The case will be heard at London’s High Court April 1-3, the Independent Schools Council (ISC), which represents private schools in the UK, revealed this week.
It’s the latest step in its furious battle to overturn a policy – key to the Labour party’s election manifesto before it regained power in July 2024 – to start levying VAT on private school fees.
The ISC said its case, led by prominent human rights barrister Lord Pannick KC, would argue that the VAT policy “impedes access to education in independent schools” and is therefore incompatible with the European Convention on Human Rights.
In the case, the ISC is supporting six families impacted by the policy, and the defendent in UK Chancellor Rachel Reeves.
The case is being heard on an expedited basis following a successful argument from Lord Pannick that parents needed certainty because they are already feeling the effects of the policy.
ISC CEO Julie Robinson said the organisation’s aim was to “protect the rights” of families and young people “who are having their choice removed from them”.
“This is an unprecedented tax on education – it is right that its compatibility with human rights law is tested,” she continued. “We believe the diversity within independent schools has been ignored in the haste to implement this damaging policy, with families and, ultimately, children, bearing the brunt of the negative impacts this rushed decision is already having.”
This is an unprecedented tax on education – it is right that its compatibility with human rights law is tested Julie Robinson, ISC
Reeves confirmed in October that the party would be slapping a 20% tax on fees for January 2025, leading to fears from independent boarding schools that their intake of international students could plummet.
Experts predicted that although some schools would choose to swallow the loss of revenue, most would be forced to raise their fees an average of 10-15% to cover costs.
An online private school told The PIE News earlier this month that it has seen a “five-fold” surge in interest from parents since the VAT policy was announced last year.
CEO of Minerva’s Virtual Academy, Hugh Viney, credited the rise in demand to the VAT policy, as he said the school’s fees are “good value” and much less than most private schools at under £8,500 per year – a price that has always included VAT and is therefore unchanged by the new legislation.
RANDOLPH, Vt. — The thermostat was turned low in the admissions office at Vermont State University on a cold winter morning.
It’s “one of our efficiencies,” quipped David Bergh, the institution’s president, who works in the same building.
Bergh was joking. But he was referring to something decidedly serious: the public university system’s struggle to reduce a deficit so deep, it threatened to permanently shutter several campuses after dramatic drop-offs in enrollment and revenue.
While much attention has been focused on how enrollment declines are putting private, nonprofit colleges out of business at an accelerating rate — at least 17 of them in 2024 — public universities and colleges are facing their own existential crises.
State institutions nationwide are being merged and campuses shut down, many of them in places where there is already comparatively little access to higher education.
David Bergh, president of the newly consolidated Vermont State University, in the building where he works at the VTSU campus in Randolph. “Public institutions are not exempt from the challenges” facing higher education, Bergh says. Credit: Oliver Parini for The Hechinger Report
“Public institutions are not exempt from the challenges” facing higher education, Bergh said. “We are already seeing it, and we’re going to see more of it, and it’s particularly acute in some more rural states, where there’s a real need to balance limited resources but maintain access for students.”
Vermont is a case study for this, and an example of how political and other realities make it so hard for public universities and colleges to adapt to the problems confronting them.
“The demographics of fewer traditional-age college students, the over-building of these campuses, the change in the demand for what we need for our workforce in terms of programs — this is something that’s happening everywhere,” said Vermont State Rep. Lynn Dickinson, who chairs the Vermont State Colleges System Board of Trustees.
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Public university and college mergers have already happened in Pennsylvania, Georgia, California and Minnesota, and public campuses have closed in Ohio and Wisconsin. A merger of public universities and community colleges in New Hampshire is under study.
When state university and college campuses close, the repercussions for communities around them can be dire.
Until this month, local students had a college “in their backyard,” said Thomas Nelson, county executive in Outagamie County, Wisconsin, where the two-year Fox Cities outpost of the University of Wisconsin Oshkosh this spring will become the sixth public campus in that state to be shuttered since 2023, after a long enrollment slide. “We’ve had this institution for 60 years in our community, and now it’s gone.”
Not only students are affected. In many rural counties, “there really isn’t a lot beyond the university,” Nelson said. “So that’s going to be devastating for the economy. It’s going to kill jobs. It’s going to be one more strike against them when they are competing with other communities with more amenities.”
Attempts to close these campuses attract the intervention of politicians, who have more control over whether public than private nonprofit colleges in their districts close. After all, “they own the place,” said Dan Greenstein, former chancellor of Pennsylvania’s State System of Higher Education, who — after that state’s enrollment fell by nearly one-fifth — led a reconfiguration that resulted in six previously separate public universities there being merged into two systems.
