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Will Record Tuition Deductions Help Private Colleges?


Both public and private colleges are competing for a limited number of students. Since public colleges are supported by the taxes of the people who live in the local regions, the tuition for public colleges tends to be lower than the tuition for private colleges. A small number of private colleges have reputations so powerful that they can secure more than sufficient students to keep themselves running for the foreseeable future, but the rest have not managed to build their brands to the same extent. As a result, it should come as no surprise to learn that private colleges are willing to use all sorts of ways to bring in more students in spite of some of their higher tuitions compared to that of their public counterparts.

For example, since the higher tuition of private colleges compared to that of public colleges is one of their main problems, it should come as no surprise to learn that private colleges are offering more and more tuition deductions. In fact, private colleges are offering so much in tuition deductions that they have actually managed to set a record for the 2015 - 2016 school year. According to the annual report of the National Association of College and University Business officers, private colleges gave an average of a 49 percent deduction on the tuition of freshmen versus an average of a 43 percent deduction on the tuition of other undergraduates, which is a significant increase considering that there was an average of a 34 percent deduction about a decade ago. In other words, this is not a sudden and shocking outcome that no one could have foreseen, but something that has been moving in this direction for a while now.

Why Are Private Colleges Providing More Tuition Deductions?

Although this can seem counter-intuitive for institutions that are interested in making a profit, providing more tuition deductions is something that can actually make sense under the right circumstances. Theoretically, the chain of reasoning is a simple one. In short, private colleges have their fair share of advantages and disadvantages compared to their public counterparts, but with the continuing rise in tuition in recent decades, cost has become more and more of an issue, which is a serious problem because cost is one of the private colleges' biggest problems. By providing more in tuition deductions, private colleges can mitigate the severity of the problem, thus placing them back in an excellent position to compete with their public counterparts for the limited number of students.

With that said, it is important to note that tuition deductions are not handed out in evenly-measured portions to all of the students who might be interested in attending private colleges, meaning that they are actually even more useful to private colleges than the previous paragraph made them sound. After all, private colleges put a lot of time and effort into making sure that most of their tuition deductions go towards the best and brightest of their potential students while leaving less to the rest, which serves their aim through one of two ways. First, having the best and bright students means raising their scores according to the metrics used to gauge an institution's academic performance, thus increasing that particular private college's reputation among its potential students.

In turn, this increases the number of students that will be interested in attending it rather than one of its competitors among either public or private colleges, which is important because the best and the brightest will be boosting its reputation in a self-perpetuating phenomenon while the rest will be paying for them through their tuition. Second, it is a generally accepted assumption that the best and brightest students are also the ones who will have the most successful careers as graduates from their colleges of choice, which in turn, means that they will also have the most money that can do towards their alma matter. Although this is more of a consideration in the long run than in the short run, it still means that attracting the best and brightest students is absolutely essential for private colleges that are looking to increase the size of the endowments that can keep them running in spite of all the risks that exist in a often-risky business environment.

What Will Be the Outcome?

Of course, given the importance of the choice between public and private colleges, it should come as no surprise to learn that this piece of news has resulted in an interesting discussion about its impact on the future of private colleges. An argument could be made that private colleges will use tuition deductions as well as other incentives to lure the best and brightest students out of their public counterparts, thus leaving the latter to stagnate while they become stronger and stronger. However, it is important to note that this is an extremely premature prediction, particularly since private colleges exhibit an enormous range of differences that make it a challenge to predict anything about them as a whole.

Even if private colleges began offering so much in tuition deductions that their tuition becomes effectively the same as the tuition of their public counterparts, cost is not the only consideration, meaning that some students will still choose their public counterparts over them. Sometimes, this is because public colleges are closer to where they live, while other times, this is because their families have emotional connections to said institutions that make it unlikely that they will head somewhere else. Whatever the reason, lower tuition will make private colleges more attractive to their potential students, but not enough to actually dominate so long as their public counterparts are still in the picture, particularly since not all private colleges have enough endowments to offer that much in tuition deduction and enough space to accommodate all of the students that might be interested in attending them.

Summed up, this trend shows that private colleges are recognizing the need to change their practices in order to adapt to changing circumstances, but that is no more than what they have been doing all along. Nothing truly fundamental has changed about the situation, meaning some private colleges will continue to prosper, most private colleges will trudge along, while other private colleges fail only to be replaced by new entrants into the market.

Garrett Parker

Written by Garrett Parker

Garrett by trade is a personal finance freelance writer and journalist. With over 10 years experience he's covered businesses, CEOs, and investments. However he does like to take on other topics involving some of his personal interests like automobiles, future technologies, and anything else that could change the world.

Read more posts by Garrett Parker

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