By Deborah Frankle, Research Analyst

Tuition discounting is the practice of using institutional aid to adjust tuition levels to best match what students and families are willing to pay, a widespread trend that is tracked by annual reports from the College Board.

We recently used publicly-available federal data to get a sense of the phenomenon at private four-year institutions, and were surprised to find that almost half of private, four-year institutions with at least 1,000 students provide discounts to 90% or more of their students. Four out of five colleges (83%) provided discounts to at least half of their students. In many cases, the average discount was quite large.

What does this mean? Actual discounting strategies vary dramatically between colleges, and the numbers above do not distinguish between need-based and merit-based aid. Some colleges use their institutional aid to help meet the financial need of low-income students, increasing access; others use it to attract students with less or no need who serve to maximize the prestige of the institution. Because we cannot distinguish between pricing and aid strategies at individual colleges, we cannot say for sure.

But one recent analysis suggests that the overall picture is troubling: institutional aid, a larger source of financial aid than state and federal aid combined, goes to higher-income students at rates far exceeding those of federal and state aid. For dependent students, 46% of institutional need-based grant funding went to those with family income above the median, compared to 3% of federal aid.

Why is this interesting? These issues bring up a number of questions:

• When institutional aid ($10 billion) far outweighs federal and state aid combined ($7 billion), what does it mean for college access that institutional aid tilts to those with higher incomes? (NPSAS, dependent students only)
• What does 'need-based' aid mean when it’s almost evenly distributed across all income levels?
• What is the point of tuition increases when almost all students receive a discount? Does the "sticker shock" of high tuition scare low-income students away before they learn about available discounts?
• Should detailed institution-level data on discounting practices be made public?

Other resources on this topic:

Tuition Discounting, Not Just a Private College Practice, College Board

Tuition Discounting and Prudent Enrollment Management, Association of Governing Boards

Posted by Edie Irons at 2:29 PM | Permalink

Robert Shireman, the founder and president of The Institute, has been guest-blogging for Higher Ed Watch, a higher education news and policy initiative from the New America Foundation. In his final post, "Building Fences," Shireman argues that state policies that use college funding as a carrot to keep students in the state after graduation are counterproductive. Here is an excerpt:

But states don’t like to see those graduates leave, so they have been getting more creative in their efforts to keep graduates from jumping the fence. Some states, for example, are considering, proposals that are modeled after the Georgia Hope Scholarship Program, which provides free tuition to top students who stay in state for college. Others are debating plans to award scholarships that would be rescinded if a graduate decided to cross the border for a job.

The current debate in Washington on immigration underscores just how backwards and wasteful these state strategies are. Corporate America is concerned that the immigration bill does not allow for enough visas for immigrants to fill jobs that Americans do not have the skills to fill. This cries out for a domestic policy response that focuses on increasing the number of young people who go on to college and complete degrees. . .

At The Institute for College Access and Success, we believe that Congress, as part of the upcoming reauthorization of the Higher Education Act, should create a College Opportunity Incentive Fund to send a strong signal to states about the national imperative to improve college access and success rather than to build fences between states. The Fund would essentially provide a bounty to the state for every student from the lower half of the country’s family income distribution. In addition, the Fund would offer a double bounty for every degree conferred on a lower income student. The states could use the money to provide much-needed financial aid and to implement other strategies to expand access and to improve retention to graduation.

Posted by Edie Irons at 1:25 PM | Permalink

The entire Economic Diversity of Colleges web site has been updated with the best available information for the 2004-05 school year. Institutional profiles reflect the new information with fresh charts and graphs, and the new data has been added to the comparison tool as well as the institutional data pages. We welcome your questions, comments, and suggestions about this update and other aspects of EconomicDiversity.org.

Posted by Edie Irons at 10:49 AM | Permalink

The Economic Diversity web site now includes the average student loan debt for the 2005 graduating class as reported by 1,421 four-year institutions. Also included is the proportion of graduates with any student loans. The site provides access to these data (as well as comparable figures for 2000 and 2004) through an agreement with college guide publisher Thomson Peterson's. (The data are copyright 2006 Thomson Peterson's, a part of Thomson Learning Inc. All rights reserved.)

