Capture Blog

Are Discounting Strategies Sustainable Long Term?

The National Association of College and University Business Officers (NACUBO) released its 2016 Tuition Discounting Study last month. The annual study, which surveys scholarship and grant awarding at universities and how such awarding affects tuition revenue, is a measuring stick of financial health in higher education.

The biggest takeaway from the latest study is that the tuition discount rate for first-time, full-time students crept ever closer to 50 percent, reaching an estimated 49.1 percent in 2016–2017. That is up from 48 percent a year ago, and up from 38 percent only a decade ago.

Essentially, the report is telling us that a) more students are getting aid, b) grants are getting larger, c) competition is getting fiercer, and d) it’s happening in an unabated fashion.

While this increase re-enforces the belief by most that the trajectory of higher education recruitment is unsustainable, there was a statistic from the latest NACUBO study that Thom Golden, Capture Higher Ed vice president of data science, found even more troubling — that just 44 percent of the university business officers surveyed said their discounting strategies were sustainable in the long term.

“I just find that unreal,” Golden said during a recent episode of The WeightList, the podcast he hosts with Brad Weiner, Capture director of data science. “I’m gob smacked by that. Economically, that doesn’t make much sense to me … If our costs as an overall higher education system keep going up well beyond that of CPI [Consumer Price Index], and we keep discounting more and more, this cannot just go on forever.”

He added that the trend is further complicated by the next major wave in university pricing — tuition-free public institutions and free community colleges. He’s referring to plans like New York’s recently passed Excelsior Scholarship, which offers free tuition at all the colleges in the State University of New York (SUNY) system for in-state students whose families earn $100,000 or less. By 2019, that number will rise to $125,000.

Also, lawmakers in Tennessee recently approved legislation to expand the Tennessee Promise Program, making the state the first in the country to offer free community college for all adults.

“We talk about the volatility in the system,” Golden said. “It’s only going to get worse.”

By Kevin Hyde, Content Writer, Capture Higher Ed

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