Using Tuition Resets to Combat 'Sticker Shock'

By Allie Bidwell, Communications Staff

Drew University, a small private university in New Jersey, announced Monday that it would be cutting its tuition by 20 percent for the 2018-19 academic year, following in the footsteps of other institutions that have made similar moves to bring more transparency to the cost of college by narrowing the gap between "sticker price" and net price.

The university said that for the 2018-19 year, tuition will be lowered to what it was in 2010: $38,668 (before financial aid), down from $48,336 this year. MaryAnn Baenninger, president of Drew University, said in a statement that lowering the tuition would help reframe the true cost of attending the university for families who might have previously been deterred by the high sticker price.

"Our current published tuition price makes it seem as if the value of a Drew education is beyond the reach of many families. But the reality is that most students and families do not pay the full tuition price thanks to the generous financial aid that Drew offers," Baenninger said.

Like many private universities, Drew University has followed a "high tuition/high aid" model. That is, most students and families do not actually pay the published price, as the tuition and fees are heavily discounted by the university. An estimated 72 percent of students at Drew University will receive need-based aid in 2018-19, for example, Baenninger said, and the average total financial aid award will be roughly $30,000.

"The benefits of a Drew education are clear to our alums, our students, and our parents. … The time has come for Drew to be clear about its tuition," Baenninger said. "This move will make Drew’s true tuition, and our true value, more clear to more families."

In recent years, several other institutions have turned to making drastic tuition cuts as a way to address college affordability. While moving away from a "high tuition/high aid" model is not a new idea, colleges and universities today have used it as a way to be more upfront about the true price students and families pay, at a time when they are increasingly worried about paying for college.

For some schools, implementing a tuition reset can draw in students from low- and middle-income backgrounds who might not have otherwise applied. However, research has shown that a tuition reset could also result in the school enrolling more students from higher-income backgrounds who can afford to pay the full price, rather than enrolling more low-income students. The outcome, though, depends on several factors, including how the college or university administers institutional aid.

According to a fact sheet on its tuition reset, Drew University said it anticipates distributing about $32 million in institutional grants and scholarships to students in 2018-19. And while need- and merit-based aid will be lower, all returning students will receive "customized information" about their estimated costs and aid for the next award year by early November 2017.

 

Publication Date: 9/12/2017


David S | 9/12/2017 1:16:35 PM

Whether 20% will be enough to make a difference to most of their students remains to be seen, but a step in the right direction. Years ago I worked at a similarly priced school also in Jersey, and gave myself an assignment in which I modeled a net neutral revenue projection that significantly decreased both tuition and the discount rate. My boss and the president were neither impressed nor interested, and the high tuition/high aid spiral kept climbing. This model relies on finding more full-payers to maintain revenue levels, but as tuition goes up, that becomes harder and harder, causing the discount rate to go higher, which increases the need for full-payers, and you have a cycle that becomes unsustainable.

But what do I know.

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