Listen To The Story

Last fall Concordia University in St. Paul, Minnesota did what might seem unthinkable these days: the small Christian college cut its tuition by $10,000, or more than 30 percent. At the same time, it cut back on financial aid.

Too many students saw the old sticker price of nearly $30,000 and didn't bother applying, says chief operating officer Eric LaMott.

"We knew that if we could get people to consider us deeper into that admission cycle, that many more would choose us," he says. And it worked. Between new freshmen and transfer students, LaMatt says enrollment grew by about 43% this school year.

Most private colleges are caught up in an intricate game of setting a tuition price and then marking it down with grants and scholarships, to attract top students or help those in need. But remember when J.C. Penney scrapped the sales and went to "everyday low pricing"? Shoppers revolted, and the company apologized. It turns out college may not be all that different from a sweater or handbag. People like to feel as though they're getting a deal.

"A lot of people equate a high sticker price with prestige," says Ken Redd, director of research and policy analysis at the National Association of College and University Business Officers (NACUBO).

Let's say College X costs $40,000 a year, but offers you a $20,000 grant. College Y charges $20,000 – no grant. Redd says most people will pick the pricier school.

"Even though the math is the same," he says. "You're still paying $20,000 out of pocket, ultimately, but folks would rather say they got a 50% discount off of $40,000 than no discount off of $20,000."

At some colleges that have tried ditching the big discounts, tuition and aid have eventually crept back up, says David Strauss, a consultant with Art & Science Group.

"What that tells me is that they have not found a new magic pricing strategy," he says. "What they found was a way to get some ink. They got a little press coverage. They got a little attention. As that ripple faded away, so, too, did any advantage they got from it."

Overall, the strategy of discounting keeps growing. According to NACUBO's latest survey, for every dollar private colleges collect in tuition, they give back a record 40 cents, on average, in grants and scholarships.


Follow Amy Scott at @amyreports