Paying For College – What is tuition discounting? Part 1

PayingForCollege-TuitionDiscountingAs promised over on the KSA Educational Consulting Facebook page, I’ve begun a series of tips and posts about paying for college. Today’s post should interest any student planning to attend college or anyone who has a vested interest in such a student. So if this is you, read on! Tuition discounting is probably one of the most misunderstood and misinterpreted aspects of college admission, so let’s start with a working definition. Hang on to your hats, this may seem complex but I’m going to break it all down.

The College Board – the education advocacy not-for-profit group that administers theScholastic Aptitude Test (SAT), the Advanced Placement (AP) exams and much more – distributed a great report in 2006 titled, “Tuition Discounting: Not Just a Private College Practice” that defined tuition discounting as the average institutional aid per student(which is the average amount that a school would give an individual student in grants or scholarships) DIVIDED BY the published tuition and required fees of that particular school (so the published total cost of that school, excluding room, board and books).

What could this look like? At a school where tuition was $41,000 and fees were $800, if the school offered its average student $15,000 in institutional aid, that school’s tuition discount rate would be 35.8%. The College Board’s report indicates that for the 2004-2005 school year, private 4-year colleges in the United States had an average tuition discount rate of 33.5%. A report in 2009 completed by the National Association of College and University Business Officers (NACUBO) indicates the average nationwide for all schools was 42.4%. Last year, NACUBO reported that the average student at a private 4-year college was receiving a tuition discount of 49.1%!

Are you still with me? An important piece to understand is what the phrase “institutional aid” means. Essentially it means all grants and scholarships issued by an individual college ITSELF. If you were following along on Facebook, you’ll know that the largest sources for college funding are: federal government (44%), colleges (36%), state government (9%) and private scholarships (6%).  So the 36% that comprises the second largest source for money for college is “institutional aid”.

I’m guessing your next question is “How do I get institutional aid?” Schools typically distribute awards according to financial need, academic merit and other non-need criteria.  That third category of “non-need criteria” is the wild card, and is unique to every school. Particularly at private institutions, non-need criteria can be anything from athletic or artistic ability to geography or choice of major.

Ok, that’s enough for Part I. Stay tuned for further installments of Paying for College where we’ll discuss the difference between private and public institutions and also cover the other three sources of funding. If you have questions, comment here or on the KSA Facebook page!