It's a pricing strategy to attract the best applicants.
The year was 1992. Enrollment was shrinking. Classrooms had empty seats. Dorms had empty bunks. Once, 1,020 students attended Lebanon Valley College in scenic Central Pennsylvania. Now, 850.
Dr. John Synodinos, the president, responded with a unique offer: if you're in the top 10% of your class, we'll take 1/3 off tuition—no matter what. The announcement proved momentous in higher education finance—the birth of merit aid. Call it the airline model. Rather than take off with empty seats, airlines discovered that it's smarter to sell them at a discount.