Running Head: TUITION DISCOUNT ANALYSIS

Analyzing Tuition Discounting in Higher Education

Samantha Sonkowsky
University of Wisconsin, La Crosse

Analyzing Tuition Discounting in Higher Education

Analyzing Tuition Discounting in Higher Education

Tuition Discounting Analysis
In an effort to appear financially attractive and competitive in the market of higher
education some institutions have looked into implementing and have launched tuition
discounting initiatives. However, a recent publication released by the Lumina Foundation for
Education (2003) warns institutions of higher education (IHE) of the damaging affects of tuition
discounting for both the institutions and its students. More specially, it appears to limit
affordability and choice for many low-income students, it does not always produce the desired
enrollment effects for institutions, and it does not always enhance institutional revenue (Davis,
2003, p. 5). This analysis will make an effort to: (1) describe the historical landscape of tuition
discounting in higher education, (2) the potential benefits of tuition discounting, and (3) its
potential affect on students and (4) the financial risk associated with discounting tuition.
Historical Landscape
Over the years tuition discounting has become norm in the world of higher education, and
is a particularly popular offering for students who are considering a four-year institution. Tuition
discounting can be defined as, [the] art and science of establishing the net price of attendance
for students at amounts that will maximize tuition revenue while achieving certain enrollment
goals (Davis, 2003, p. 4). Data from 2001 (as cited in Hubbell and Lapovsky, 2002) revealed
that nearly eight out of ten students at private four-year institutions were receiving a tuition
discount rate around 38 percent. Additionally, two out of ten students at public IHE received a
tuition discounts around 14 percent (Davis, 2003). With the foundations of creating greater
access to IHE for low-income and minority students, tuition discounting has resulted in the
opposite, as it has show to negatively affect those who cannot afford tuition rates at all.

Analyzing Tuition Discounting in Higher Education

IHE tuition discounting initiatives occur over time for a number of reasons. Historically,
its main objective has been to increase enrollment, as more students equal more revenue for the
institution. Recent efforts also have an objective of increasing the student population but with a
focus in fostering diversity and inclusion in a way to attract more multicultural and
underrepresented students. This can be attributed to various social and legal movements such as
the Americans with Disabilities Act, the GI Bill, Civil Rights, and recent Title IX compliances
(Ibarra, 2006). In the past and even today students as well as institutions have positively
perceived tuition discounting, yet the data on tuition discounting has revealed contrasting results.
Potential Benefits
Tuition discounting can work for some IHE. For tuition discounting to work, an
institution must successfully attract enough students with a result of increased revenue. If an
institutions mission is to create great accessibility to low-income, underrepresented, and
multicultural students it should take into consideration the addition need for other forms of
financial aid. For most of the students tuition discounting attracts, the reduction simply is not
enough to entice them. There must be additional forms of financial support to attract students
and gain buy in. The University of Wisconsin Platteville currently has a tuition discount
program called the Tri-State Initiative. This initiative is geared towards attracting students from
the states of Illinois, Iowa, and Minnesota and offerings a tuition rate lower than the non-resident
rate but higher than the Wisconsin resident rate. Some what similar, Minnesota offer tuition
reciprocity to Wisconsin resident students.
Increase of Student Support Services
Institutions using tuition discounting must consider the services and support their campus
provides, as they students they are attempting to attract could need on-campus support from

Analyzing Tuition Discounting in Higher Education

different areas such as multicultural student services and disability services for example. For
IHE in Wisconsin, it could become increasingly difficult to support the students they aim to
attract with the current budgetary climate and cuts to the University of Wisconsin System as a
whole. Davis noted, in an era of constricting budgets and shrinking endowments, higher
education stakeholders need to examine both the effectiveness and consequences of tuition
discounting to institutions and their students (2003, p. 2). Furthermore, there may be an
increased need for remedial education and bridge programs as many students attracted by tuition
discounting have not achieved SAT scores to increase the institutions average SAT (Davis,
2003). The increase need of student support coupled with new programming to better ready
students for college both result is added financial expenses, of which could decrease an IHEs
revenue significantly.
No Guarantee on Investment
Although beneficial to students, with offering a discount on tuition there is no guarantee
that the initiative will help retain students or influence their persistence on to graduation. Being
particularly challenging, is finding a positive correlation linking the influence of tuition
discounting and the graduate rate of the students receiving the discount. Foreseeable is the
increase need of student support services with the students the discount attracts. If there is a lack
of student supportive services this could lead to decrease enrollment and thus a decrease in
revenue. Evidently, there can be great financial risks associated with the creation of new
services, support, and programming for students. It being especially difficult to directly and
indirectly measure results as it relates to the time, money, and human resources invested into
retaining the students it attracts by offering an increase and/or new supportive services as a result
of the tuition discounting.

Analyzing Tuition Discounting in Higher Education

Summary
By examining the historical landscape and the goal tuition discounting traditionally aims
to achieve, there still remain mixed results as to its benefits to students and institutions of higher
education. With a goal of increasing enrollment to boost revenue tuition reductions often fail to
produce such results. Tuition discounting means well, as it perceivable creates greater access
and affordability for various students, but frequently requires additional means of financial aid
for students. With IHE facing difficult times due to budget reductions, many have adopted a
form of tuition discounting in an effort to increase enrollment. Tuition discounting can be
advantageous if an institution:

Carefully examines the relationship between the actual cost of tuition and the reduction
rate

Is able to offer necessary supportive services to students receiving the tuition discount

Is aligned with the institutional mission and goals and is measureable

Offers others means of financial aid

Yet, as previously stated, tuition discounting often negatively affects IHE and their students.
Ultimately, institutions often see little to no result or even a loss in revenue due to tuition
discounting and their students will often require additional forms of funding, supportive services,
and new programs.

Analyzing Tuition Discounting in Higher Education

References
Davis, J. S. (2003). The Unintended Consequences of Tuition Discounting. Lumina Foundation
for Education New Agenda Series, (5)(1).
Hubbell, L. L., & Lapovsky, L. (2002). Tuition discounting: Results from NACUBO's annual
survey indicate increases in tuition discounting. NACUBO Business Officer, 35(8), 2433.
Ibarra, R. A. (2006) Context diversity: reframing higher education in the 21st century, retrieved
from http://www.compact.org/20th/read/context_diversity