Even trying to rename a public university can have political consequences. When Augusta State University in Georgia was combined with Georgia Health Sciences University to become Georgia Regents University, there was a local outcry over the fact that “Augusta” was no longer in the name. Within two years, the merged school had yet another new name: Augusta University.
“Public institutions are complex structures,” said Ricardo Azziz, who led that consolidation, served as president of the resulting institution and now heads the Center for Higher Education Mergers and Acquisitions at the Foundation for Research and Education Excellence. “They’re influenced by politics. They’re influenced by elected officials.”
When the proposal to close campuses in Vermont was met with public and political resistance, state planners backed down and decided instead to merge them, laying off staff and cutting programs. That did not go well, either, and resulted in raucous public meetings, votes of “no confidence,” plans that were announced and then rescinded and a revolving door of presidents and chancellors. Only now, in its second year, has the process gotten smoother.
Alarm bells started sounding about problems in Vermont’s state universities before the Covid-19 pandemic. With the nation’s third-oldest median age, after Maine and New Hampshire, according to the Census Bureau, the state had already seen its number of young people graduating from high school fall by 25 percent over the previous decade.
Enrollment at the public four-year and community college campuses — not including the flagship University of Vermont, which is separate — was down by more than 11 percent. A fifth of the rooms in the dorms were empty. And with the birthrate in the state lower than it was before the Civil War, there was no rebound in sight.
These trends have contributed to the closings of six of Vermont’s in-person undergraduate private, nonprofit colleges and universities since 2016.
“We’d be keeping our head in the sand if we didn’t think that those same forces were going to affect our public higher education system,” said Jeb Spaulding, who, as chancellor at the time, merged two of Vermont’s five state colleges, in Johnson and Lyndon, in 2018.
The red ink continued to flow. Two years later, just after Covid hit, Spaulding recommended that three of the five public campuses be shut down altogether — Johnson and Lyndon, plus Vermont Technical College in Randolph.
“What we needed to do was save the Vermont State Colleges System as a whole,” which has 145 buildings for fewer than 5,000 students, Spaulding recalled. That same problem of excess capacity is affecting higher education nationwide.
“It was well known that we had too much bricks and mortar for the number of traditional-type students that were going to be available in Vermont,” Spaulding said. “We saw all that coming, and we had started a process of educating people and working on what would be a realistic public-sector consolidation plan so that we could actually put our resources into having a smaller constellation, but well financed and up to date.”
The reaction to the plan was explosive, even in the midst of a pandemic. At socially distanced drive-by protests, critics brandished signs that said: “Start Saving: Fire Jeb.” Within four days, the proposal to close campuses was withdrawn. A week after that, Spaulding resigned.
“I guess I didn’t realize that in the public realm, you can’t make the kind of difficult decisions that if you were at a private institution you would have to make,” he recounted. “When the politics got involved, then it became clear to me that there was no way that I was going to be able to get that through.”
Instead of closing the campuses, the state decided to combine them with the other two, in Castleton and Williston, all under one umbrella renamed Vermont State University, or VTSU. In exchange, the blended institutions would be required to cut spending to help reduce a deficit estimated at the time to be about $22 million.
That decision was almost as contentious. As in Georgia, even the name was controversial. Alumni petitioned in vain for the new system to be called Castleton University instead of Vermont State, to preserve the legacy of the state’s oldest and the nation’s 18th-longest-operating higher education institution, founded in 1787, instead of demoting it to “Castleton Campus.”
Beth Mauch, who as chancellor has overseen VTSU and Vermont’s community college campuses since January, said she gets this kind of sentiment. “There are community members who have had these institutions in their community. There are folks who are alumni of these institutions who remember them in a certain way,” said Mauch. “Really, they are in the fabric of a community.”
Beth Mauch, chancellor of the Vermont State University system and the state’s community college campuses. “Really, they are in the fabric of a community,” Mauch says. Credit: Oliver Parini for The Hechinger Report
That close relationship between the universities and their communities only resulted in additional friction when 23 full-time faculty positions were cut, out of the then-existing 208. So were an equal number of administrators and staff. Not only were there more beds and buildings than were needed for the number of students, there were too many faculty compared to other comparably sized universities, a planning document said.
Neighbors of the campuses, and their elected representatives, didn’t see it that way.
