Over the past few decades, one of the broad and substantial transitions within student financial packages has been the increased presence of institutional tuition discounting, which is generally defined as using institutional grants to subsidize educational expenses. This has been especially prevalent at four-year private institutions, and although much analysis has been focused on the amounts of discounting, little has investigated discounting’s relationship with net tuition revenue.

This study investigated tuition discounting’s impact on net tuition revenue at 456 four-year, non-profit, private colleges and universities classified as Bachelor’s/Arts & Sciences or Bachelor’s/Diverse Fields. The timespan of interest was 2003-2012, and the main data source was the Integrated Postsecondary Education Data System (IPEDS).

The study utilized quantitative techniques, including generalized method of moments (GMM) to model the relationship. No significant benefits were found with high levels of discounting. Negative impacts of discounting that were found included a disproportionate impact on low-income students, shirking of net tuition revenue, presence of over-discounting, and lack of sustainability within discounting practices.