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Competition wins: As colleges slash costs, student enrollment surges, data show

When colleges lower their price, they aren’t signaling the end of their existence. Instead, such cuts are helping small colleges stay afloat and increasing competition.

That’s the argument in a new report from Alex Contarino, a research assistant with The James G. Martin Center for Academic Renewal. He writes colleges aren’t putting themselves on life support when they decrease their costs:

Contrary to some analysts’ claims, struggling colleges that reduce tuition rates are not signing their own death certificate. Rather, they are enhancing their competitiveness, which in turn is reaping benefits for students and parents.

Staying competitive is no easy task for colleges, especially now, when demand seems to be deflating. Nationwide enrollment has fallen in eight of the last nine semesters, cumulating in a two percent drop since 2012. The hardest hit schools are small, non-elite public and private schools that lack the branding power of state flagships and elite private universities.

Unlike public universities and elite private colleges, Contarino writes these smaller institutions don’t have large endowments to offset financial struggles:

Smaller colleges, however, are much more dependent on their students’ tuition dollars and, in turn, their ability to maintain, and if possible grow, their enrollment figures.

In an effort to reverse the trend of falling enrollment and attract new students, some colleges are cutting their tuition significantly. More than 50 public universities have reduced their tuition rates—particularly for out-of-state students—by more than 10 percent in recent years. Dozens of private universities have made similar cuts—such as the University of Charleston, which reduced its tuition from $25,000 to $19,500 in 2012.

Contarino points out that “falling demand for college and pressure to reduce tuition seem to paint a very bleak picture of college finances.” However, he says the future of higher education isn’t as dark as some portray it:

Yet there is a strong case to be made that higher education is not on the brink of catastrophe. The rate of college closures has been holding steady at the historical five-per-year average. Most colleges, while perhaps struggling, are nonetheless finding ways to pay the bills each year. And many others are actually thriving, even while doing the once-unthinkable: slashing tuition prices.

Read the full report.

MORE: Higher education’s like an obese person — and it needs to go on a diet, prof says

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