“The people that work at the colleges are local. Everyone knows people that work at these colleges,” said Billie Neathawk, a librarian at what was formerly Castleton University for more than 25 years, and a union officer. “They’re related to people. Especially in a small state like Vermont, everybody knows everybody.”
The layoffs went through anyway. There were also cuts to majors. Ten academic programs were eliminated, 10 others changed locations and still others were consolidated. That meant students at any campus could take the remaining courses in a format combining in-person and online instruction that the system dubbed “In-Person Plus.”
Lilly Hudson is a junior at Vermont State University, whose consolidation means some programs are being offered online. Hudson prefers learning in a classroom but liked being able to take a class online from another campus that wasn’t available on hers. Credit: Oliver Parini for The Hechinger Report
Lilly Hudson, a junior at Castleton, said she prefers learning in a classroom. “It’s just such a difference to be able to see people and meet your professors and go in person,” said Hudson, who is majoring in early education. But she was also able to take a class online from another campus that wasn’t available on hers.
That can be an underappreciated upside to mergers, said Greenstein, now managing director of higher education practice at the consulting firm Baker Tilly. “You can only run as many programs, majors and minors as you can enroll students into,” he said. But by merging institutions and letting students take courses from other campuses online, “now they can go from 20 programs to 80 or 90.”
While that seemed a step forward, the consolidated university’s inaugural president, Parwinder Grewal, next announced that, to cut costs, its libraries would go all-digital and give away their books, the Randolph campus would no longer field intercollegiate sports teams, and athletics on the Johnson campus would move from the NCAA to the less prestigious U.S. Collegiate Athletic Association.
This proved another blunder in a state so fond of its libraries that it has the nation’s highest per-capita number of library visits, and where rural communities rally around even Division 3 athletics. Faculty and staff unions and student government associations on every campus voted “no confidence” in the university’s administration. Athletes transferred away. Grewal was loudly booed when he met with students.
“There was a hot streak there where, every email, we were, like, now what’s going on?” said Raymonda Parchment, a student who was halfway toward her bachelor’s degree at the time.
Raymonda Parchment, who just graduated from Vermont State University, is grateful that a plan to close some public campuses was reversed. “If you can’t afford to go out of state for college, and you can’t afford to pay for maybe a dorm for a couple of years, where does that leave you if there’s no school within commuting distance?” she asks. Credit: Oliver Parini for The Hechinger Report
The library and athletics decisions were eventually reversed, too, and Grewal was out before he’d served a full year. But the damage was done. When the new university finally debuted, at the start of the 2023-24 school year, freshman enrollment was down by about 14 percent from what it had been at the separate campuses the year before.
“I know a lot of friends whose programs were consolidated and shuffled around,” said Parchment, in an otherwise empty study room on the snow-covered Johnson campus. “That was probably the biggest change for students that had direct impact on them. Some people’s programs don’t exist anymore. Some people’s programs have been moved to a different campus.”
Vermont is still working out the kinks, said Bergh, the system’s current president, who was the president of private, nonprofit Cazenovia College in New York when it closed in 2023.
Although first-year enrollment went up about 14 percent this fall, he said, “We’re still surfacing places where our systems aren’t talking to each other as well as they should be, and that we need to correct.”
Parchment likes that it’s easier now to move from one campus in the system to another, without having to go through the red tape of the transfer process. She graduated at the end of the fall semester after moving from Castleton to Johnson to be closer to an internship.
And no campuses were ultimately closed, as had been proposed — a relief to students, prospective students and community members, Parchment said. “Because if you can’t afford to go out of state for college, and you can’t afford to pay for maybe a dorm for a couple of years, where does that leave you if there’s no school within commuting distance?”
Hudson, the Castleton student, whose father is a sixth-generation farrier — a specialist in trimming, cleaning and shoeing horses’ hooves — agreed.
The campuses are “in the middle of an area where there’s a lot of rural towns,” she said. Keeping them in operation means that students nearby who want to go to college “don’t have to pick up their lives and move.”
But Spaulding, the former chancellor, warned that public higher education budget and enrollment problems aren’t likely to subside, in Vermont or many other states.
“I don’t think the storm is over by any stretch of the imagination.”
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Two quick additions/clarifications to this: The definition of full-pays is those students who receive no institutional funds. EM people don’t care where the cash comes from, only the discount. Second, yes, I know some institutions use endowments to pay for institutional aid. That percentage is likely very small, although concentrated at a few institutions.
