Tuition: Can't Get Much Cheaper Than Free (or Can It?)
The New York Times had a pair of articles last Sunday chronicling what seems to be an emerging "race to the bottom" among universities, to see who can most cut tuition, either across the board or for families under a certain income level. They also profile several schools that effectively have zero tuition.
The New York Times - "Keeping the Lid On"
The New York Times - "The (Yes) Low Cost of Education"
I've also included the full text of these articles below the cut (in case NYT changes the link or makes your register). Both of these articles are very important for campus radicals to read and chew on; it's a fantastic glimpse into the kind of "peer pressure" that goes on among colleges and universities. Up until recently, the trend was "if you raise your tuition, I'll raise mine," with the added revenue going either to prestige-building exercises (new buildings, facilities, etc.) or financial aid. And of course, there's this:
Donald Heller, director of the Center for the Study of Higher Education at Pennsylvania State, offers one reason: “There’s something we refer to in college pricing as the Chivas Regal effect. If an institution drops its price, it’s seen as a decrease in quality.”
It's sad, but it's something that's true, to a certain extent. And the NYT articles certainly show that in some cases, reducing tuition can have the opposite impact, and actually attract higher-income students, showing that as we look at our own universities, it isn't just the "sticker price" we should be worried about.
Having a good grasp of what your university's peers are doing in terms of tuition can be an effective weapon when fighting for lower tuition and more financial aid, with the goal being tuition abolition. It can also be a key part of any narrative you submit to the press. "All we're demanding X University do is what Y College and Z University have done. They all have similar endowments, so why is X being so greedy?"
But the biggest problem is not that your university "just doesn't have a big enough endowment." The biggest problem is that dealing with tuition is not on the priority list for most schools, and when it is discussed, it's usually in the context of how much it will be increased, instead of whether. If tuition reduction was a priority on par with, say, new athletic facilities, or new buildings, or expanding the student population, then I think things would be much more workable, and almost all schools would easily be able to afford significant tuition decreases. But the Boards of Trustees, comprised mostly of business leaders, would think it crazy to do so.
To push tuition reduction to the fore, it will take an organized, militant student movement on each campus (probably arm in arm with counterparts among faculty and staff), fighting for a more democratic running of the university.
Now this is pure conjecture, but I think a significant side-benefit of winning a "liberated" university, one where everyone has a meaningful, democratic say in the course of their academic and institutional lives, is that alums will feel much more connected and invested in the institution, and will be much more likely to continue to give financially or volunteer there after graduation. I think a lot of students are as likely to donate to their past schools as they would be to "give back" to a prison they just got released from. And I think that analogy is apt in more than one way...
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April 20, 2008
Keeping the Lid On
By MICHAEL M. GRYNBAUM
ESCALATING tuition, a perennial complaint in higher education, has become particularly acute in the last five years. In that time, tuition and fees have gone up 14 percent at four-year private colleges (when adjusted for inflation), with the average price reaching $23,712 this year. As the economy slows, tuition threatens to put an even tighter pinch on pocketbooks.
But under pressure from parents, Congress and one another — higher education is, after all, a free market — colleges have tweaked the financial aid model.
Many of the changes seem to benefit the well-to-do. Starting with Harvard in December and spreading across the Northeast corridor in recent months, the nation’s most selective institutions have not only increased aid for lower-income students but also reduced — sometimes sharply — what families earning incomes far higher than the national mean are expected to pay. Parents who make six figures may now find Yale more affordable than the University of Connecticut. Even institutions without Ivy League assets are substituting grants for loans in their financial-aid packages.
Ostensibly, the idea is to ease the financial burden, but colleges also want to attract top students. “All these institutions are highly competitive within their niches,” says Tony Pals, a spokesman for the National Association of Independent Colleges and Universities. “As soon as an institution like Harvard or Yale does something large like this, everybody is going to take note. Over the last few months the announcements have been surprisingly quick.”
Below are some of the ways colleges and universities are trying to make themselves more affordable — and more desirable — to students and their families. Who benefits, and by how much, is not always so clear-cut.
