My youngest child starts college this month, attending the most expensive school of all three children. The total sticker price is $82,000 per year, including room & board. I allowed her to apply to the school knowing we could not afford the full amount only because I know the little secret in higher education about discounting and scholarships.
Many families like mine who earn a good living look at $82,000 and assume they are going to have to pay for all of it. In fact, that is often not the case. My daughter is receiving $30,000 in scholarships (we call this discounting), almost 50% off her tuition! This is less than another school with a similar price that offered $45,000.
The sticker prices of many schools convince families like mine not to apply in the first place. Surprisingly, the average family income for public or state school students is higher than for private non-profit institutions. The lower sticker price entices families like mine to apply.
Sticker price vs discount
When I look at the details of net price per student for many of my clients, I find that very few students at small private institutions receive anything less than a 25% discount (aka scholarship) on the tuition. What if the sticker price were $30,000 for tuition instead of $40,000? Would that cause more families like mine to apply to those schools? The average tuition discount rate at private colleges was almost 52% for the 2023-2024 school year, according to a new study from the National Association of College and University Business Officers (NACUBO).
In my daughter’s case, if I had not known this little secret about discounting, I would never have allowed her to apply. You can go to the College Navigator website and look up any college to see the average net price by family income. I suspect many families do not know about this tool.
When you use coupons at a store, you generally know the original price. Since the coupon states the discount up front, you know what you’ll pay when you are shopping. While private institutions publish their average discount rate, families like mine still assume we will not receive that discount because our income is too high.
This has caused more colleges and universities to discuss the concept of tuition price resets. This is where you reduce the stated price and the scholarship by an equal amount to more accurately reflect the minimum amount families like mine are likely to pay. Families with lower incomes will still get scholarships to help cover their costs, but the stated price and scholarship amount will both be lower. The hope is that by decreasing the price, the institution will attract more students, especially from families who can afford to pay for a portion of their education.
Tuition price resets
I have heard a lot of skepticism over tuition price resets. Many of my colleagues who have not experienced a price reset have shared that schools do not gain additional students and even lose money because they keep giving the same scholarship amounts.
It was time for a little research. I reached out to colleagues who worked at universities using price resets and heard overwhelming support for them. I also reached out to Lucie Lapovsky of Lapovsky Consulting, an expert in tuition price resets, to get her feedback on the topic. Here are some takeaways from that conversation.
“Institutions can be hesitant because there is risk involved,” Lucie said. “It is not simply an exercise of lowering the price, it requires a change in how you speak with families about scholarships.
“You are no longer offering a $20,000 scholarship, but a $3,000 scholarship with a $17,000 reduction in price.”
Lucie stresses the importance of talking to families about the net price compared to other schools, rather than focusing on how large or small the scholarship is.
“You need to consider how you make a $3,000 scholarship award sound important, so parents still have bragging rights. How you communicate is important. It needs to look like the positive change it is, rather than a desperate attempt to attract more students. The messaging to existing and potential new students is critical and requires careful planning. For schools with high discount rates, a lower price will result in a much smaller gap between the net and published price – this leads to more transparency.”
She adds “Students who are already attending need to see the numbers and realize they will pay the same amount or less than they are paying now.”
Plan conservatively and target the right students
While Lucie advises her higher ed clients to plan their budgets conservatively and not anticipate an increase in the number of students attending, she also suggests that institutions often see an increase in the number of applicants.
Resetting also requires schools to consider which students they are targeting now that their prices enable them to compete more effectively with lower-priced public institutions.
Lucie also suggests that there may be a change in the composition of applicants, especially more middle-income students. She cautioned against awarding too much merit aid since higher-income students often have higher GPAs, which would result in more merit awards.
Lucie has developed a list of the characteristics of an institution that should consider a price reset. If this interests you, I urge you to contact her.
Price resets are not always the answer
I am not suggesting that every institution needs to reset its price. It is a lot of work over two years and there are no guarantees that it will improve your situation. Consider that some people love coupons. I’m not one of them. I like to know the actual price. I want the price to be reasonable, and I want the quality to be good; this is how I measure value.
Full disclosure, Lucie is working with one of my clients on a tuition price reset, so expect to see more on this topic as we see the results of that reset starting in Fall 2025.
What is your shopping experience related to the true cost of education?
Lucie Lapovsky of Lapovsky Consulting is considered the expert in Tuition Price Resets and is a nationally recognized higher education expert. She is a frequent presenter at major national higher education conferences and a respected author. She is also a frequent contributor to Forbes and other well-known publications. Her experience as a college president, CFO, faculty, and board member has given her a keen understanding of how schools, colleges, and universities operate. Since founding Lapovsky Consulting, she has worked with more than 100 institutions throughout the U.S. as well as in France and Japan. She prides herself on her ongoing relationships with clients, who often ask her to return for additional projects.
Did you catch Rebeka Mazzone on the This Week in College Viability podcast? Rebeka joined Gary Stocker to discuss financial transformation, why turnaround plans take so long, and the recent FAFSA debacle. Listen here.
Photo by Rochelle Nicole on Unsplash