Discounted Tuition On the Rise – But Does it Have a Catch?

Finance
Posted By Candace Talmadge on September 29, 2015 at 9:10 am
Discounted Tuition On the Rise – But Does it Have a Catch?

With a recently released study showing rising college tuition discount rates, and with the ranks of free or low-cost tuition colleges growing, tapping into financing alternatives can pay off for student and parents —with some critical caveats.

Spending fewer or no dollars on tuition generally means paying in some other way, such as working a certain number of hours per week to benefit the institution, said Dr. Ethan Gregory, a university admissions counselor training college and high school guidance counselors near Shanghai, China.

Advanced placement classes are another form of tuition discount, provided the student’s chosen college or university will grant course credit for achieving a certain score on the test, Gregory said. He urges high school students to take as many AP course as possible, because the $100 cost for each AP test is far lower than the $3,000 to $5,000 per course they will pay in college.

Another avenue is to spend two years at a community college and then transfer to (and graduate) from a four-year college, he added. There has even been a recent  push to make community college tuition free or low-cost through state funding or federal earmarks, but that could subject those dollars to annual state budget shortfalls and politics. Gregory recommends a website, www.2plus2.org, for students wishing to explore this option. “If you need the money, it’s worth it to take the time to do the research.”

Free tuition schools also have limitations, such as who they will admit, costs that tuition funding may not pay, or the kinds of courses they teach and degrees they offer. For example, Barclay College in Haviland, Kansas offers full-tuition scholarships to students living on campus, buts admits only Christian students, although they can be from any denomination. The costs of room and board are also not included in the scholarships.

“What we offer is not for everyone,” said Shai Reshef, president of the University of the People, based in Pasadena, California. The institution is tuition-free, accredited online university that confers bachelor’s and associate’s degrees only in computer science and business administration, but is developing degrees in health science and an MBA. “We chose the degrees most likely to help students get a job,” says Reshef.

Although UoPeople does not charge tuition, students pay $100 per exam, making the average total cost for a four-year degree $4,000. Reshef said the institution, which began operating in 2009 and was accredited in 2014, will be sustainable in another year even charging that little per student per year.

The National Association of College and University Business Officers 2014 Tuition Discounting Study revealed that the average discount rate, or institutional grant dollars as a percentage of gross tuition and fee revenue, reached 48 percent for freshmen and 41.6 percent for all undergraduates in the 2014-2015 year. That compares to 46.4 percent and 38.8 percent, respectively, for the prior academic year. The study also showed that discounts are decreasing tuition revenues at many college and universities.

“Colleges should explain to students why they should pay the price of $10,000 or $20,000 per year,” Reshef said, adding that in the future, there will be a wider range of college pricing, and institutions will have to think long and hard about the kinds of student they wish to attract. “There’s going to be a very hard shakeout in the higher education world.”

Candace Talmadge
Candace Talmadge has been a professional writer since 1976. She has been on staff or reported and written freelance for media that includes Adweek, Advertising Age, BusinessWeek, the Dallas Times Herald, the International Herald Tribune, The New York Times, and Reuters America.

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