Big Tuition Discounts Disguise Small Savings at Liberal Arts Schools

The recent economic upheaval has made it more difficult for small private liberal arts colleges to attract the new students they desperately need to continue operating. That is why a growing number of them are turning to steep tuition discounts and tuition freezes aimed at making the schools more attractive to budget-minded prospective students.

The latest to take this step are Ohio's Ashland University and South Carolina's Converse College. They've announced that they will cut their tuition by more than $10,000 for students paying the full tuition next fall. Of course, "paying full tuition" is the rub. Thanks to complex financial aid schemes, both private and public, a small percentage of students at almost any college pay the full list price. As Ry Rivard of Inside Higher Education explains, this means that as impressive as those cuts appear at first glance, most college students will not feel their impact at all.

The colleges each portray the efforts as a path to reducing the financial burden on students. And, indeed, they may, but not nearly as much as at first glance. That's, in part, because the colleges have reduced their sticker prices to about what most students are paying already, given all the scholarships and aid that colleges give to lure students to high-tuition institutions. Hardly anyone was paying the old sticker price anyway.

These price reductions simply look good – but do little besides. The example of Converse is instructive. Rivard points out that the school spent 12 months analyzing its tuition structure, concluding that despite the fact that the school's stated tuition was $29,000, hardly any students paid more than about $17,000. Presto! A 40% price reduction is announced, good press abounds and the college hardly loses a penny in revenues.

Betsy Fleming, the college president, has a slightly more benign take. The high list price simply disguised how affordable Converse was. So, even though the students weren't likely to see many actual savings, those who were considering the school as an option got a more clear idea of what the true costs of attending it were.

Fleming said an end to the "high-tuition, high-discount model" will help attract new students who were scared away by the old sticker price.

It could also help to retain some middle-class students who were caught in a doughnut hole: too wealthy to qualify for need-based aid and too poor to be able to easily afford college using their own money or loans. "When we announced it to our students there were incredible cheers of gratitude, even tears — students coming up and saying, ‘This is going to help out my family so much,' " Fleming said.

Fleming said all students will be paying less, while the college does not project any revenue losses because it expects enrollment increases due to the cuts. It is also working to control costs.

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