The Rise of Never-Charging-Sticker-Price

In 2021, 805 universities offered every admit a discount; in 2001, 474 did. Larger universities have embraced the discounting-always trend.

A number of great businesses specialize in never charging sticker price including: TJ Maxx ($130bn market cap), online mattress stores, and outlets (like Nordstrom Rack). The pricing strategy of always-discounting also happening, with increasing frequency, in higher education.

In 2021, 805 universities offered 100% of admitted students a tuition discount.

ANYAIDP is a neat IPEDS variable, defined as: “Percent of full-time first-time undergraduates awarded any financial aid.” Going deeper, it defines any financial aid as including both need and non-need forms of aid, like tuition discounting. Specifically, here are all the things ANYAIDP captures:

• Grants,
• Loans,
• Assistantships,
• Scholarships,
• Fellowships,
• Tuition waivers,
• Tuition discounts,
• Veteran’s benefits,
• Employer aid (tuition reimbursement) and
• ”other monies” (other than from relatives/friends) provided to students to meet expenses. This includes Title IV subsidized and unsubsidized loans made directly to students.”

Why is that so interesting? In the above list, most aid requires an application (like the FAFSA), except for tuition discounts and tuition waivers. At the same time, it is well-known that wealthy families do not apply for financial aid. So how is it possible that ANYAIDP can = 100%, if not everybody applies for financial aid but everybody gets financial aid?

When ANYAIDP = 100%, it means the university is awarding wealthy students financial aid that they did not apply for, via tuition discounts. In other words, setting ANYAIDP = 100% gives us a lens into how widespread tuition discounting is, and it turns out that there are hundreds of universities that bundle tuition discounts with every admission offer.

When IPEDS variable ANYAIDP = 100%, we can see how many universities bundled all of their admission offers with tuition discounts.

• In 2000, only 474 universities bundled every admission offer with a tuition discount (accounting for 91,219 admission offers).
• In 2021, 805 universities bundled every admission offer with a tuition discount, accounting for 1,677,550 admission offers.

Guaranteed-tuition-discounts have risen 6.5x in absolute terms from 2001-2021 (see chart below). Larger universities, like Grand Canyon University, have adopted the strategy of discounting tuition for every admitted student.

The prevalence of tuition discounting does not say anything about affordability; average net price can rise even when everyone gets a tuition discount. Most likely, tuition discounting makes rising net prices more palatable.

As bundling tuition discounts automatically with admission offers becomes more widespread, it raises some really neat algorithimic aid quesitons:

• How are tuition discounts set for wealthy families without financial need?
• Are there tuition-bots, applying to and recieving financial aid letters from rival colleges,like how Amazon deploys pricing bots to monitor competitor’s prices? This feels implausible right now, but inevitable soon.