How do I offer a tuition discount?

Many schools have financial aid packages where the institution doesn't distribute funds, but rather gives the student a discount on tuition or fees (sometimes these are called Unrestricted Institutional Scholarships). Since they do not result in any new money in your checking account (that is, no new assets), such discounts are best considered as expenses.

The best way to handle tuition discounts is as follows:

1. Create a liability account and also an expense account for the discount. (You can also create an asset account so you don't have to run the journal entry from Step 6, below.)
2. Create an award type for the discount (pay special attention to the Affects Need and IRS 1098-T fields). Associate it with the liability account (and the asset account, if you're using that).
3. Go through whatever process you require for the student to accept the award (application, etc.).
4. Schedule any appropriate disbursement(s).
5. Run a batch for the discount.
6. If you didn't add an asset account to the award in Step 1, you'll want to record a journal entry. This entry must credit the liability account and debit the discount's expense account.
7. When the aid is posted to the student's account (and applied to invoices), it will reduce your A/R and liability, and the net effect on your entire Chart of Accounts will be reported as an expense.