Discount Rate: The portion of total tuition and fee revenue channeled back to students as institutional grant and scholarship aid.
In keeping with Earlham’s focus on the guardrails, I wanted to share some thoughts about the tution discount rate. Not only is this metric a focus for Earlham, but it is also of crucial importance for all colleges and universities in this quickly shifting world of higher education.
Context – national
According to the NACUBO Tuition Discounting Study (Inside Higher Education) discount rates have been steadily climbing for the past 10 years, from about 39% up to a national average of about 50%. This means that institutions, on average, are paying for half of each student’s tuition sticker price.
Context – private colleges
More specifically, the Chronicle reported a significantly higher number of private colleges breaking into the 60% discount rate ballpark, according to Moody’s. The credit-rating agency’s annual tuition survey, released November 2018, shows that private colleges are facing increasing pressure to undercut their sticker prices. In 2017, only 13% of private colleges reported a discount rate higher than 60%. Just one year later, that number increased to 19%. The sharp increase now finds colleges trying to figure out a model that is sustainable.
Earlham vs. comparison groups
For Earlham, the climb in discount rate has been steep, showing an increase from 39% for the Fall 2007 cohort up to 77% for the Fall 2016 cohort. Earlham’s discount rate has doubled in the last 10 years. In fact, no other college in either the GLCA nor the ACM nor the HCAC has seen as sharp an increase in discount rate.
I would say that for too long, Earlham denied the realities of this changing landscape and acquiesced by offering larger and larger amounts of financial aid. From one recruiting cycle to another, despite all the best admissions and marketing efforts, the reality hits home some time during the spring weeks of the recruiting cycle. And as the clamor for new students gets louder, that discount rate starts to climb.
Thus, President Stewart’s call to focus on this metric, a metric which, at least in part, represents the value of the education and experience that is offered at Earlham College.
So you might ask yourself …. Despite all the planning and hard work over the past 10 years, why has the Earlham experience become less valuable rather than more valuable? What is it, about other post-secondary experiences, that makes the Earlham experience less and less attractive? When the Earlham experience is discounted by 77%, how can we expect others to believe in its value?………….Without pointing fingers, I think we all need to wrap our heads around these questions.
As always, you are invited to leave a comment or contact me directly.
Director, IR and Assessment