Warnings About Tuition Discounting

As Australia prepares to deregulate the setting of tuition prices, experts there warn that universities will begin offering cut-price “scholarships” while maintaining high sticker prices as markers of quality.

September 16, 2014
 

As Australia prepares to deregulate the setting of tuition prices, experts there are warning that universities will adopt a heretofore foreign practice that is common in the United States: discounting prices.

Students could pay vastly different prices for the same course as institutions compete by offering cut-price “scholarships” while maintaining high sticker prices as markers of quality.

Experts are warning the market will be complex and murky, similar to the airline industry, where different deals, changing prices and brokers mean you can never know what the person sitting next to you has paid. The Australian government wants to ­deregulate fees in 2016 but the legislation faces being blocked in the Senate.

“It is an inevitable consequence of deregulation and it will lead to a very untransparent market. It will be a case of buyer beware,” said Leo Goedegebuure of Melbourne University’s LH Martin Institute. He said that in the U.S., most students were paying discounted fees through a multitude of scholarships.

A survey in July by the National Association of College and University Business Offices found that among 401 nonprofit colleges and universities, almost 90 percent of first-year students were receiving grants equivalent on average to a 50 percent discount on the sticker price.

Goedegebuure said a dedicated consumer organization might have to be created to track fees, but he warned it would be difficult because universities would be wary of being transparent and undermining their high headline prices.

He said it was analogous to universities boasting high academic entry scores to build prestige for courses but then offering many bonus points to bring in students with lower school scores.

“There is an incentive for ­institutions to ensure the market isn’t transparent because it strengthens their market position,” Goedegebuure said.

Another higher education analyst, Andrew Norton of the Grattan Institute, agreed and warned that universities could face complaints from ­students demanding to know why a fellow student was paying much less for the same course.

“The logic in the U.S. and among the airlines is that there are different groups with different levels of price sensitivity and therefore they play the market to get as much as they can,” said Norton, who earlier this year ­reviewed the university system for the Abbott government.

He said universities would use the term “scholarships” rather than “discounts” to protect their prestige, but it would amount to the same thing. But Norton also expected some universities to market themselves as affordable high-quality providers and seek to show their quality by their teaching results rather than their prices.

Universities Australia said it would be in the interests of universities to ensure the market was as transparent as possible to encourage students. “Universities want to be able to deliver a good service to a strong student base,” said its chief executive, Belinda Robinson.

 

Back to Top