must enroll more students to make the practice worthwhile.
Sadly, it often doesn’t happen as expected. Over time, institutions start losing money by offering steep discounts to students. Their losses escalate proportionally to the number of students they enroll under discounted tuition terms. After some time, these losses can really snowball, particularly if enrollments fail to meet the expectations.
Factors Affecting Discounted Tuition’s Financial Burden
All universities don’t function the same way and aren’t built the same. How one is affected by discounted tuition differs from the others. Some can survive the wave of this rapidly rising phenomenon much better than their counterparts. Schools that have substantial endowments already allocated for financial aid don’t need to make use of tuition discounting to the same level as colleges that aren’t so fortunate. These schools can offer grants to disadvantaged and deserving students without affecting their bottom-line significantly. In contrast, other schools have no alternative but to make up for the cost of discounted tuition out of their overall tuition revenue.
Additionally, schools with several enrollments from low-income and minority students have more access to Pell Grants. This makes it a lot easier for such schools to invite these students to attend without having a negative impact on the financial front. Unfortunately, schools with a higher annual cost of learning suffer because most of these students are easily frightened by their steep sticker prices.
Tuition discounting is among the multiple creative methods higher education institutions employ to deal with the escalating costs of college tuition. However, they may need to develop other effective solutions that aren’t as damaging as discounted tuition to their overall financial stability.