College applicants should may notice their financial aid packets getting a bit thinner this year. The Wall Street Journal reports that a number of colleges are cutting both tuition and financial aid in an effort to attract cost-sensitive students and break their dependence on financial aid and scholarships. Effectively, these colleges are gambling that they can keep making a profit with lower tuition by attracting students who are prepared for the financial commitment they are making when they apply:
Published tuition rates have soared in the last decade, but only a small percentage of families actually pays full freight. Between grants to needy students and merit scholarships to entice other desirable candidates, schools these days are giving back nearly 50% of gross tuition revenue in the form of aid and awards, according to the National Association of College and University Business Officers.Such discounting has become so widespread that many small, private colleges say they are stuck in a vicious cycle: They won’t meet enrollment goals if they charge full price, even to affluent families, but they can’t afford to continue cutting everyone a deal.
At the moment, the number of schools doing this is still small (less than 10), and tuition overall continues to rise. Many other schools are wary of lowering tuition for fear that students associate high tuition with greater quality.But this news, combined with the recent slowdown in college enrollment, could paradoxically be good for students in the long run. The fact that colleges are cutting back on both aid and tuition suggests that some institutions are finally waking up to just how unsustainable the current arrangement is, and are looking for ways to compete with each other on price rather than on amenities. These may be small steps, but they’re in the right direction.[College quad image courtesy of Shutterstock]