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Higher Education Bubble
Tuition Discounts at Private Colleges Are at Record High

Private colleges and universities take a lot of flak for their sky-high tuition rates, but they’re also knocking quite a lot off those steep sticker prices. According to Inside Higher Ed, the National Association of College and University Business Officers has found that these schools make only 54 cents for every dollar of tuition. More:

The “high tuition, high discount” business model is often confusing to students and parents, but it’s how things are done at most private colleges: the colleges charge high prices and then offer students they want huge discounts. The discount comes in the form of need-based aid for low-income students and “merit” aid for students with characteristics that make them desirable to a college. At wealthy colleges, endowments may have actual funds to replace lost tuition revenue, but most colleges are just waiving the chance of getting more.

This so-called discount rate – the college’s aid dollars as a percentage of tuition and fees – is again at an all-time high.

In fall 2013, the average discount rate was 46.4 percent for first-time, full-time freshmen, according to NACUBO’s survey of 401 private nonprofit colleges. The discount rate is up from 44.8 percent in 2012 as 57 percent of colleges in the survey reported enrollment declines, in part due to growing concern about college costs

And then there’s this:

[…] in inflation-adjusted dollars, the net revenue per student at private colleges has not grown at all in the past 13 years. (That inflation adjustment is made using the Higher Education Price Index, not the Consumer Price Index, which is used to track inflation in the broader economy.)

If you are looking for a sign of the inevitable shake-up of the higher education system, look no further.




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  • Kevin

    Umm… If the Higher Education Price Index is indexed to the price paid for higher education, then prices for higher education that are deflated by this index should not change, no?

    • Curious Mayhem

      The general inflation index includes a basket of many things, of which higher ed is one small part. The higher ed index includes just higher ed. Once you correct the latter for the former, you get an accurate picture of higher ed costs relative to prices in general across the whole economy.

      The higher ed index adjusts for costs across the higher ed complex. The higher ed revenues are then compared to those costs.

  • Duperray

    Any trick to catch money in US is the real local religion, whoever is made poor ! Education is the basis of a country’s future and those money-sharks do not hesitate to grad money even if some exceptional young brains (often from poor families) are eliminated…!
    To be blamed.

  • William Ockham

    The internal workings of our prominent private colleges are run by and for the benefit of the faculty and a small number of administrators. With almost 50% of the tuition now coming from scholarships to recipients determined by the administration and faculty they now also determine the student body. These guys run everything.

  • bittman

    If we could get the government out of the business, prices would go down because the colleges and universities could eliminate a lot of staff jobs essential to ensure compliance and reporting to the USA government.

  • Alarms & Discursions

    The discount rate speaks to a factor that very few people who notice the rate ever bother to mention, which is that it’s simply another way that the Left redistributes wealth. If a college needs 15k per student in tuition, it will charge some 30K and others nothing… essentially forcing students from rich families pay the tuition for students from poor families.

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