Norwich to offer fewer scholarships

Imagine you are looking to buy a new stylish car to fit your budget and your lifestyle. You see a car you really like. The sticker price reads $25,000. However, the salesman, being a shrewd seller, has a proposal.

"I really see you in this car," he says. "As a matter of fact, I'm going to discount the sticker price. I'll sell you this car, for only $20,000!"

At Norwich, and many other colleges, this anecdote also describes how students are awarded merit scholarships, which are really just a discount on the cost of tuition.

But due to fewer students attending Norwich in future years and budgetary concerns, financial aid will be offering fewer merit scholarships to incoming students, according to the Norwich president.

"The school may say, ‘OK, it'll cost $20,000 to come here, however, we'll let you come for only $15,000,' because a student is expected to perform well in our environment," said Norwich President Richard Schneider. "… The school wanted someone to come, so they discounted the price by $5,000."

"We do that all the time, and so does every other college in the nation. What's happening though, in America, is the discount rate is rising dramatically," said Schneider

The average rate at which schools discount prices has increased from 38 percent to 43 percent in under one year. While it may be hard for most people to believe, higher education has been getting cheaper because of the increased rate of average discounting.

"The only trouble is, schools are struggling to make the classes! Would an airline want a plane to fly, with half the seats empty? No way. Schools need the students that get accepted, to attend," Schneider said. And so schools offer discounts to entice students to attend, but at a financial cost to the school's bottom line.

Cutting budgets is difficult, though, because most higher education prices are fixed, including faculty pay and campus maintenance. "If I don't make this next class, it's bad for our budget!" Schneider said.

"Now, am I going to fire a faculty member, because 20 accepted freshmen don't attend our school? No… I need to find ways to save for these setbacks, and I can barely do that with our fixed expenses," Schneider said.

Financial planners for Norwich are considering two options: Bringing in more students, or lowering the discounts for incoming students.

With future Norwich class sizes decreasing, lowering the rate at which discounts are offered is the next step. These changes to discounts offered will take place in the coming years, changing slowly with time.

Many discounts and merit aid scholarships are offered to students at Norwich. "Currently, Norwich puts over 40 percent of its tuition revenue back into grants and scholarships for students," said Tracey Steine-Mingo, director of student financial planning.

"For the 2010-11 year, this equates to around $25 million."

According to Steine-Mingo, the $25 million already given to students this past academic year is an "increase of over $4 million over the past three years."

This trend may have to level off soon, due to more students relying on federal financial aid and student loans to pay for education.

"Approximately 85 percent of undergraduate students receive some kind of financial aid, whether it is from grants, loans or work study," Steine-Mingo said. With the turn in the economy in recent years, there has been an increase in the number of students applying for financial aid.

"Nationwide, the use of loans by students has increased steadily over the last 10 years or so as college costs have risen," Steine-Mingo said. "This is also true at Norwich.

The increase in students filing a Free Application for Federal Student Aid, or FAFSA, seems to "indicate that more students are looking to the government for assistance in paying for college. In recent days, however, legislation has been proposed that would cut some federal aid programs and reduce others," Steine-Mingo said.

These changes, if passed, could affect Norwich students. "We are working through state organizations to try and ensure that our representatives in Congress are aware of the effects these cuts would have on our students," Steine-Mingo said.

With more students relying on federal financial aid, and federal aid possibly being reduced in the future, the trend of average rising discounts is most likely going to level off, according to financial planners.

While the use of loans has been increasing over the past decade, the average loan indebtedness has remained fairly constant over the past couple of years and the amount of private loans taken out by students has decreased.

But, parents of students have been taking out more loans, so there remains a "heavy reliance on loans in order for families to pay their bills," and pay for college expenses, according to Steine-Mingo.

Norwich has had to see some staff members go in order to make budget cuts.

"We go through major budget cuts. I take staff out, I've had to fire staff before, or laid staff off," Schneider said. "But in the future, I'm going to have to give fewer discounts. In other words, you can't lose a little bit of money on every kid, and make it up with volume. That's not a sustainable business model."

"We're running a $480 million business here. What we have to do, of these 400 new rooks and 175 civilian students coming in, we're going to try to make this class without giving so much money away, and have them pay more," Schneider said.

"This is because we need it, to run this place. I've got 3 percent of the students who actually pay the full price," Schneider said. "We always give what we can, to those most qualified students."