ARCHIVES :: SEPTEMBER 2002 :: YOUR MONEY

Brighter Students
Qualify for Discounts

By June Kronholz
Staff Reporter of The Wall Street Journal

Eager to attract the most talented students, many of the country's financially stronger universities are actively offering high achievers discounts off their usual tuition rates.

These rebates, which can be thousands of dollars, are not coming from endowments or government grants. Instead, the colleges are dipping into their own tuition revenues -- essentially taking from students who pay full price and giving to others. And it's the high achievers, rather than the needy students, who are getting a good chunk of the money.

The practice is remarkably widespread, reaching almost all but the 30 or so Ivy League and other elite colleges that ban merit-based financial aid. Schools are also becoming more aggressive in promoting their discounts. At the DePauw University Web site, enter an SAT or ACT score, grade-point average and class rank, and a computer program immediately tells you what kind of "award" the Indiana college will offer.

Only "the real unlucky" pay full price any more, says Kenneth Redd, director of research at the National Association of Student Financial Aid Administrators.

About 76% of first-year students got some form of discount this year at 331 private schools polled annually by the National Association of College and University Business Officers. Average award per student: $7,000.

Tuition discounting began to soar about a decade ago as the federal government started shifting from outright grants to student loans. Colleges stepped in to fill the void, and many opted to use some of their money for merit-based awards. Now, more than one-third of the money that private colleges spend on aid goes to distinguished students. In discount terms, that translates this way: This year, schools gave back to freshmen $38.20 for every $100 they collected from them in tuition and fees, compared with $26 in 1990.

Even some public four-year colleges are offering discounts to certain students, a relatively new practice for them. With state budgets stressed, tuition has been rising, and the publics have had to compete more aggresively for students. Now, two-thirds of public universities' scholarship money goes to students based on academics, athletic ability, race -- anything but financial need.

The flip side of big discounts is that less money is available to improve academic programs and school infrastructure. Mr. Redd says he found that universities that have sharply increased their discounts have seen graduation rates fall, and that that's true even among highly selective schools. "They get the students in the door, but don't have the services to keep them," he says.

Schools don't publish their discount rates, although it is possible to calculate them using information in the schools' annual reports. Another place to look is college Web sites, which often report the percentage of students receiving aid (though that number doesn't distinguish between loans and grants, or between federal money and university money). The sites also often list the size and number of grants the schools offer, and the required qualifications -- grade averages, arts accomplishments, intended major. That makes them the best place to look into discounts.