The latest NACUBO survey of tuition discounting is more bad news, but not surprising news, for private higher education. Last year’s first year discount rate was almost 45% while this year’s rate is above 46%. In reality there is very little room left for additional discounting but nevertheless, I expect the discounting to continue and to increase. In my opinion, the upper limit is slightly above 50%. Therefore, if I am correct, this pattern has three to five years longer before we will have no choice but to compete on different grounds than maximum scholarships.
My expectation regarding continued discounting is based on knowing there are some good east coast institutions that did not meet their enrollment targets for this year, and in at least one case the cause was directly tied to not increasing the already very substantial discount rate by 1 or 2 percent more. It doesn’t involve rocket science to see that the discount rate will increase next year and thereby likely place other institutions at a disadvantage.
Discount rates cannot be viewed in isolation. The more money that is directed to discounting, the less money is available for other purposes. And ultimately, resources will be withdrawn from just those programs that may cost a little more but provide the distinction the school needs. All of this is basic economics. If you lower the real price, sales increase. And if you need to cut costs, discretionary cuts will always come before mandated costs.
There are no easy answers especially since none of us operate in a vacuum. Perhaps we should pursue a special voluntary guideline that would limit first year discount rates to no more than 50%. And let’s spend time perfecting other avenues of cooperation, collaboration, and competition that work to limit discount rate costs for all while recognizing the value of competition.