Colleges experiment with tuition discounts to attract, hold top students

BETHLEHEM, PA. — BETHLEHEM, Pa. -- It is not quite the "These deals are INSA-A-ANE" world of late-night stereo and sleep-sofa ads, but increasingly, discount merchandising is coming to academia.

At Lehigh University here, a new program allows top students to get a fifth year of undergraduate or graduate education free. The school, for the first time, has instituted scholarships not based on financial need as a way to attract top students.


Its business school has cut tuition 22 percent for its master's program. Those who earn a master's in business administration get two-thirds off the regular tuition price for any course they take after graduation.

The changes at Lehigh are just a glimpse of a revolution beginning to rock America's colleges and universities as more consumers make it clear that they cannot or will not pay the sticker price for college.


"We're not trying to be the discount kings here," said James Schmotter, dean of Lehigh's College of Business and Economics.

"But I think we've sat here on campus and thought we're special and we're different from other kinds of marketplaces. Our customers no longer think we are that different; they see us more like other high-priced luxury goods.

"As time goes by, I think we're going to see increasingly more aggressive and creative and sometimes desperate pricing schemes."

The higher education market has already changed significantly. In the past four years, the number of students paying full tuition at Lehigh, for example, has dropped to 49 percent from 63 percent, and nationally fewer than half of all college students pay full tuition.

Experts say that discount schemes are proliferating. They include more financial aid awards based on need, new merit scholarships designed to attract more sought-after students and innovative pricing plans.

Dr. Robert Zemsky, director of the Institute for Research in Higher Education at the University of Pennsylvania, said, "I think the whole price structure of higher education, particularly in the private sector, is collapsing, and there will be a lot of what might be called novel experiments in the years to come.

"The market is trying to, in a larger sense, clear and find out the real price the public is willing to pay for higher education."

Experts say at least four factors have put higher education in its current bind. The first is that the cost of a college education has grown far faster than the Consumer Price Index and personal income.


Second, the pool of applicants is declining or stagnant. Third, the public is increasingly skeptical and cost-conscious as a result of the consumer movement and negative publicity about academic life. Fourth, the competition for top students is increasing.

Those factors have contributed to experiments such as these price-cutting plans:

* In October, the University of Rochester announced that it would give a $5,000 grant to all New York state residents who enrolled as freshmen in 1995.

* The University of Detroit Mercy, Michigan's largest private university, took the opposite tack, offering out-of-state students a grant program of up to $1,950 to match what the state gives Michigan students.

* Susquehanna University in Pennsylvania and Clarkson University in upstate New York are among schools that have begun offering four-year degrees for the price of three, allowing students to cut $12,500 to $25,000 from the cost of their bachelor's degrees.

* Stevens Institute of Technology in New Jersey and Clark University in Massachusetts offer what amounts to 20 percent more education free: a no-tuition fifth year.


* This month Michigan State University announced what it called a "historic" policy guaranteeing that tuition would not rise faster than the projected rate of inflation for the next three years.

According to the College Board, average tuition is now $11,709 at four-year private colleges and $2,686 at four-year public colleges, both up 6 percent over the previous year.

When room, board, books, supplies and transportation are included, the total price comes to $18,784 for resident students at four-year private colleges and $8,990 at public ones. The average American student pays about half of the total college bill, experts say.

A study by Mr. Zemsky's institute last summer examined five representative colleges from 1987 to 1993 and found that all were increasingly likely over time to offer more financial aid.

The study also suggested that the purpose of the aid was not just to assist needy students but to increase enrollment and maintain class sizes. The emerging discounts are part of the same picture.

Not all campuses feel the pressures equally. But Mr. Zemsky says there are probably fewer than 35 universities in the country with a reputation or market niche so secure that they are largely immune from the pressure to discount tuition.


Lehigh was once known largely for its rigorous engineering curriculum and wrestling program. Now, of its 6,300 students, 36 percent are majoring in engineering.

Like many colleges, Lehigh, where 72 percent of entering freshmen came from the top quarter of their high school class, finds it increasingly difficult to find students who will pay full tuition, $18,700.

In 1990, it provided $12 million in financial aid, and 37.4 percent of its freshmen received financial aid. This year, its financial aid budget is $23.1 million, and 50.9 percent of freshmen receive financial aid.

The pressures on colleges are affected by the increasing financial sophistication of prospective students.

Chris Holler, an 18-year-old Lehigh freshman from Baltimore, hired a college selection firm to scout out the financial aid prospects at institutions he was considering. They included Lehigh, Bucknell, the University of Maryland, Villanova, Virginia Tech and the University of Delaware.

He said he was leaning toward Delaware, where many of his friends had gone, but chose Lehigh after it came up with the best financial aid offer, including a $15,000-a-year scholarship. He also took out two or three loans, he said.


"In the end, it worked out great, both in terms of the school and the financing," he said.

Mr. Holler's scholarship was based on need, but growing competition is forcing many universities to increase their pool of merit-based as well as need-based financial aid. Until this year, Lehigh was among the fewer than 15 percent of four-year colleges that gave out aid strictly on the basis of need.

But the university found that it was increasingly losing more and more students to such competitors as Emory, Carnegie-Mellon, Rochester, Richmond, Villanova and Johns Hopkins, all of which have moved aggressively to offer merit scholarships as recruiting tools.

In a survey of applicants who were accepted by Lehigh but chose to go elsewhere, 62 percent said they would have been interested in Lehigh if they had received a merit scholarship.

Partly in response, Lehigh this year announced President's Scholarships, in which students with a cumulative grade point average of 3.5 or higher or who graduate with "high honors" can attend another year free to get a master's degree or complete a second major.

It also announced some $5,000 to $7,000 Dean's Scholarships to superior applicants for the freshman class, and $2,500 music and theater scholarships not based on need.