Before we begin, here is what this post does not do:
It will generally not tell you where you can get low tuition, with a very few exceptions. And when it does, it won’t be at one of “those” colleges.
It will not tell you which colleges are likely to close soon, although after the fact, you can probably find a closed college and say, “Aha! Right where I expected it would be!”
It will not show you net costs to students.
It will not adjust for things like church support, enormous endowments, or the cost of living in that high-priced city where Excellence College or Superior University is located.
Got it? Good.
This will show you the discount rate on first-year students at about 1,000 four-year, private, not-for-profit colleges in 2021-22. Discount as I define it is the total unfunded institutional financial aid divided by the total charged (gross) tuition and fees. A university that charges (published tuition and fees times the number of students) $10,000,000 and awards $4,000,000 in aid has a discount rate of 40%. At most colleges, this discount is simply an accounting transaction, much like a coupon to save a dollar on a sandwich at Subway. That, of course, is a gross over-simplification of the “what” of discounting, and it doesn’t touch the “why” of discounting at all. But if you want an explanation, I’ll gladly talk to your trustees for a reasonable fee.
And there is a difference between discount and net revenue, although at any given tuition charge, the two are perfectly related. Unfortunately, as you’ll soon, see, colleges all set their own tuition. To wit:
A college charging $50,000 with a 20% discount has net revenue (the cash you can spend) of $40,000 per student.
That same college with a 50% discount has just $25,000 per student.
A college charging $30,000 with a 10% discount has $27,000 per student.
That same college with a 40% discount has $18,000 per student.
As a college, you don’t care where the cash comes from: Pell grants, state grants, loans, or the student’s family. This means, hypothetically, a student with low institutional aid might pay less than one with more aid. Confused? Good.
If you use this with your trustees to explain your own college’s market position, consider supporting my costs of time, hosting and software by buying me a coffee. Just click here to do so. If you counsel high school students, or your a parent of a prospective college student, must keep reading and don’t feel any obligation at all.
Here is the data, in three views. The first two are box and whisker plots, where half of the colleges fall inside the gray box on each column to show you the middle 50%.
The first view shows net revenue per freshman student, arrayed by the institution’s Carnegie type. Use the controls to filter region, highlight region, or highlight an individual college. To do the latter, type any part of the name in the box, hit enter, and select from the options. Hover over dots for details; each dot is a college.
The second view is identical, but it shows discount rate, the number people obsess over while missing the more important net revenue figure.
The third view shows those two values arrayed, with the same highlighters, allowing you to filter on Carnegie type, or even the percentage of the students who are full-pay (that is, they get no institutional aid at all.)
You’ll soon see that discount and net revenue don’t seem to be big issues at the big name, strongly endowed institutions. That’s because, at many of these places, undergraduate education is essentially a sideline business, and only a minor source of revenue. The money they bring in (or don’t) on this presumably core function of the university is managed to best optimize to reputation or selectivity, or other factors (including, sometimes, mission).
Note that I’ve done my best to remove some outliers with wild data that throw the charts off. Many of these are colleges I have never heard of, and they’re tiny. Others are places with strong religious missions (like Yeshivas or Seminaries) that may be externally funded in ways this can’t account for.
This is always a popular topic, but the subject is misunderstood. I want to talk about discount rate at private colleges.
IPEDS has the best data on first-year (or freshman) discount, so that’s what I visualize. And the first part of this is going to get a bit into the weeds; if you work in a private college or university, and you use this in your work, or you send it to trustees, you can support my time, effort, software, and hosting costs by buying me a coffee. If you don’t want the details, and you think you understand this concept, feel free to skip down to the section that breaks down the views, below the line of asterisks.
For those who always ask, no, I don’t do this for public universities. It may be helpful to compare institutions within a state, but beyond that, state funding models and the mix of resident and nonresident tuition rates make comparisons across borders mostly meaningless. And for the more knowledgeable who might wonder, I assume that all institutional aid is unfunded; that is, it’s not coming in as a revenue stream from an external source to provide funding.
Let’s do an exercise to help you understand discount: Suppose you run an ice cream store, and you have more ice cream than you can sell. You might offer a coupon, let’s say for 50% off a cone.
The cone you normally sell for $4, you now sell for $2. You just take less money for it. There is no one there to hand you two extra dollars to make up for the gap. The Department Store store down the street sells a very similar cone in its food court for $8, but offers a 75% off coupon. They decide to take $2 for the cones they sell in order to be competitive with you.
