Sunshine Anderson was at Mills College’s annual welcoming ceremony in 2017 when the liberal arts college revealed its big news: It was slashing its tuition by more than a third.
Elated, the history major, who is now a senior, immediately spread the word on Twitter and recalled thinking: “Oh, my God, this is going to make a huge difference!”
In the end, it didn’t. Mx. Anderson, who uses gender-neutral pronouns, paid Mills about as much as before tuition was reduced.
But the move could pay off for the school.
Mills is just one of a small but rising number of mostly private liberal arts colleges that say they are cutting their tuition prices. But what they’re actually doing is reducing their advertised rates, which only the wealthiest students usually pay. At the same time, the colleges are also reducing the heavy discounts they offer to everyone else. The result is a new sticker price that more closely reflects what students already pay.
Institutions are making the change out of economic necessity: As college costs have soared, expensive smaller schools risk being bypassed as applicants seek more affordable options.
The colleges hope the truth in advertising will attract more applicants, including transfer students, and increase retention rates.
“We wanted more of the students who weren’t considering Mills,” said Elizabeth L. Hillman, the college’s president. “This was also about communicating that the gap between a public university and a small private college wasn’t as gargantuan as it started to seem.”
The number of colleges “resetting” their tuition rose sharply starting in 2012 to an average of 10 a year, according to an analysis by Mark Kantrowitz, publisher and vice president of research at Savingforcollege.com, who looked at resets through the 2018-19 academic year. From 1987 through 2011, the average was one annually. Last year, the total surged to 18.
So far for 2019-20, five private colleges have trimmed their tuition prices, by 16 to 57 percent, Mr. Kantrowitz said. They include the University of the Cumberlands in Kentucky, Stephens College in Missouri, St. John’s College in New Mexico and Maryland, and Wells College in New York. Also, Oglethorpe University in Georgia charges lower prices to certain qualifying students.
At Mills, which competes with many high-quality state universities, tuition dropped to $28,765 from $44,765, essentially rewinding the price back to its 2005 level. (That figure does not include room, board, meals and other fees, which generally remain the same when schools cut tuition.)
Utica College studied the issue for 18 months before it enacted its own plan in 2016. The New York college settled on a price it thought prospective students would respond well to, and guaranteed that all returning students would pay at least $1,000 less.
Beyond cutting tuition, the school doubled its marketing budget and made improvements on campus including a $4 million renovation of its dining hall, Utica’s president, Laura Casamento, said.
Three years later, Ms. Casamento, who wrote her doctoral dissertation in education on tuition resets, said she was happy with the results. Utica exceeded its overall targets for net tuition revenue each year; enrolled more students, including a significant rise in transfers; and increased retention. Its students are also graduating with less debt.
“Students and their families were taking institutions off the table based on the sticker price,” Ms. Casamento said. “They didn’t even want to have the aid conversation — and you have to have that conversation to understand the net price.
“We really looked at that long and hard,” she continued, “and that is why we went out to prospective students and families and did a pricing study.”
Not all schools are taking the same approach. Nor are they doing it for the same reasons. St. John’s College decided to rethink its tuition even though its applications were at a record high. Administrators peered 10 years into the future and realized that if tuition continued to rise at a standard 3 percent a year, a St. John’s education would cost $70,000 annually for tuition alone.
Pano Kanelos, president of the college’s Annapolis campus, said that had prompted some existential thinking: “Is that the institution we are? Is that sustainable? And what will happen when we get there?”
The college dropped its tuition to $35,000 from about $52,000.
High prices, even with discounting, are often most painful for students in the middle — those who cannot afford the full price but do not qualify for as much need-based aid as lower-income students. It also begins to warp the calculus of distributing resources, Mr. Kanelos said, as schools are tempted to recruit wealthier students who can pay the list price, taking spaces from lower-earning applicants.
All of this prompted St. John’s to think about a completely new financial model, one that is no longer heavily dependent on tuition but is philanthropy-centric. It seems to have worked: The school embarked on an ambitious capital campaign and has raised $200 million of the $300 million needed for a sustainable endowment, which can be used to provide aid to students.
Public colleges are also turning to similar tactics, in some cases promising to charge out-of-state students the lower in-state rate, or at least extend special discounts to applicants who live within a certain radius. Others are simply cutting their sticker prices, while some are freezing tuition.
“There are a myriad of different strategies that public universities are employing that are driven by many of the same reasons private colleges are discounting,” said Susan Fitzgerald, an associate managing director at Moody’s. “Families are looking for affordable options, and it is a competitive environment out there.”
The high-tuition, high-discount model may have been more effective in years past, when it gave parents bragging rights about the generous merit scholarships (read: discounts) their children had earned. Families were once more likely to accept the notion that higher price also connoted high quality. But that idea is no longer as compelling, particularly as student loan debt tops $1.3 trillion and college affordability is recognized as a national problem.
And the so-called merit packages have become commonplace. Nearly 90 percent of full-time freshmen at private colleges received institutional grants in 2017-18, according to a study by the National Association of College and University Business Officers, and the size of these discounts continue to rise. When tuition discounts rise faster than an institution’s sticker price, they eat away at the revenue it ultimately collects (known as net tuition revenue).
“The motivation for most discounting is survival,” said Jim Galbally, a senior consultant at AAL, a higher education consulting firm. “They are using the discount rate as a way to increase enrollment.”
Mr. Galbally added that tuition accounted for more than 80 percent of the revenue at most colleges, “so every student really matters.”
Whether reducing tuition has its intended effect is difficult to answer, according to a recent study of two dozen private colleges. Consultants say it depends on the institution’s goals and how the plan is executed — simply coming up with a more attractive sticker price isn’t enough.
The tuition cut at Albright College in Pennsylvania captured the attention of Sabrina Malone, a mother of six in Dover, Del., even if she did realize, after running some numbers, that it was probably a marketing tactic.
With or without the reduction, she said, “it was still going to cost us the same amount of money.”
After the reset at Mills, Mx. Anderson’s tuition dropped by nearly 36 percent for the fall 2018 semester, to about $14,000, but scholarships and grants dropped by more than half, to about $6,000. When various fees and other details are taken into account, in the end Mx. Anderson’s total costs didn’t change significantly.
A total of 91 colleges reset their tuition from 1987 through 2018, according to Mr. Kantrowitz’s analysis. That’s just a tiny fraction of the roughly 4,300 degree-granting institutions, according to the National Center for Education Statistics, but more are expected to join their ranks.
Though it’s hard to predict how many will move ahead, Mr. Kantrowitz’s analysis found that an additional 273 four-year, nonprofit colleges shared characteristics with schools that have reduced prices. They’re often small, not highly selective and dependent on tuition revenue.
Wells College, which cut its tuition this academic year to $29,400 from nearly $40,000, also added five new majors, improved its athletic facilities and residence halls and created a new student union.
“At some point, it is like smoke and mirrors,” said Jonathan Gibralter, president of Wells. “We decided it made sense for us to be more honest and authentic and to talk about the educational product at Wells. And we wanted that to be available to many more people who may not otherwise look.”
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