A new study from the National Association of College and University Business Officers (NACUBO) found that the difference between how much an education costs at a private college and how much students are actually paying for that type of education is growing as tuition discounts become more popular.
In all, 401 private, nonprofit colleges reported record-breaking tuition discounts for the 2015-16 school year in the 2015 NACUBO Tuition Discounting Study. The majority of these discounts were even higher than they had been the previous year. The average discount rate for the 2015-16 academic year was found to be around 48.6% for first-year, full-time, freshman and 42.5% for all other undergrads, meaning that the typical college puts 42 cents of every dollar it brings in into scholarships and grants.
During the 2009-2010 school year, the discount rate was found to be 41.6% for freshmen and 36.1% for undergraduates overall.
More students were awarded this aid last year than ever had been before. Close to 88% of first-year, full-time freshmen and 77.6% of all undergraduates received aid, amounting to an average of half the total cost of tuition and fees for both groups.
Schools that have the largest endowments were more likely to use this funding for scholarships and were more likely to offer aid to students who can prove they have a financial need for it. Institutions that had endowments over $1 billion typically used this funding for one-third of scholarships, and 85.5% of the grants to meet need. Meanwhile, schools with endowments under $25 million funded 7% of scholarships with this money, and 76.7% of scholarships met need.
"Even in a year of lower endowment investment returns, colleges and universities spent substantially more from their endowments. It is not surprising to see higher discount rates as many institutions are directing endowment spending to student financial aid," said NACUBO President and CEO John Walda.
However, at the same time, many schools are beginning to see the effects of offering more students financial help. Net revenue growth decreased to 1.8%, less than the 2.2% rate of growth found in the 2013-14 school year, and 37.5% of institutions noted a decline in enrollment for not only first-year students but the student body as a whole.
"With the help of their endowments, private colleges and universities continue to strive toward increasing affordability for their students," said Ken Redd, NACUBO's director of research and policy analysis. "However, with net revenue growth slowing down and the nation's student population evolving, many schools are testing strategies to ensure they can continue to deliver on their missions and remain financially sustainable in the years ahead."
Tuition revenue is expected to come in at 1.2% per full-time student, which comes in as a decline because it is not keeping pace with the rate of inflation. The situation is worse for some private schools where the per-student revenue growth is expected to only reach 0.6%, reports Jillian Berman for MarketWatch.
As a result, many small, private schools are beginning to deal with the effects of a decreasing student enrollment. For example, Sweet Briar College, a small liberal-arts women's college in Virginia, announced that it would be closing partly due to declining enrollment.