Resetting Prices: Estimating the Effect of Tuition Reset Policies on Institutional Finances and Enrollment

Abstract

Private nonprofit colleges are increasingly using tuition resets, or a decrease in sticker price by at least 5%, to attract new students and counter declining demand. While discounting tuition with institutional aid is a common practice to get accepted students to matriculate and to increase affordability, a tuition reset is a more transparent approach that moves colleges away from a high aid/high tuition model. The authors find minimal evidence that these policies increase student enrollment in the long run, but that there may be short-term impacts. As expected, institutional aid decreases and varies directly with the size of the sticker price reduction. The average net price students pay decreases, but this effect may be driven by changes in the estimated non-tuition elements of the total cost of attendance. Finally, net tuition revenue appears unrelated to tuition resets. These findings call into question the efficacy of this practice.