Help for the (Upper, Upper) Middle Class
In the world of higher education, “middle income” is like a shoe size: its definition changes depending on the brand. Next academic year, Stanford will waive tuition for families with financial need that make less than $100,000 a year. At Harvard, where average family income is north of $160,000, students whose parents make $120,000 to $180,000 will pay, on average, 10 percent of that income; the percentage declines steadily for families making less until hitting zero at the $60,000 mark. Budding bulldogs at Yale will get a similar deal.
“You’re seeing a lot of these new projects that are looking at families with income up to $75,000 or $100,000,” says John Walda, president of the National Association of College and University Business Officers. “That’s a real trend, and it’s responsive to the perception that independent colleges in particular have become out of reach financially for many families.”
While institutions explain their programs using income-level cutoffs, whether a family demonstrates “need” is a subjective calculation. Officials weigh various factors — income, financial holdings, home equity, medical expenses, number of children in college — to determine how much they think a family can afford to pay toward a child’s education. The new policies modify the formula in parents’ favor. In the fall, for example, Harvard will no longer consider home equity in determining a family’s ability to pay. Stanford will consider the higher cost of living in some parts of the country. Yale will eliminate the first $200,000 in assets from its calculation.
Even if on a free ride (some colleges will cover room and board as well as tuition), a financial aid recipient will often still be on the hook for several thousand dollars in “student contribution,” which can be paid through an outside scholarship or work-study program. “We believe every student should be contributing something toward their education,” says Bill Schilling, director of student financial aid at the University of Pennsylvania, where the self-help contribution will be up to $2,250 a year.
Loans to Grants: Everyone Elite in the Pool
Beginning next fall, many prestigious institutions will replace loans in their financial aid packages with grants, allowing students to graduate debt free. (No-loan policies at some colleges, including Dartmouth, Haverford and Rice, begin with incoming freshmen, which might not settle too well with sophomores.)
Each college sets a different benchmark. Lafayette’s policy will kick in for a family making under $50,000, and M.I.T.’s at $75,000. Colby’s grant-only aid system will apply to families with need regardless of income.
Eliminating loans, says Stephen Collins, a Colby spokesman, “may have been a bigger step for Colby, but we want this place to be affordable to lower-income students.” Its program will cost it $1.5 million a year, financed in part by double-digit returns on its $600 million endowment and a $50 million fund-raising campaign.
Mr. Collins acknowledges that administrators worried that Colby would fall behind other colleges. “There was a sense this is going to happen in the next several years,” he says. Colby’s view was: “Let’s just do it now.”
College as Cellphone Contract: Lock It In
A growing number of colleges are freezing tuition for each incoming class, good for the next four (or five) years of college. Entire state systems, including those of Georgia and Illinois, offer flat-rate plans. The University of Colorado, Boulder, guarantees that tuition won’t go up for out-of-state students. A plan for the State University of New York is awaiting legislative approval.
The idea is to give families a sense of financial certainty. But one side effect is that to maintain revenue, some universities have had to raise tuition significantly for each subsequent class. In 2004, the first year of its fixed-rate program, George Washington University increased tuition by almost 17 percent. “Like any business, you need a revenue projection,” explains Tracy Schario, a spokeswoman. Without the flat rate, the increase “would have come out to 4 percent a year.” George Washington is now labeled the nation’s most expensive college; next fall, tuition, fees and mandatory housing will come to $50,607.
Some colleges have decided the benefit to families isn’t worth the risk. Pace University, for example, set tuition rates so high that enrollment began to plummet; last year, after four years of declines, Pace disbanded its fixed-rate program.
Lowering the Bottom Line
Blackburn College, a small liberal arts college in southern Illinois, has joined a handful of private colleges, mostly in the Midwest, that have taken an unorthodox approach to the tuition game: they’ve lowered their sticker price. In the fall, Blackburn announced it would drop its baseline charge 15 percent, to $13,500 from $15,720. The strategy proved an attention-getter: applications ran 10 percent ahead of last year. But to compensate for the loss in tuition dollars, the college has cut back on aid — all need-based aid and most merit aid from its own coffers — and plans to expand enrollment.
Officials say prospective students were turned off by the published price, and had dismissed the college without looking into tuition discounts.
“We found students were very confused by the process of determining the bottom-line cost,” says John Malin, Blackburn’s enrollment manager.
