Private Colleges Can Conquer ‘Perfect Storm,’
Starting by Keeping Tuition Costs Manageable
by Thomas R. Kepple Jr., President, Juniata College
(PA)
Published in University Business, Fall 2003
Is this the perfect storm for some institutions in higher education?
In September, U.S. Reps. John Boehner, R-Ohio, and Howard McKeon, R-California,
introduced a bill that would financially punish colleges and universities
that raise tuition faster than the rate of inflation. If institutions
fail to comply within two years, they could be ineligible for many federal
grants.
Meanwhile, state financial support for public institutions is declining
along with state revenues. Already at record enrollments and receiving
more applications than ever, many of these institutions are unable financially
to accommodate additional students without significant reductions in quality.
Record tuition increases are inevitable in order to balance budgets, while
parents who are already financially strapped are wondering how much higher
tuition can get.
Regardless of whether the congressional bill gains enough support to
become law, colleges and universities should proactively seek innovative
ways to reduce the tuition burden for parents and students. Private colleges
with smaller endowments, innovative programs and solid capital campaigns
are in an advantageous position to prosper while they find ways to ease
the burden. These institutions have never relied on large endowments or
state income to support their budgets, and they are often in a position
to implement innovations to keep college costs affordable.
These are a few measures that can be modeled by private colleges and
universities to make them more attractive to cost-conscious parents and
students during lean budgetary times:
Reducing the cost below today’s tuition. In 1996,
I founded a consortium to develop a national prepaid tuition program for
private colleges and universities to lower our tuitions below today’s
price. Nearly 300 colleges and universities joined the effort to create
the plan, from Ivies (Princeton) to research institutions (Syracuse, Vanderbilt,
Washington University in St. Louis) to smaller liberal arts colleges (Sewanee,
Rhodes, Furman, Pomona). Thanks to Congress’s action to allow private
consortiums to offer a prepaid program, the Independent 529 prepaid tuition
program began in September.
The colleges take on all the investment risk and guarantee the cost up
front. Each institution sets its own discount based on the risk and the
tuition increases it expects over time. For example, parents or grandparents
of a newborn will be able to lock in a freshman year at Juniata College
at two-thirds of today’s price. Member schools can market this as
the only program in higher education that both lowers and guarantees the
future cost of tuition. We should let our prospective customers know that
it’s hard to find any other program in any industry that’s
comparable. State programs – run by state agencies that are not
in charge of setting tuition – are struggling to keep up with increased
state tuition rates.
Graduating in four years. Aside from tuition increases,
much of the recent increased college cost comes from extending the traditional
four years of undergraduate education to five and beyond. Students, of
course, must do their part. But at Juniata we ensure that classes and
advising are in place to make graduation attainable in four years. Seventy
percent of our entering students graduate from Juniata in four years.
This compares to a 28 percent graduation rate at public institutions nationally.
The initial reaction to this extraordinary difference is that, when compared
to state institutions, students attending private colleges are wealthier
and fewer are minority students. The fact is that the percentages for
wealth and diversity are virtually identical at state and private colleges
in Pennsylvania and in most states across the country.
Simply put, Juniata students usually pay for only four years of undergraduate
education and are in the workforce (or graduate school) much sooner than
those attending the typical state institution.
Loans to parents. In order to assist parents spread
the cost of higher education over a longer period of time, Juniata initiated
the JC PLUS plan. Loans of up to $20,000 are provided to parents at no
interest during the time their son or daughter is at Juniata. Once the
student graduates, the parents have up to 10 years to repay the loan,
at an interest rate of 1 percentage point less than the federal rate.
Other colleges have used similar deferrable loan structures, including
Dickinson College, University of the South, and Lafayette College.
In recent studies of the millennial generation, it’s clear that
they are much more willing to look beyond the brand-name institutions.
They will certainly be disillusioned when visiting a campus in the middle
of budget-cutting turf battles, deteriorating facilities, program reductions,
a higher likelihood of being rejected, and uncertain future tuition rates.
Colleges with a slightly growing enrollment, new programs, new faculties
and a better admissions acceptance possibility will look a lot better
in comparison.
That’s where marketing is key, and in these cash-strapped days
we need to be aggressive in boasting of these creative efforts to keep
tuition down. Now is the time for those colleges in this class to fare
much better than their larger, state-affiliated counterparts could have
predicted just a few years ago, and to outmaneuver this “perfect
storm.”
|
Making
the Case