Using the new 2005 data, we constructed statewide enrollment-weighted averages for all 50 states and the District of Columbia. The state averages will be posted tomorrow on our sister site, the Project on Student Debt, along with a brief report. The five states with the highest average cumulative student debt are New Hampshire, Iowa, North Dakota, Rhode Island and Pennsylvania. The five lowest are Utah, Hawaii, Delaware, Maryland, and California.

These data aren't perfect. Colleges are asked to report the total federal and private student loans taken out by graduating seniors while they attended that institution. This means that prior borrowing by students who transfer is not included. Actual debt may also be higher due to private loans taken out by the students but not handled by the campus financial aid office (and therefore not in the campus' records).

Posted by Ajita Talwalker at 9:46 AM | Permalink

The Education Writers Association just had their national conference in New Orleans. One of the sessions was called "How the Game is Played in Enrollment Management -- is richer always better?"

Panelists included Tally Hart, outgoing Director of Financial Aid at Ohio State University; Ken Redd, Director of Research and Policy Analysis at NASFAA; and Matthew Quirk, a reporter-researcher at the Atlantic Monthly. Quirk has written an in-depth article about enrollment management, an important piece of the financial aid and admissions puzzle that increasingly influences economic diversity at colleges across the country.

The discussion focused on the effect of enrollment management techniques on economic diversity and access for low-income students. All three panelists agreed that financial aid is increasingly used as a carrot to attract certain types of students to an institution, rather than simply a way to help lower income students afford college. Nationally, only 2/3 of financial aid dollars go to financially needy students. Enrollment managers can engineer the admissions and financial aid processes to increase tuition revenue, raise a school's US News ranking, attract more academically high-performing students, or increase ethnic and/or economic diversity.

Panelists agreed that good enrollment management should also be about retention, success, and persistence. Quirk said it is three times more expensive to recruit a student than to retain one. Redd and Hart spoke about the problem of qualified students passing up competitive institutions for cheaper, less challenging ones due to financial concerns. When students downsize their aspirations, they are less successful, Hart said.

The panel discussed the elite colleges' competing programs to attract low-income students. They expressed some concern that intense media coverage of these efforts may overshadow other (often more affordable) methods of increasing economic diversity.

Posted by Edie Irons at 11:25 AM | Permalink

The new Carnegie Classification system of higher education institutions is now in use on economicdiversity.org. The new classifications were released in February 2006, and increased the total number of classifications from 18 to 33. Thirteen of these additions are for Associate's colleges. One addition was made to the Research category, one addition was made to the Master's category, and Other Technology replaced Teachers College in the Special Focus category.

One significant change is that the new Basic Carnegie Classification is based on a single year of data instead of three-year averages. The most current data available for all institutions through 2004 was used. The update cycle has yet to be decided, but it is expected to be more frequent than in the past. The Basic Classifications will be used in the 2007 publication of U.S. News & World Report's rankings of "America's Best Colleges."

On economicdiversity.org, we have created shorter labels for the Basic Classifications so that they can be displayed more easily on institutional profiles and data tables. We have also added "Carnegie" as a criteria when choosing institutions for comparison.

Posted by Edie Irons at 12:00 AM | Permalink

There is now a variable called "Fall Term International Students" for every school in the database. On institutional profiles, the variable is in the "Students" section under the heading "Total Undergraduate Enrollment."
International students are not eligible for federal Pell Grants, Stafford Loans, PLUS loans, or work study programs. Researchers may want to subtract the number of international students from the overall enrollment number before calculating the percentage of students who receive Pell Grants or other federal financial aid. One reason we added this variable was to make that calculation possible.
How do international students fund their US education? Possible sources include a student's home country, the US institution they attend, and international organizations such as the Fulbright program, the United Nations, and the World Health Organization. There is no centralized source of data on the incomes of international students in the US.
The most comprehensive online resource for international students who want to study in the US is here.

Posted by Edie Irons at 12:00 AM | Permalink | Comments (1)

This blog is a place to discuss issues related to the role of income in higher education and the Economic Diversity of Colleges database. The database is the first publicly-available source of college-level information on student income, race and ethnicity, loan and grant usage, and over 128 other variables.

The goals of both economicdiversity.org and economicdiversity.info are:

• To make public the extent to which American colleges and universities enroll undergraduates from various economic, ethnic and racial backgrounds;
  
• To encourage discussion and examination of economic diversity and related issues; and,
  
• To identify ways to improve the quality and use of data related to access and success in higher education.

Posted by Edie Irons at 12:00 AM | Permalink