"Colleges Retreat In Tuition Showdown" - By Ruth Simon, Wall Street Journal

[turtlerock]

<p>Interesting article from today’s WSJ about average aid given to students (grants and scholarships) at private colleges increasing:

Colleges Retreat In Tuition Showdown
By Ruth Simon</p>

<p>Private U.S. colleges, worried they could be pricing themselves out of the market after years of relentless tuition increases, are offering record financial assistance to keep classrooms full.
The average “tuition discount rate” - the reduction off the list price afforded by grants and scholarships given by these schools - hit an all-time high of 45% last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers.
“It’s a buyer’s market” for all but the most select private colleges and flagship public universities, said Jim Scannell, president of Scannell & Kurz, a consulting firm in Pittsford, N.Y., that works with colleges on pricing and financial-aid strategies.
It is likely that some private colleges will be forced to be even more generous with discounts this fall. As of the May 1 deadline for many high-school seniors to commit for their freshman year of college, early reports suggest some non-top-tier schools fell 10% to 20% short of enrollment targets, said Mr. Scannell.
The jump in aid shows that many colleges are losing pricing power as more families focus on cost and value, with about 65% increasing their discount rate in the fall of 2012. Except for the most exclusive schools, private colleges increasingly are vulnerable to the stagnant wages of many families,

</p>

<p>There is a separate article on the front page of today’s USA Today explaining that although business and corporate profits have jumped in the last couple years, wages have only increased an average of 2%, which means they have ran flat over several years when accounting for inflation . . .</p>

<p>

deepening student debt, the uncertain job market, growing questions about the value of costly four-year degrees and unfavorable demographics.
About one of every eight U.S. undergraduates is enrolled at a private nonprofit college. Such schools provided 70% of all grant aid to undergraduate students in 2009, the most recent year for which data are available, Nacubo says.

</p>

<p>For those who do the math, that means these schools account for about 12.5% of the undergraduate student body, but accounted for 70% of undergraduate aid provided. My question would be “Do these private schools account for 70% of all collegiate revenue?” and therefore it could be determined which system - public or private - are providing aid closer to their portion of the “pie”, if you will. If private schools account for 99% of revenue (or some can include endowment amounts), but only provide 70% proportionate aid back to students, then it wouldn’t seem very “nonprofit” to me, but that’s my personal opinion and I completely understand schools will have other costs involved, including wages to admin/staff/faculty and a whole bunch of other things.</p>

<p>

The average discount rate at private colleges has climbed for seven years in a row, and the latest increase was smaller than the jump in 2011, said Natalie Pullaro Davis, the study’s author. But colleges are having a tougher time boosting their sticker prices. That makes it hard for colleges to generate enough new revenue to offset the impact of higher aid and their own rising costs.
Because of economic factors and political pressure on colleges to hold the line on tuition, “we have hit a tipping point on price,” said John Nelson, managing director at Moody’s Investors Service. Last Year, the median sticker price at about 280 private colleges and universities tracked by the debt rating firm rose 3.9%, the smallest increase in at least 12 years.
Tuition increases for the 2013-14 year at these schools are likely to be about the same or slightly smaller, Mr. Nelson said.
Meantime, at four-year public colleges and universities, tuition and fees for in-state students rose 4.8% in the 2012-13 academic year, the smallest increase since 2000-01, according to the College Board. Tuition at these schools for out-of-state students rose 4.2%.

</p>

<p>Tuition at public schools rose at a higher percentage rate for in-state students than it did for OOS? It’s worth noting that 4.8% on $15k is a smaller nominal figure than 4.2% on $30k.</p>

<p>

The discount rate for public universities fell modestly in 2012, said Mr. Nelson of Moody’s, after rising from 2007 to 2011.
Last fall, enrollment fell at 46% of the 383 private solleges in the Nacubo survey as the pool of high-school seniors declined. . .
Some private colleges are seeing just 20% of the students they accept actually enrolling, down from about one-third of accepted students five years ago, Mr. Scannell said. . .
Discounting can help private colleges compete against public institutions. Maureen Anderson, who lives in Detroit Lakes, Minn., said a $55,740 scholarship, which covers tuition, fees and certain other expenses, sealed her daughter’s decision to attend New York University instead of her other top choice, the University of California, Berkeley, which made her a less generous offer. NYU’s tuition and fees are about $44,800 for the 2013-14 year. . .
A Berkeley spokesperson said 40% of undergraduates pay no tuition because of grants and scholarships, while 65% get at least some financial aid. . .

</p>