The widespread practice of tuition discounting by colleges and universities has unintentionally restricted poor students' access to higher education and could undermine some institutions' finances, concludes a new report by the Lumina Foundation for Education.

The report, titled "Unintended Consequences of Tuition Discounting," analyzes student-aid data from the U.S. Department of Education and other sources. It was released on Tuesday by the nonprofit foundation, whose stated goal is to increase educational access.

Through the process known as tuition discounting, by which colleges effectively lower tuition for selected students by offering them scholarships or other institutional financial aid, institutions seek "to increase racial, ethnic, or income diversity on their campuses or to woo students who have shown superior academic performance or other special skills," the report says. And by setting variable price levels for tuition, institutions seek to maximize tuition revenue.

Lumina's analysis found, however, that while some institutions attain those goals, others do not, and that tuition discounting can result in revenue losses. If institutions balance those deficits by cutting instructional budgets or student services, they may undercut their efforts to attract and retain students. Revenue losses from tuition discounting could also imperil the financial stability of some colleges, the report says.

Despite those potential drawbacks, tuition discounting has been widely embraced, particularly among private institutions. In 2001, the average tuition-discount rate for four-year private colleges was 38.2 percent, the report says, "with nearly eight of 10 students getting discounts."

Discounts have been applied unevenly, however, and the consequences could be devastating, the report suggests.

In a comparison of data for the academic years beginning in fall 1995 and fall 1999, for example, the study found that the average dollar amount of institutional grant awards rose faster for higher-income undergraduates than for their lower-income peers at both public and private four-year colleges.

At private institutions in 1999, students from families with annual incomes of less than $20,000 received average institutional aid that was 29 percent less than the average for students from families with incomes of $60,000 to $80,000, according to the report. Four years earlier, average aid received by the less wealthy students was 2 percent higher than that of the wealthier students. As a result, lower-income students are now less likely to choose a private college, the report concludes.

The report observes "similar patterns of change" at public colleges.

Non-institutional grant aid to more-affluent students also grew at faster rates than did aid to lower-income students at both public and private four-year colleges and universities, the report says.

Lower-income students also are bearing a greater share of tuition increases than their more-affluent peers. To make ends meet, the less-wealthy students "had to borrow more, work longer hours, possibly detracting from their academic performance, and otherwise make sacrifices to meet the increased net charges."

"Tuition discounting is producing serious financial difficulties for low-income students and for their institutions," says Jerry S. Davis, Lumina's vice president for research and the author of the report. "Higher education and the supporters of higher education -- state and federal government, foundations, business, and industry -- have to all work together to remedy this situation."

Lumina, formerly the USA Group Foundation, came into being following the purchase of the USA Group, a student-loan provider, by Sallie Mae in 2000. The former corporate foundation received the sale's proceeds of $770-million, became a separate entity, and changed its name.

Not everyone agrees with Lumina's conclusions. A report on tuition discounting sponsored by the National Association of College and University Business Officers concludes that "increases in tuition and tuition-discounting policies have not adversely influenced access to independent higher education."

The report from the business officers' group bases its findings on data that indicate rising rates of college attendance among students from families with annual incomes of $15,000 to $35,000. The increase in college-going rates, however, could result from greater attendance at community colleges. The Lumina study looks only at data for undergraduate students enrolled full-time at four-year institutions.