Why does tuition increase faster than inflation? And why does tuition continue to increase even when states increase their investments in public colleges and universities? These questions have perplexed policymakers and higher education consumers alike. Though tuition setting can be very complicated, one of the drivers for rising costs is price discrimination in the form of tuition discounts. In 2008-09, the average published tuition and fee rate for four-year public institutions was $6,811, but the average net revenue per student was only $5,564- a difference of $1,247, or more than 18 percent. This difference is referred to as a tuition discount. Tuition discounting is the practice of awarding targeted financial incentives to students, usually in the form of merit awards or need-based grants. Importantly, a tuition discount is not real money; it is an intentional markdown or revenue foregone. Colleges have a variety of motivations for discounting tuition, such as increasing the college's academic profile, enticing wealthy full-pay students to enroll, or increasing the diversity of the student population. Though the practice has its benefits, if not managed well it can lead to large increases in costs for the majority of students and dissuade low-income students from enrolling at all. In this issue of "The Progress of Education Reform," we examine tuition discounting, with specific attention focused on the impact state-legislated tuition caps can have on the practice.