A handful of colleges announce one-time tuition cuts each year.
These colleges hope that the publicity from the tuition reset will help them attract and recruit more students, thereby, compensating for the lower tuition revenue per student with increased enrollment. Total undergraduate enrollment increases with decreases in tuition, as shown in this chart based on data from the 2011-12 National Postsecondary Student Aid Study (NPSAS).
For example, when Bethany College of West Virginia cut its tuition in 2002-2003 by 42% from $20,650 to $12,000, it was able to attract 60% more freshmen, increasing total campus enrollment by 13% to 875 students. Financial aid was also cut by 43%. The combined impact of the increase in enrollment and the cut in financial aid yielded a net increase in total tuition revenue despite the decrease in tuition rates.
Types of Colleges That Reduce Tuition
Most of the colleges that have implemented tuition cuts are not very well-known nationally, instead drawing most of their enrollment regionally.
For a college to benefit from a reduction in tuition, the college must have significant excess capacity, sufficient to absorb an increase in enrollment.
For a tuition cut to be effective, cost must be a primary factor in the students’ decision to not enroll. Typically, the college will have had above-average tuition for the region prior to the cut and below-average tuition afterwards.
None of the colleges that implemented tuition reductions appear to have been affected by the “Chivas Regal effect,” where high price is associated with better quality. So, there was little risk that the tuition cut would be perceived as a reduction in institutional quality. None of the colleges implemented tuition cuts in conjunction with other visible cost-cutting measures that were perceived as hurting institutional quality.
The tuition cut must also be dramatic, at least 20%. Sometimes, the cut will be designed to reduce tuition below certain psychological thresholds, such as round numbers, or to roll back tuition by a decade or more. The tuition cut must be big enough to generate significant publicity for the college, to help the college attract a big increase in the number of applicants. Most colleges launch big PR campaigns in conjunction with the tuition cut.
Impact on College Affordability
One-time tuition cuts generally do not reduce the financial burden on students who receive financial aid from the college, because the net price does not change. The tuition cuts are accompanied by corresponding cuts in financial aid spending. Full-pay students and other high-income students, who do not receive grants and other types of gift aid from the college, will save money from the tuition cuts. One of the goals of a tuition cut is to attract more full-pay students.
Tuition cuts are necessarily one-time events. All colleges that have cut tuition have returned to tuition increases in subsequent years.
Colleges That Have Cut Tuition