While tuition reduction, on the face of it, seems to improve access for low-income students, the affluent may benefit more. Students who can afford to pay full freight get a discount right off the bat, while poor students no longer get institutional need-based aid and must meet higher academic standards to qualify for merit aid.
Eureka College, Ronald Reagan’s alma mater, cut its tuition in 2004 to $13,000 from $18,700 and eliminated need-based institutional aid. Since then, average scores on standardized tests have increased and enrollment has grown about 43 percent, to 700 students. The expansion has largely been among the more affluent students that Eureka was hoping to attract, says Brian Sajko, who oversees admissions and financial aid. The decision to lower tuition, Mr. Sajko says, “is a way to think about who you are trying to serve, but also that you are a business. People at Harvard can put out a tablecloth and sit there quietly. But colleges like us need to wave that banner. We have to be a little more out there in the world.”
Muskingum College in Ohio is credited with being first to cut tuition across the board, in 1995. Others include Wells (New York), Heidelberg (Ohio), the College of Idaho and North Park University (Chicago).
Why don’t most colleges just cut their sticker price?
Donald Heller, director of the Center for the Study of Higher Education at Pennsylvania State, offers one reason: “There’s something we refer to in college pricing as the Chivas Regal effect. If an institution drops its price, it’s seen as a decrease in quality.”
No Tuition Here: Free-for-All Colleges
A handful of colleges have, for decades, quietly offered the best deal in higher education: $0 tuition.
Armed with a strong historical mission — along with aggressive fund-raising and, at some, student work programs that offset operating costs — administrators at free colleges all say they would dip further into their endowments before they would consider charging tuition. “It has to do with our whole reason for being,” says Joanne Singh, associate vice president for development at Berea College, in Kentucky.
With Congressional leaders questioning why more of institutions’ swollen endowments isn’t being used to make college cheaper, it’s worth considering those that manage without charging a penny of tuition, among them the College of the Ozarks, Webb Institute, Curtis School of Music, Franklin W. Olin College of Engineering and Deep Springs, a two-year college in the California desert.
Berea was founded in 1855 by abolitionists who sought to educate poor students in Appalachia. Today, the college retains a Christian character, and applicants must meet financial limits roughly parallel to standards for federal Pell grants. Students work a minimum 10 hours a week in jobs like broom making, horticulture and iron forging to help cover tuition and earn spending money.
With its $1.1 billion endowment, Berea ranks ahead of Dartmouth, Duke and the University of Chicago in money per student. Endowment returns cover about three-fourths of operating costs, but finances can be hard to maintain. “It’s very difficult, especially when there’s a downturn in the marketplace, because we depend upon our endowment to perform,” says Joe Bagnoli, Berea’s associate provost for enrollment management.
“We’re probably not going to be the school that has the $8 million piece of equipment,” Ms. Singh says. Yet it recently implemented a program that provides free laptops to all incoming freshmen; the computers are theirs to keep. Half of Berea’s students study abroad, with 50 percent paid by the college.
Gifts and bequests make up most of the endowment, though one traditional incentive for alumni giving — a leg up for offspring in admissions — probably doesn’t apply. Postcollege success lifts most alumni incomes beyond Berea’s ceiling for applicants, $52,000 for a family of four. “If we’ve done our job, their kids are not going to get in here,” Ms. Singh says.
In a very different setting — the East Village of Manhattan — the Cooper Union for the Advancement of Science and Art educates roughly 1,000 students of art, architecture and engineering, providing all with full tuition plus aid for living expenses. Founded in 1859 by Peter Cooper to provide city children the education he never received, it is one of the country’s most selective colleges, admitting only 10 percent of applicants. Cooper, a self-made industrialist who invented the gelatin dessert that became Jell-O, had the foresight to buy the future site of the Chrysler Building, which was completed in 1930. The building’s lease now provides nearly 45 percent of the Cooper Union’s revenue.
The college’s fortunes rise and fall with the real estate market.
Less than a decade ago, the institution had annual deficits of up to $15 million. But a series of real estate deals, including the conversion of an Astor Place parking lot to a 22-story apartment tower making $2 million a year, has helped the college to get back into the black — and to meet its commitment to keep education, as Cooper said, “as free as water and air.”
