As award letters start flooding student inboxes this month and next, we thought this was an important question for students to know the answer to. 

Answer: 39%

Questions:

• What criteria do colleges use to determine the amount of the discount that a student might receive?
• Rather than list a discount percentage on your award letter, colleges provide financial aid and grants to reduce the cost of tuition. Why do you think they rarely use the word "discount" anywhere in their financial aid materials?
• Do you think that public colleges would have higher or lower discounts? Explain.
• If a private college had tuition cost of $30,000, what would a student receiving the median discount rate expect to pay "out of pocket" for tuition (remember there's room and board and other costs also which usually are not discounted!).

Here's the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (Chronicle of Higher Education):

In general, the report says, small private colleges are discounting more than their larger peers are, partly because smaller colleges offer mostly undergraduate programming. The median discount rate will most likely continue to rise, the report predicts, to 39 percent in 2019, a five-percentage-point bump from 2014.

Rising discount rates will continue to stifle private colleges’ pricing flexibility, Fitzgerald said. That’s because once a certain discount rate is promised to incoming freshmen, she said, it’s really difficult to tell them the following year that they’re getting less of a break.

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Want to dig in deeper on Award Letters? NGPF has a Fine Print to develop your students skill so they can learn to interpret their letter.  

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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