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Colleges Cut Financial Aid, Students Win?


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]

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  • rheddles

    Sounds like Every Day Low Prices with a few Rollbacks thrown in.

  • Kevin

    I deeply dislike price disrcimination based on parental status, especially for public institutions. Who your parents are ought to have no effect on how you are treated by the government.

  • Jacksonian_Libertarian

    As demand falls Colleges will be forced to lower prices to compete for the remaining students. Cheap online credentialed courses are now taking an ever increasing bite out of College tuition income. Well endowed Colleges will be able to ignore reality for a while, but even they will soon feel the competition.

  • Jane the Actuary

    50% of tuition going to financial aid? Wow — that’s huge, larger than I had imagined. And what’s especially galling is when columnists and reporters compare this to the difference between sticker price and the final cost of a car, as if a student could negotiate their way to a better deal, instead of being wholly dependent on the college, and with students of upper-middle-class/diligently saving parents obliged to pay full price (and thus being required to subsidize their peers).
    (Ever notice how student loan figures utterly ignore the loans their parents take on? And a student whose parents won’t pay their “expected family contribution” are doubly SOL.)

  • Gideon Gonzales

    This is also a great news that CSN president says financial aid errors are being fixed.
    Learn more about Financial Aid for College. You can attend this FREE WEBINAR

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