NEW YORK (MainStreet) — Seeing their pool of students decrease, many U.S. private colleges are offering more and more aid to keep classrooms filled.
That was the finding of an annual tuition discounting survey conducted by the National Association of College and University Business Officers. The study found the average tuition discount — which are grants and scholarships offered by the schools — for the 2012 incoming class hit a new all-time high of 45% at schools.
"We saw 5% tuition increases in recent years until 2008," said Bill Hall, president of Applied Policy Research Inc., which advises colleges on pricing and admission strategies. "That kind of rate is unsustainable, especially with the changing demographics."
Despite the increased discounts, the study revealed more than half the schools — nearly 51%— reported a decline in enrollment of incoming freshmen or maintained identical numbers from 2011.
"Institutions have been trying to use discounts to attract students," said David Longanecker, president of Western Interstate Commission for Higher Education. "However, institutions can't continue this practice. Colleges are going to have to learn how to give quality education to a changing demographic more cost effectively and less expensively."
While the numbers seem to indicate private institutions may be responding to a weak economic recovery and students focusing more on value and cost, there also is another factor at play, education experts say.
"Look at the numbers," Longanecker said. "You are seeing a decline in the population of U.S. high school graduates. The pool is shrinking and for some schools, in some areas, it is getting harder and harder to fill incoming classes."
In fact, the Western Interstate Commission for Higher Education released its annual "Knocking at the College Door: Projections of High School Graduates" analysis earlier this year and surmised national high school graduate numbers peaked at 3.4 million in 2010-11 — after 15 years of growth — and began a decline that will not stabilize until 2013-14 at 3.2 million to 3.3 million graduates. The next period of significant growth is not projected to begin until 2020-21, according to the study.
Hall said about 10 of the 20 undergraduate private colleges he advises on pricing still have empty seats for their freshman class this coming fall. "The pool of traditional college-bound students has shrunk — and that will be the reality for a while," Hall said. "For the next decade or so, the only real growth we are expecting to see is among Hispanic families."
In the commission's study, changes in the number of high school graduates will vary greatly across the U.S. through 2019-20, with many states in the South and West expecting some growth, but numerous states across the Midwest and Northeast can expect declines. The research also showed high school graduating classes are rapidly becoming more diverse, with 45% of the nation's public high school graduates projected to be non-White by 2019-20 — a 7% increase from the class of 2009. This trend is spearheaded by the rise in Hispanic high school graduates, which by 2019-20 is expected to increase by 197,000.
"The impact will not be the same across the country," Longanecker said. "You have Asian and Hispanic families growing. Nevertheless, institutions will have to change the way they do business."
John Walda, president and chief executive of the National Association of College and University Business Officers, agreed private institutions likely will have to use multiple strategies in an attempt to attract students.
"The expectation that a private institution can maintain or grow enrollment and increase net revenue simply by offering large tuition discounts is no longer valid," Walda said. "Price sensitivity, changing student demographics and a dynamic, competitive landscape all point to the need for increased attention to a strong brand, good marketing, diverse revenue streams and cost containment."
--Written by Chris Metinko for MainStreet