For decades, rising college tuition rates have been almost as reliable a feature of American life as death and taxes. A substantial part of the increase has underwritten student aid, often in the form of merit scholarships.
This has been called the “high tuition, high discount” model, as colleges charge high prices to some students while giving large discounts to students they hope to attract — generally brighter or more diverse students — while also increasing revenues.
The idea has been around since the 1970s, but there are growing signs that it is unsustainable, and some schools are reversing direction. One of those in the forefront is Belmont Abbey College here in North Carolina.
Next year, Belmont Abbey will cut its tuition-and-fees “sticker price” for freshmen and transfer students by 33 percent, from $27,622 to $18,500. Older students will not receive the cut, but the school has promised not to increase their tuition as it had previously planned. Belmont Abbey will continue to offer institutional aid, but not as much.
“It just seemed crazy to me,” said Belmont Abbey President William Thierfelder in an interview with the Pope Center, referring to the continuing rise in college tuition. “We’re going to keep raising prices until when? When is it ever going to stop?”
Indeed, the high-tuition, high-discount phenomenon has become so pronounced that on average 42 percent of gross revenue from undergraduate tuition and fees is given back to students in scholarships, fellowships, and other grants, according to a 2012 study by the National Association of College and University Business Officers.
Thierfelder would not disclose Belmont Abbey’s discount rate, but said until now it has been slightly less than the national average.
Some have criticized colleges’ large discount rates on privacy grounds because the system relies on detailed information provided by families on the federal application that students seeking aid must file. “A car dealer who demanded such information so that he could see how badly he could gouge you would either be out of business or in jail within days or weeks,” noted economist Richard Vedder in a speech to Hillsdale College.
Moreover, some evidence suggests that the high tuition, high discount model may work for some colleges, but as a whole it is counterproductive. A 2005 Lumina Foundation study by Jerry Davis found that, for the period surveyed, despite increases in institutional aid, many colleges saw no increase in bright students, diverse students, or revenues.
Another factor is leading Belmont Abbey away from the high discount rate: Students and their parents are changing the way they choose colleges.
According to Thierfelder, prior to the recession of 2008-09, aspiring college students and their families tended to associate higher price with higher quality. Following the recession, however, they have become more cost-conscious. As a 2012 poll by the College Board showed, over half of college applicants passed over colleges based on their sticker price alone, not considering the net price they would likely pay including aid.
Other private colleges cutting tuition include William Peace University in Raleigh (a 7.7 percent cut followed by a tuition freeze), the College of Charleston (a 22 percent cut for freshmen and transfer students), Concordia University in Minnesota (33 percent for all students), and Sewanee University in Tennessee (a 10 percent cut for the entering class in 2011).
Thierfelder insists that lower tuition will help poorer students, too. Belmont Abbey still plans to offer $5 million in aid, and the lower price means that outside aid dollars — such as private scholarships or the federal Pell Grant Program — will stretch further.
In general, Thierfelder hopes the lower sticker price will help students “recognize that this kind of education is accessible to them.”
Duke Cheston is a writer for the John W. Pope Center for Higher Education Policy (popecenter.org).