Michael M. Grynbaum is a business reporter for The Times.
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April 20, 2008
The (Yes) Low Cost of Higher Ed
By DAVID LEONHARDT
ON Oct. 2, 2003, board members at the University of Virginia filed into the Upper East Oval Room of the Rotunda, the centerpiece of Thomas Jefferson’s campus design, for one of their regular meetings. As usual, they were joined by the university’s top administrators. Just before the meeting began, a member of U.Va.’s public affairs staff walked over to John T. Casteen III, the university president, to hand him a clipping from that morning’s newspaper.
The clipping described a sweeping new financial-aid program that the University of North Carolina had just announced. North Carolina was going to cover nearly the full cost of any student whose family made less than 150 percent of the poverty level or, for a family of four, about $30,000 in today’s dollars. Students would still have to work 10 to 12 hours a week in a campus job, but they would not have to take out any loans.
At the time, it was one of the most aggressive aid programs at any major university.
The program touched a nerve with Mr. Casteen. The son of a shipyard worker from Portsmouth, in the southeastern corner of the state, he was the first member of his family to attend college. But during his 13 years as president, tuition had risen significantly, as it had at many colleges, and the Virginia campus had become even more dominated by upper-middle-class students. North Carolina’s new policy, which had the potential to lure students away from Virginia, could aggravate the situation.
Before the meeting had ended, Mr. Casteen announced to the room that he wanted the financial-aid staff to come up with a response. He wanted it quickly, he said, and he wanted something bigger than what North Carolina was doing. Four months later, at the board’s next meeting, it approved a plan that was similar but somewhat more generous than North Carolina’s. Making sure everyone had a chance to attend college, Mr. Casteen would say, was “a fundamental obligation of a free culture.”
That same spring, officials at Harvard had been working on their own plan. Three weeks after Virginia’s announcement, Lawrence H. Summers, then Harvard’s president, traveled to Miami to give a speech titled “Higher Education and the American Dream.” In it, he alluded to Jefferson’s views on the importance of educating poor and rich alike, and he decried the paucity of low-income students on college campuses. The punch line came toward the end of the speech, when Mr. Summers raised the bar on North Carolina and Virginia. Harvard would cover nearly the full college cost for any student whose family made less than $40,000.
The financial-aid bidding war at the nation’s top universities was under way.
North Carolina soon expanded its program, to cover 200 percent of the poverty level, or $41,300 today. In 2005, Yale undergraduates occupied the admissions office to demand that their university increase aid, and administrators soon did. The University of Maryland came forward with a plan. So did the Massachusetts Institute of Technology, the University of Pennsylvania and Stanford. In 2006, Harvard raised the bar again, saying parents making less than $60,000 would not have to pay anything toward the cost of their child’s education.
All of these moves focused on low- and middle-income students — an ever-rarer breed at elite universities over the last generation. But in 2007, the bidding war took on a new character: it began to address the concerns of the upper middle class as well. In July, Amherst College announced it would eliminate loans for all students, no matter their income. In December, Harvard — under Congressional pressure, like other wealthy colleges, to spend more of its endowment — introduced a policy under which most families making less than $180,000 a year would receive significant aid. For all but the most affluent 3 or 4 percent of the population, Harvard would be roughly as expensive as many state universities.
Harvard being Harvard, the policy received a huge amount of attention, and set in motion a frenzy that made the previous few years of dueling announcements look leisurely by comparison. Within weeks, Yale went as far as Harvard had, while Bowdoin, Colby, Dartmouth, Haverford, Pomona and others came up with their own — usually less generous — policies.
In less than five years, the entire tuition and financial aid system at the nation’s top colleges has been overhauled. Today, it looks a lot like a highly progressive tax code, in which the affluent are bearing an enormous share of the overall tuition burden. No matter how high the published cost — almost $50,000, typically — these top universities have become significantly more affordable for the majority of students.
It may be the first time that has ever happened.
The changes have not been greeted with a chorus of joy, however. At colleges without large endowments, administrators are worried about the pressure they will face. Some have suggested that they may end up reducing aid to low-income students to compete for more affluent students, who typically have higher test scores and thus help an institution’s ranking in U.S. News & World Report. In the past, these colleges were able to woo some students away from the Ivy League with merit scholarships.
