Scholarships Likely to Decline at Private Colleges and Universities

Now that colleges are tallying up applicant numbers and receipts look pretty good so far, the truly difficult task of determining how much financial aid to make available for next year’s freshmen begins. It’s no secret that money will be tight this year, but US News and World Report (USNWR) makes it look like private colleges are going to be exceptionally stingy as a result of decisions made in 2009.

According to USNWR, some financial aid officers believe “they went overboard last year” handing out money to compensate for the obvious drift toward public institutions among more thrifty college applicants. When things looked grim, officials at many private colleges offered “extra-big” scholarships to lots of applicants, just to make sure they had enough incoming freshmen to fill all those brand new dorms and lecture halls built when the economy looked better.

And the strategy worked. So well in fact that dozens of private colleges reported more generous aid offers resulted in large or even record-breaking freshman classes. Among these were the University of Richmond, Johns Hopkins, Roanoke College, and Trinity Washington DC.

But as a result of this maneuvering, 30 percent of private colleges will take in less total tuition dollars this year than last, according to a recent analysis by Moody’s. This decline comes in the face of an average 4.4 percent increase in the sticker price of a private school education, which currently averages about $26,000. In other words, while some students are paying higher prices this year, more students got much bigger scholarships than in previous years.

It doesn’t take a PhD in economics to figure that this kind of a strategy can’t last. The 30 percent of colleges that were so generous with scholarships that their revenues declined will have to tighten up aid for the next batch of freshmen. And as the economy improves, financial aid officers want to believe that families really can afford more than they estimated last year.

This means that many of this year’s applicants, especially those who don’t have the grades, test scores or special talents to make themselves especially competitive might have to spend a little more to attend private colleges. It also suggests that full pay candidates may become even more attractive to admissions.