Published by Inside Higher Ed
…
Why those well-heeled universities would choose to discount tuition is likely a mix of altruism and pressure from students.
Colleges that have traditionally sold a residential college experience are recognizing they're offering something different this year, said Craig Goebel, a partner at Art & Science Group, a higher ed consulting firm.
More importantly, Goebel said, students are saying the experience is different from what they thought they were paying for.
Research from Art & Science Group found that two-thirds of prospective four-year college students said they expected to pay much less for online instruction.
In some cases, students have also taken those demands to colleges directly.
…
Colleges also are recognizing families' reduced ability to pay. An Art & Science study found in April that 52 percent of prospective four-year students had at least one parent who lost a job during the pandemic.
David Strauss, a partner at Art & Science, said at one college he has been in touch with, "the number of admitted applicants appealing their aid awards this year is three times what it was last year."
…
Tuition revenue largely goes toward instruction, he said, which pays the same professors to teach the same curriculum. Institutions also have increased costs due to the pandemic, such as those associated with building and supporting online infrastructure or enhanced sanitizing for students and staff members on campus.
Strauss said that addressing the crisis with more generous financial aid rather than tuition discounts has been the more common approach, and in the grand scope, tuition discounts remain mostly limited.
As for why 10 percent has been a common discount choice, Strauss and Goebel said colleges are likely following one another with little empirical evidence to suggest 10 percent is an optimal choice.
How tuition discounts will affect individual students and their families depends on circumstances, but the biggest beneficiaries are likely to be wealthier families who pay full tuition, Goebel and Strauss said. Those institutions discounting tuition have relatively high shares of families paying full price.
"When you reduce the cost of something, you are also therefore reducing the demonstrated need, and therefore probably also reducing the award in most cases," Strauss said.
Students who are receiving significant financial aid would then not likely see a full 10 percent decrease in their personal costs.
Looking Forward
Downward pressure on tuition was apparent before the crisis, with the pandemic only tightening an already existing squeeze on price.
"The crisis will pass and institutions are going to need to look ahead to think about how they should be pricing themselves in a more steady-state future. They're going to need to think about how to compete better in a future post-COVID-19," Strauss said.
Net tuition revenue, the amount colleges take in after discounting, has remained flat over recent years, research has shown. Demographic and economic changes, such as a declining number of American high school graduates and stagnant household incomes, have joined with public criticism about the value of a college degree to put significant pressures on institutions around price and competition for students.
"Those things were getting worse before this ever hit," said Strauss. "After this eases, those challenges will be worse still, not better."