The Gourmet Ice Cream Shop around the corner sells cones for $12, because they think their ice cream is much better, their store nicer, and their location more convenient to the subway station. On occasion, they will tell the kids at the orphanage they’ll give them a free ice cream cone, but everyone else pays. And finally, Mel’s Fair Deal Ice Cream store sells ice cream cones for $2.50, but never offers coupons.
If everyone uses your coupon, your store has a discount rate of 50%, and your net revenue per cone is $2. But of course, some people will pay $4. If everyone uses the coupon at the Department Store, their net revenue per cone is also $2. But their discount rate is 75%.
The Gourmet Store is more generous with the orphans than people realize; about half of their cones are given away. So their discount rate is also 50%, but their net revenue per cone is $6. And finally, Mel’s Fair Deal Ice Cream has a discount rate of 0% and a net revenue of $2.50 per cone.
It’s important to remember that none of these stores cares where the cash comes from. It could be from the customer’s pocket, from a parent or aunt, government food stamps, or a loan they take out from the government. You count the cash, not the source of the cash.
Now, guess what? Almost all college aid is discount, much like those coupons the ice cream stores hand out. It’s simply the college agreeing to take less cash than its published tuition rate. If tuition is $40,000 and you offer a $20,000 discount or scholarship, you simply take $20,000 to educate the student, and write the rest off as an accounting transaction.
The need for higher discounts in higher education are driven by tuition prices that are too high for most people to pay. Colleges have to discount, or they’re going to have costs associated with making too much ice cream to sell that they can’t pay.
(This is the part where someone will want to comment and extend the analogy ad infinitum: Which ice cream is better? Is one really worth six times more? Why don’t you make more flavors to attract more customers instead of discounting the vanilla to bring people in? Does your cost of ice cream production get lower if you produce a lot more? Can’t you do research and optimization to figure out who should get the coupons when to maximize profit? And if so, couldn’t you lower price a lot and drive the others out of business? Couldn’t you offer the coupon to fewer people and hope more pay full price? Please don’t be that person. I’ll do a workshop for you if the price is right.)
So, to easily calculate discount, in case it’s not clear, take the amount you have to discount and divide by the published price. For a college, the discount rate is total institutional (unfunded) grant aid/total gross tuition. For average net revenue, take total gross revenue, subtract institutional (unfunded) grant aid, and divide that number by the number of students.
For instance, if your sticker tuition is $40,000 and enroll ten students, your total gross tuition is 40,000 x 10, or $400,000. If you award $100,000 in unfunded aid to make that enrollment happen, your discount rate is 100,000/400,000, or 25%. After you take the aid away from tuition, your average net revenue is (400,000 – 100,000)/10, or $30,000 per student. That’s how much cash you have to work with to do things like pay faculty, cut the grass, heat the buildings, and run the administration.
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Now, below, you can dive into college discount rates, net revenue, mixes, and the shape of the industry. This data set is very rich, and I may do another angle on this topic later. But for now:
Discount arrayed (the first view using the tabs across the top) arrays about 950 four-year, traditional, private colleges. I’ve removed lots of religious seminaries, some very small institutions, and, frankly, some suspect data from this for the sake of clarity. This is IPEDS data so it’s reliable, but never perfect.
Each college is a dot, colored by region and sized by freshman enrollment relative to the set displayed. The view shows discount rate on the x-axis, and average net revenue on the y-axis.
You can use the filters at right to limit the set further. You can’t break anything, and you can reset the view using the controls at the bottom. Try this: Use the First-year students filter to look at colleges with at least 2,000 freshmen. Then look at those colleges with fewer than 250. Interesting, no?
The reference lines are the unweighted average of all 950 institutions in the set.
Institutional grant policy shows how many colleges and how many students fall into institutional grant aid categories. Some institutions give aid to 100% of all students. The vast majority give aid to 90% or more.
And finally, the Full-pay and Pell shows two variables: The percentage of students who get no aid (full-pay students) and those who get Pell grants at the institution shown. And remember, it doesn’t matter where the cash from full-pay students comes from: That group includes some students whose parents write a check, and some who might get a Pell and whose parents take out an ill-advised PLUS loan for the cost of attendance.
The point? Discount rate is important for similar institutions in the same region, but as thing unto itself, it’s kind of meaningless. Net revenue is more important, for the most part, but at some institutions where undergraduate education can almost be called a sideline business, even net revenue is not important as it might seem.
