Drastic Tuition Cuts Can Address College Affordability – But Not for All Schools

By Allie Bidwell, Communications Staff

At a time when students and families are increasingly concerned with the cost of college, seeing a drastic cut in tuition can make an otherwise overlooked college look like a much more attractive option.

Earlier this month, two small, private liberal arts institutions – Rosemont College in Pennsylvania, and Utica College in New York – announced within days of each other that starting next year, they would cut tuition by more than 40 percent each, to $18,500 and $19,996, respectively. The two schools announced they will also be reducing their room and board rates. With the two reductions taken together, the total cost of attendance at each school will hover around $30,000 per year. By comparison, tuition alone this year is $31,520 at Rosemont College, and $33,946 at Utica College.

It’s a stark contrast to public universities struggling to keep tuition flat amid state budget cuts, and other private universities that stick with a “high tuition, high aid” financing model.

Moving to a low tuition, low aid model is by no means a new idea – news stories as far back as 1995 depict the decision as a triumph for college affordability supporters, as a handful of colleges and universities buck the trend of annual tuition increases.

But the model doesn’t work for every school, and it doesn’t always benefit low-income students.

North Carolina Wesleyan College was among a handful of small, private colleges that dropped tuition rates in 1996, but a few years later decided to increase its tuition over the course of several years to make it comparable to other state universities, The Chronicle of Higher Education reported in 2003.

The primary reason many private institutions make the move to a low tuition, low aid model is to lessen the sticker price shock many students and families see. Although private institutions list higher tuition rates, low-income families typically pay a fraction of that price after scholarships, grants, and other financial aid offers are taken into account.

With a low tuition, low aid model, the sticker price is the actual price, said Will Doyle, an associate professor of public policy and higher education at Vanderbilt University.

“It simplifies the process for tuition and financial aid for students and families because otherwise, many times there’s a two-step process where many people will be aware of what the tuition and required fees happen to be, but they’re not aware of the financial aid package they might get,” Doyle said.

While the change might attract more students who would not have otherwise applied, the schools would also have to restructure how they administer institutional financial aid, to help absorb the cost.

“It’s not a simple question to say, ‘What’s it going to cost me to go here?’” at many institutions, Doyle said. “It becomes simpler and for some subset of students, the tuition will go down. The question is, which subset of students?”

Research has shown that in some cases, tuition resets can result in schools enrolling more students from higher-income families, who can afford to pay the full price, rather than opening the doors to more low-income students. It could also result in low-income students paying a higher net price.

“When you go with a one-price model, paradoxically, if beforehand it was primarily a need-based system, then afterwards, you’re going to get a system that makes it less affordable for low-income students, and more affordable for high-income students,” Doyle said.

Slashing tuition and fees means schools that implement a tuition reset could forfeit some revenue if they don’t enroll enough students, too. But there’s a way to avoid those concerns, said Kristin Vogel, associate vice president for traditional enrollment management at Concordia University-St. Paul. The university in 2012 announced it would implement a significant tuition reset, and is currently entering its third admissions cycle with the lower price.

“We were hearing from everyone essentially about the rising cost of higher education becoming out of reach for many families,” Vogel said. “So as an effort to make a Concordia education more accessible for more students, we decided to reduce our tuition by $10,000.

Since then, the student profile has remained relatively the same, with nearly one-third Pell Grant-eligible students, Vogel said, and the university worked to ensure that all students would save at least some money under the reset.

But overall, the university has seen a 49 percent increase in enrollment since the tuition reset. Vogel also noted that there has been a slight increase in household income in the last few years, but it’s unclear if that can be attributed to the tuition reset, or to family incomes rising in general since 2012. Since the tuition reset, the university has increased tuition between 2 percent and 3 percent each year, but the increase has resulted in a tuition increase of a little more than $1,000, Vogel said.

But with the lower price, Vogel said federal and state grants and aid, such as the Pell Grant, can stretch much further.

“What really has worked in Concordia’s favor is that we spent a lot of time planning and preparing for this,” Vogel said. “We also were very clear in our messaging to families.”

While tuition resets may be a good option for certain schools to address access and affordability, a bigger, overarching problem, is clarity on net price, Doyle said.

Rather than the all-or-nothing structure in place – with some schools using a one-price-for-all model, and others with a net price determined through an opaque process – a solution to address access and affordability, as well as net price, would be to take a middle route to more clearly present students’ net price based on academic qualifications and family income.

“If there was an intermediate step that said if your family income is between this and that, your net price is going to be this – that combines some of the best of both worlds,” Doyle said. “Even if there was some clarity and a simplified price structure, where you could be assured that given your academic qualifications and your income, this is the price you’re going to pay - that’s a nice middle ground.”

 

Publication Date: 9/30/2015


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