Chart: The Growing Trend of Tuition Discounts

Chart: The Growing Trend of Tuition Discounts

 

tuition discounting

 

Here we get some insight into a prevalent, confusing, and frustrating, aspect of the college experience: the fact that nobody knows what they will pay for any given school. While schools will publish tuition rates and total costs, if you pull ten random students from any random college (particularly the private ones) to ask what they actually pay you’ll end up with ten different answers.

As an article and accompanying chart by Kellie Woodhouse of Inside Higher Ed show, the average tuition discount now runs a full 48% for incoming freshmen and 41.6% overall. The article also states that a full 77% of current students currently receive a discount. In other words, we’re approaching the point where three-quarters of students pay an average of nearly half of the published tuition at their schools.

Why is this done? Why does the actual price paid differ so widely from the published price? The answer is twofold: 1) the higher published price allows colleges to charge more whenever they can get away with it and 2) discounts act as a discriminatory admissions tool. The college might only “need” to charge $25,000 per student, but if it has a certain number of students able to pay a higher tuition then they feel that to “only” charge that amount leaves money on the table. Also, as a college seeks to round out its student body with students of a certain variety (admissions counselors seek to engineer their demographic diversity along economic, racial, geographic, study area, and other lines) it will offer discounts to entice desired students to join the mix.

The second of these reasons engenders much controversy. After all, if a landlord posted rent at $X but put out the word that he would take half that amount from tenants of a certain “desirable” variety he would soon be sued for discrimination. But in the world of college this practice has become very much the norm. Right or wrong, it is what it is.

That said, this understanding should shift the behavior of those prospective students looking to get a good deal. For one, it literally pays to go where you’re wanted, as we’ve explored previously. For two, I always encourage students to explore schools primarily for other reasons beyond price, given the wide prevalence of discounting. In short, don’t rule out schools that seem out of reach if they’re an otherwise good fit (We’ll discuss this idea further in our next Tip of the Week).

In the meantime, be discouraged enough by tuition increases to take action to alleviate the pain, but encouraged that not all is at it seems on that front.

 

Chart: The Increasing Role of Parental Help

Chart: The Increasing Role of Parental Help

Sources of college funding

This chart comes to us as part of a series of data included in Sallie Mae‘s most recent “How America Pays for College” report. Of note this past year was the big increase in family assistance relative to other college funding sources. The average cost-to-student will run $24,164 in 2015, a substantial increase (about $3,300) from last year. To cover this increase, parental help has also ratcheted up, with an average of $10,365 coming from mom and dad to cover the bills (up about $1500 year over year).

In fact, parental resources have now become “… the number one source of funding, surpassing scholarships and grants for the first time since 2010.” According to Sallie Mae parental assets now account for 32% of total funding versus 30% from scholarships and grants. Also interesting to note, student efforts account for a full 27% of the total, split between income, savings, and borrowing.

In other words, with bills running almost $100,000 over a four-year period students and/or their families can expect to cover well over half of that total on average. Thing is, the “average” family I know doesn’t have that kind of money available. Thus I see over and over again students running off to college with everything they can muster financially thrown into the maw, only to return home a year or two later broke, confused, and frustrated at the experience. The nationwide data seems to support this trend.

Families must be vigilant as they plan their help to avoid this fate. For this reason I highly recommend exploring other options for boosting assets and decreasing costs. Also, it becomes extremely prudent to map out not only what students and parents have to offer, but to budget when the proceeds shall be applied to the college experience in order that the student can explore their options knowing the price point they must hit on a per-year basis.

 

 

 

Chart: The Value of Experience by Degree

Chart: The Value of Experience by Degree

The Benefits of Experience

Hats off to the consulting firm PayScale, providers of this chart. This data-intensive and interactive feature displays not only previously seen earnings by major or lifetime earnings by major, but also the value of job experience over the course of a given career.

If you play around with the chart for a while you quickly see not only the degrees/careers that pay more from the outset, but also those which reward (or not) years on the job. For instance, not only do early childhood education majors face dim wage prospects from the outset, they also don’t get much relative boost in pay in return for being on the job for a long period of time. Starting salaries run about $30,000 and after twenty years in the workforce median pay has only increased to $41,000. In contrast, almost any engineering or technical degree can expect consistent and healthy pay raises along the way.

This shouldn’t necessarily discourage anyone from pursuing this or that major, but certainly should temper one’s expectations of long-range returns. Many jobs may start discouragingly low on the totem pole in wages, but the promise of steady pay increases or brighter job prospects in return for sticking it out makes the education and early struggles worthwhile. Meanwhile, other careers will continue to hold you back with little hope of progress if you start out on the wrong foot, i.e. with a boatload of debt and other bills to pay.

We’ll explore this pain vs gain dynamic in our next Tip of the Week when I walk you through a process whereby you can calculate your expected Return on Investment (ROI), which will then enable you to properly determine the maximum out-of-pocket costs you should pay, depending on your career plans, in order to get to and through your chosen career in one piece.

 

Projecting Payoffs

Projecting Payoffs

The words Pain and Gain on a matrix of choices showing how to minimize pain or sacrifice in order to maximize returns and results

The Last “R”

So far we’ve explored ensuring affordability by running two sets of necessary filters: how to narrow down your college choices by priority so as to not run afoul of opportunity costs (Rank), and how to know how much college you can your income and assets will allow you (Resources). Now we’ll explore a critical third component to affordability/affordology: that of Return. 

This exercise will help you make two critical financial determinations:

For one, you’ll note in the previous discussions we didn’t address a major funding component of college in this day and age: the loan. Before counting loans as a resource, we must know whether that loan will count as “good debt” or “bad debt.”

For two, even if a student has plenty of available cash resources and thus doesn’t need loans, it still helps considerably when choosing colleges to understand the tipping point at which the cost of a college is worth it or not. Continue reading Projecting Payoffs

Plotting Resources

Plotting Resources

Automated grains food packaging machine production line

Previously in these pages we’ve witnessed the high costs of college, the increasing rate at which for student/family contributions cover these expenses, and the all-too-common specter of fund shortage induced dropout levels. So how do we not fall short ourselves? Here’s what I recommend: Continue reading Plotting Resources

A Prioritized Pursuit

A Prioritized Pursuit

Pinnwand

Rank: Priority of Priorities 

In another posting related to a Chart, I encouraged you to look into colleges with monetary costs as a secondary consideration. That might sound funny coming from a blog dealing with keeping college affordable.

But remember, while you can get anything in life you want, you can’t have it all. Prioritization must be your first priority. Before we get into the actual dollar cost aspects of affordology, let’s firstly address the opportunity cost considerations. Even a cheap experience (money-wise) at the wrong place may prove unaffordable (opportunity-wise). Besides, as we’ve noted, costs are highly negotiable while the other aspects of an experience at a particular college are relatively fixed.

Continue reading A Prioritized Pursuit