Private College Pricing: Are Current Policies Sustainable?

During the years of sharp tuition increases in the 1980s, the role of student financial aid provided by institutions shifted from the need-based formulas that had prevailed into a new pattern, subsequently called “tuition discounting.” As a president of a private college during that time, one of the authors (Breneman) lived through the discomfort and analytical confusion that occurred during these transition years. The accounting systems colleges and universities used back then were a large part of the problem, for all enrolled students were treated on the revenue side as if they paid full tuition, while financial aid from both restricted and unrestricted funds was treated as an expense on the debit side of the ledger. The result was a false sense that financial aid could be controlled in just the same way as any other item of expenditure. This elementary confusion gave rise to endless discussion on many campuses about the “right” level of financial aid, and the growing fear that somehow it was becoming an uncontrollable, and dangerous, threat to institutional wellbeing.