Over the past ten years, I have seen an increase in scholarships both in number and in dollar amounts. As a result, the scholarship high is causing tuition resets at more colleges across the country. At the spring conference of the National Association of College and University Business Officers (NACUBO), a panel discussed the increase problem of colleges providing these scholarships or tuition discounts.
Since 2005, the national college discount has risen from 38.1% for entering freshman to 48.3% in 2015-16. This is according to the NACUBO annual study. This pricing practice has caused confusion and added stress for many families.
The Scholarship High
Think how good everyone feels when a student gets a scholarship. It is a self-confidence boost for the student and parents are able to tell their family and friends about the scholarship. High schools are able to promote the amount of scholarships that their graduating class received and the college can promote to their prospective students how much financial aid and scholarships were offered each year.
It is a win – win for everybody. So why is college affordability such a concern for so many families?
This all started when colleges changed their focus from education to a life experience. The colleges started to compete for students on the campus enhancements and life style. Costs started to rise and families began relating the cost with value. The next part of the evolution is to add scholarships to attract the students that a school wants to attend. Now 15 years later, the college business officers and families are starting to realize that this is a vicious circle.
It is confusing and increases the stress for everyone involved. As a result, approximately 26 colleges have adopted a new pricing policy, which minimize these scholarships or discounts. It is called a tuition reset and is a major decision that a college must make. It is not just a financial decision but a new perception that the college must develop before they implement it.
What is a tuition reset?
It is a term that is being adapted at more colleges recently. A tuition reset occurs when a college announces a one-time tuition cut. This tuition cut resets the base tuition for future years. It is implemented by the college in the hope that the publicity will help attract more students and increase the enrollment at that college. The lower tuition revenue per student will be compensated by the increased enrollment and a more transparent net college cost.
In my own state of Pennsylvania, three institutions have implemented a tuition reset recently.
- LaSalle University reset its tuition from $40,000 to $28,000 for the 2017-2018 academic year. This was a 29% reduction and brought tuition back to what students had paid in 2008.
- Rosemont College’s reset it’s tuition in 2016-2017 academic year and had a 43% reduction in tuition from $32, 620 to $18,500 that year. The college also reduced room and board from $13,500 to $11,500 for the same year.
- Immaculata University tuition will be reduced by 25% for the 2017-2018 academic year which means tuition was reset from the rate of $35,400 to $26,500.
Cutting tuition sounds great but families will need to dig deeper into the actual costs and review the net price of each college. Many families may notice that their actual tuition did not change much from the tuition reset. One-time tuition cuts generally do not reduce the financial burden on students who receive financial aid from the college because the net price does not change that much. This means that along with the tuition cuts is a corresponding cut in the financial aid awarded or discounting scholarships.
The tuition reset can often benefit the full-pay student and other high-income students who often do not receive any need based financial aid. It creates greater clarity on the cost without the stress of hoping for the discounted scholarship amount.
The need-based families numbers will not changes as much since they would have received approximately the same amount of financial aid making the net price approximately the same.
Net Price Importance
Many college bound students who are trying to determine the cost at a college may experience sticker shock when they first begin their college search. Students need to go beyond the sticker price and determine the net price. Net price is the tuition, fees, room board, books and personal expense at a college minus the grants and scholarships a student may receive. It is based on the student’s personal financial need and the college’s financial aid policies.
Determining the net cost of what college cost not only helps families to anticipate the amount of debt needed to attain that college degree but also it may help families to find colleges that they thought were out of their reach in terms of affordability. Therefore, whether you look at a college that has reset its tuition or another college on your list, the most important factor is calculating your net cost until graduation.
Planning your net price until a student graduates is critical. This is a shortfall of the current college process. Colleges only provide one year of financial information. Due to this lack of planning, student debt has double since 2009. That is why we developed EFC PLUS software so that students and parents can better evaluate their total net cost and avoid excessive student loans.
The colleges are at a crossroad. If the tuition resets becomes a trend, it may be harder for families to determine the net cost of each college for a while. In any case, a student must determine the best value, which includes net cost, campus environment, academic opportunities and financial outcome.