Is That College Price Drop Real?

According to an article in The Christian Post, several Christian colleges have recently announced that they will be either lowering or freezing tuition costs in the near future. For example, Gordon College, Houghton College, and Seattle Pacific University have all committed to lowering their tuition pricing next year. For its part, Liberty University promised to continue it's tuition freeze for another year. While this news will undoubtedly serve as glad tidings for those currently attending these Christian institutions of higher education, one may wonder if this will really be good news for new students.

An important thing to remember is that college pricing has a sticker price--the listed cost of tuition and fees that a university lists on its website. There is also a net price--the actual tuition and fees that the student has to pay, after subtracting scholarships or financial aid that doesn’t have to be repaid. Here is a good summary from the Urban Institute on the difference between these two concepts.

The reality of college pricing is often a bit more complicated than most people realize. The vast majority of colleges in the United States provide a decidedly high price tag on their website, with the full knowledge that most of their students will be offered a discount in some fashion. This allows the school to charge some well-to-do students the full cost, while also providing the institution the opportunity to send out encouraging acceptance letters to other admitted students. These other students are delighted to receive a letter from the admissions office telling them that they have earned a significant reduction in tuition because of some merit or need on their part. Students unfamiliar with this technique often feel that the school must really want them since they are wooing them with such a large discount. Unfortunately, many of these perspectives don't understand that there was never anything special about the discount; almost all new students are offered some type of significant reduction.

Indeed, according to the National Association of College and University Business Officers, the average institutional tuition discount rate for new college students at private, nonprofit colleges and universities in 2019-2020 was estimated to be about 53%. In other words, the typical new student at a private (nonprofit) college had the sticker price of their school reduced by slightly more than half. This means that many schools have already been reducing tuition for some time.

So getting back to the news story from The Christina Post; are the Christian schools who are committing to reducing tuition in the next year, going to drop the sticker price while also maintaining their discount rate? If they drop the sticker price while reducing their discount price, there really won't be any savings for the new student.

Let me provide you with an artificial example to make this more clear. Let's say that Featherstone University currently lists a tuition price of $30,000 per year. However, the institution typically discounts this price by 50%. Hence, the average incoming student pays about $15,000 per year in tuition and fees after grants. Let's now say that Featherstone University launches a new marketing campaign promoting the fact that tuition will be reduced by 20%. Now the sticker price for the university is $24,000, which certainly does look like a generous decrease in cost. But is it really? If Featherstone University also reduces the discount it has been offering new students to 37% from 50%, the net cost to new students will be about the same as it was before and the student won't be saving any money.

Prospective students need to be aware that just because a college indicates it is lowering its listed tuition, that doesn't mean that her or his net cost will necessarily decrease. So, be sure to compare your net cost offer from the school you are interested in to the US Department of Education's College Scorecard. Discover if the discount you receive this year is better than the one the typical entering student received last year. Also, be sure to apply to at least five schools, as I discuss in this previous post, because you'll want to compare multiple offers in real time. Best wishes in you college search.

©2020 by Christian Postsecondary