Private college net tuition revenue from freshmen fell in 2021-22, study finds


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Diving Brief:

  • According to the National Association of College and University Business Officers, tuition discount rates for full-time freshmen attending private, nonprofit colleges rose 2.1 percentage points to 54, 5% on average in 2021-2022, a new record.
  • Average tuition discount rates also rose for all undergraduate students attending private nonprofits, rising 1.4 percentage points to 49 percent, according to an annual NACUBO study released Thursday. This measure also reached its highest mark on record.
  • Net undergraduate tuition revenue fell for only the second time in 10 years, with colleges that are not admissions-selective struggling the most.

Overview of the dive:

Colleges have long used grants, scholarships, and bursaries to entice students to enroll or help them with the cost of a college education. The rates at which they discount tuition are closely watched in light of concerns about the cost and value of a college education.

Discount rates are also particularly important to the business model of private, not-for-profit colleges, most of which depend on tuition for the majority of their revenue. NACUBO’s study is based on responses from 359 nonprofit colleges, with an average enrollment of 2,788 undergraduate students.

The trends seen among private institutions may be important for higher education more broadly, said Ken Redd, senior director of research and policy analysis at NACUBO.

“Even in public institutions, we know cuts are happening,” Redd said. “Our study indicates certain trends which, although we focus on private universities, are an indicator of trends occurring not only in higher education, but in society in general.”

More than eight out of ten undergraduate students who participated in the NACUBO study received aid. This widespread reduction, combined with rising discount rates, is putting increasing pressure on the tuition revenue that institutions actually collect, Redd said.

According to the study, net tuition and tuition revenue for new undergraduate students fell 2.3% before adjusting for inflation in 2021-22. It is only the second time in a decade that the measure has declined year over year, far exceeding a 0.8% drop in 2017-18.

Adjust for inflation, and revenue net of tuition and fees per undergraduate fell 3.2%, according to NACUBO. For all undergraduates, net tuition increased by 0.6% after inflation.

Net tuition revenue per undergraduate student is down 2% from 2017-18, after adjusting for inflation.

Highly selective colleges tend to offer lower discounts on their published tuition prices than colleges that admit a large portion of their applicants, according to analysis that is new in this year’s study. It defined highly selective institutions as accepting less than 51% of applicants. Moderately selective colleges admitted between 51% and 74.9%, and low-selective institutions admitted 75% or more.

The median undergraduate first-time discount rate for highly selective institutions was 44.8% in 2021-22. For moderately selective institutions, the median discount rate was 60.2%. It was 58.6% for less selective establishments.

Highly selective institutions saw 2.6% more first-time net undergraduate tuition in 2021-22 than in 2020-21. Moderately selective institutions saw the net tuition measure drop by 4.8%, and low-selective institutions saw a 7.2% drop.

“We don’t like to talk about this so much in higher education,” Redd said. “The schools that struggle the most are the schools with the least resources, and the schools that still do well are the large research universities that tend to have more competitive admissions criteria.”

Tuition reduction does not always mean a loss of income. Institutions may fund grants and scholarships through other sources such as endowment expenditures or donations. But the report’s data suggests that much of the tuition reduction for small private colleges is being fueled by institutions that tap reserves or simply waive some tuition for students — without ever collecting the revenue it does. would represent.

Only 4.9% of institutional aid came from planned giving or fundraising in 2020-21, NACUBO found. Only 9.9% came from endowment revenue. Institutional reserves funded 31.2%, and the remaining 54% came from other non-dedicated sources, which could include tuition dollars, general funds, or unforeseen contributions.

“It just shows that institutions are scrambling even more than we realized to fund these aid programs,” Redd said. “We have to keep in mind that most of the schools in our surveys don’t have large endowments and don’t raise a lot of money for financial aid.”

The new NACUBO report largely covers data for the 2021-22 academic year, but colleges set prices for that year before concerns took off about runaway inflation. For the coming year, several colleges have already drawn criticism and made headlines with major tuition increases.

In the current environment, colleges will likely keep concerns about affordability and access top of mind, Redd said. This could mean an even bigger reduction in tuition fees as published prices increase.

“Even though the listed price may go up in nominal terms next year, I’m not sure the actual price will go up as much as people think,” Redd said. “There will always be a huge demand, I think, among families for financial assistance.”

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