Think tuition at private colleges is too expensive to even consider attending? You’re not alone – the majority of students believe this. However, there’s proof that this is a complete misconception and, in truth is a complete myth.
The National Association of College and University Business Officers (NACUBO) reports
that, in reality, “about 89 percent of first-time, full-time freshmen and the average grant award in 2017-18 covered 56.7 percent of tuition and fees, up from 55.3 percent in 2016-17.” This is a record amount, even compared to last year’s study, which also found record-breaking amounts.
To put this in perspective, “for academic year 2017-18, the average institutional discount rate—or the percentage of total gross tuition and fee revenue institutions give back to students as grant-based financial aid—was an estimated 49.9 percent for first-time, full-time freshmen and 44.8 percent for all undergraduates.”
Why is this happening? The recent survey indicates that private colleges utilize discounts by offering them as “merit scholarships,” in attempt to flatter and recruit more applicants. In reality, they are more closely related to a discount than anything. Either way, it means that students are saving on tuition -which is what matters.
Where can you find these discounted tuition prices? Apparently, the higher the acceptance rate, the better the odds of obtaining these tuition price deals.
Mainly, wealthier, more selective colleges and universities receive plenty of applicants. According to NACUBO reports, colleges with the largest financial endowments utilize the funds most frequently to fund scholarships. They were also much more likely to put aid toward students’ with demonstrated financial need, which make sense since they have the funding available in the first place.
Due to rising tuition costs, applicants need scholarships and grants to afford private colleges. Private colleges are simply accommodating this need so students are able to consider attending their schools.
On the flip side, many of these private colleges who want to attract more applicants have taken on the above strategy to help attract students but are feeling the impact of the tuition discounts. The study found that “more than three-quarters of institutional grant dollars awarded in 2016-17 were used to meet students’ demonstrated financial need.” If more aid goes to needier students, which the percentage of needier students attending college will only continue to increase with tuition, then colleges and universities will have a real problem on their hands within a few years’ time.
So if most private colleges are offering discounts, why don’t these private colleges just reduce overall tuition instead of offering discounts in the form of awards?
Simply put, offering these discounts in the form of scholarships works. A private college consultant researched the psychology behind this and found that 40 percent, or a little over one third, of students and their families would choose a school that awarded the student a scholarship that ultimately discounted tuition prices because of “bragging rights,” over another college with lower tuition and aid (with comparable net costs).
Studies have shown that decision-making can be affected by an occurrence that’s sometimes referred to as the “Chivas Regal effect.” This means that high prices are interpreted as an indication of quality so, in the case of college decision-making, many assume the higher the “sticker” price, the better quality of an education. Please note that this assumption is completely false and research into this theory has led to findings proving the “higher cost equates to better quality” theories.
Take away: look beyond the school’s “sticker” price and focus on the “net” price, which is the actual tuition amount paid after scholarships and grants have been applied. “Sticker” prices can be misleading, especially now, when record-amount of students are offered such high discounts.
At the end of the day, it’s best to consider any college you love. Then, find out what you’ll actually owe in tuition to determine if it’s affordable – never make assumptions before counting a school out. Plus, don’t forget that you can always apply for additional scholarships and grants
on your own for even more tuition help!