Tuition Discounting at Small, Private, Baccalaureate Institutions: Reaching a Point of No Return?

Abstract

This paper describes relationships between tuition discounting (TD), net tuition revenue, and other institutional characteristics at four-year, liberal arts institutions. TD, a practice whereby institutional grants are used to subsidize a student’s educational expense, has become a common practice at four-year institutions. TDs impact on enrollments, financial aid, and budgets continues to increase, raising concerns about the longterm sustainability of the practice. Drawing upon Breneman’s (1994) economic theory of four-year private institutions, this research examined trends in student characteristics, enrollment, institutional grants, and net tuition revenue (NTR) and the relationship between TD practices NTR. Analyzing panel data of four-year, small, liberal arts colleges from 2003-2012, results illustrated that over the 10-year period, enrollment, tuition, and number and amount of institutional grant aid increased; average yield and SAT average score decreased. NTR has increased but lags behind increases in tuition and gross tuition revenue. Additionally, there is a point at which TD practices do not generate additional revenue. The results highlight the importance of financial aid officers and institutional leaders to examine the effectiveness of their current tuition discounting practices, the demand for their institution, and strategies for improving enrollment and retention. Disciplines Educational Assessment, Evaluation, and Research | Educational Methods | Educational Technology | Education Economics | Higher Education Comments This article is published as Behaunek, Luke and Gansemer-Topf, Ann M. (2019) "Tuition Discounting at Small, Private, Baccalaureate Institutions: Reaching a Point of No Return?," Journal of Student Financial Aid: Vol. 48 : Iss. 3 , Article 3. Posted with permission. This article is available at Iowa State University Digital Repository: https://lib.dr.iastate.edu/edu_pubs/130