As U.S. colleges and universities are increasingly incorporating business principles in their operations, they are offering smaller merit scholarships to larger numbers of students. Some administrators see this as a way of increasing enrollments and tuition income without lowering the academic quality of entering freshmen.

The practice is not unlike that of discounting airline fares in order to fill more seats.

As a result, published tuition rates vary widely from rates actually charged.

• From 1990 through 1996, published tuition rates for small colleges with low tuition fees increased 48 percent -- but only by 26 percent after the impact of student financial aid offered by the schools was factored in.

• For large colleges, the published rates increased over the same period by 47 percent -- but actually went up only 33 percent when assistance was included.

Tulane University is an example of how administrators are juggling amounts of assistance offered to qualified entering freshmen.

• Rather than spending its entire merit-based scholarship budget on just 111 full-tuition scholarships as it did in 1995, Tulane in 1996 reduced the number to 50 -- and offered $10,000 discounts to 600 to the most qualified applicants.

• More than half of the 600 enrolled.

• The loss of those students who turned down the $10,000 offer -- but who would have accepted a $20,000 offer -- was more than offset by the enrollment of larger numbers of still excellent students.

While the total cost of merit-aid outlays went up, so did total tuition income because the class size swelled by 98 students.

Source: Peter Passell, "The New Economics of Higher Education," New York Times, April 22, 1997.