Others say the latest round of changes will not solve the larger issue of economic opportunity raised by Mr. Casteen, Mr. Summers and others. “There is a perception that this has gone farther than it really has,” says Sandy Baum, an economist at Skidmore College who oversees the College Board’s annual report on college costs. “The number of students going to these schools is tiny. It’s not going to make a dent in educational opportunity.” Increases in the federal Pell grant, which typically go to students whose families make less than $40,000, would probably accomplish far more on that front.
Over the last decade, the average net cost of attending a four-year public college — including room and board as well as financial aid, and controlling for inflation — has risen to $9,980 a year, from $7,650, according to the College Board. The average net cost at private colleges has risen to $23,000, from $18,050.
Still, other education experts have pointed out that the new aid policies aren’t always as generous as administrators make them out to be. Some colleges, for instance, have committed to covering only tuition, not room and board, which can be substantial.
All of these concerns may well be valid. Yet it’s still worth taking a minute to consider how quickly — and how much — the recent announcements have actually changed the landscape of higher education.
THIS past November, the admissions deans from Harvard, Princeton and Virginia went on a recruiting tour together. They no longer had to spend the month reading applications, because they had abolished their early-admissions programs. So they hit the road instead, speaking at high schools across Virginia and West Virginia.
One night, they held an information session at a Holiday Inn in the Appalachian town of Bluefield, W.Va. They had sent invitations to about two dozen students and had told guidance counselors to spread the word. William Fitzsimmons, Harvard’s admissions dean, had expected about 45 students and parents to show up, based on previous recruiting trips.
Just three years earlier, John Blackburn, Virginia’s dean, had gone on a similar tour in nearby western Virginia and discovered that few students had heard about the university’s new financial-aid plan. “You can’t just raise the U.Va. flag and expect a lot of low-income kids to come out,” Mr. Blackburn had said after one lackluster night in 2004 at a college fair in Big Stone Gap, Va. Many had assumed U.Va. was simply too expensive, even if financial aid would have made it affordable for them. This assumption, officials say, is one reason the student body at elite colleges has become less economically diverse in recent decades.
But something may be changing. At the Bluefield Holiday Inn, 110 people showed up to listen to Mr. Blackburn, Mr. Fitzsimmons and Janet Lavin Rapelye, Princeton’s dean. “We were blown away,” Mr. Fitzsimmons recalls.
The best explanation seems to be that the flurry of high-profile announcements about financial aid has helped overcome years of headlines about rising tuition. As Ms. Baum of the College Board says, “Low- and moderate-income kids now know that it’s fine to apply to Harvard and Dartmouth and money won’t be an issue. And that’s good.”
The number of low-income students at top institutions is still fairly low but is growing. The share of Harvard undergraduates receiving Pell grants rose to 13 percent this year, from 10 percent in 2003-4. At Amherst, over the same span, the number has risen to 18 percent from 15 percent.
The purest case study may be Princeton. It took perhaps the first step down this road in 1998, when it replaced loans with grants for low-income students. It expanded the program to all financial-aid students in 2001. But other colleges didn’t follow suit. And the policy had only a modest effect on the makeup of Princeton’s student body. Between 1998 and 2005, the share of undergraduates with Pell grants rose to 7.7 percent, from 6.9 percent, says Robin Moscato, the director of undergraduate financial aid. But over just the last two years, with other colleges trumpeting their new programs, the share of Princeton undergraduates receiving the Pell has increased to almost 10 percent.
The elimination of loans is a crucial part of the changes. From a straight economic perspective, this doesn’t entirely make sense: because people with a bachelor’s degree make so much more on average than people without one, college loans are usually well worth their cost. But these benefits come years later, while the costs come immediately — and intimidate many families.
“A lot of students from smaller towns look at the university and they’re like, ‘No,’ ” says Carla Rojas, a senior at North Carolina whose father is a construction worker near Lincolnton, N.C., and whose mother does alterations there. Many students know there are scholarships, Ms. Rojas says, but they figure, “Oh, I won’t get one.”
Replacing loans with grants changes the calculation. Rather than having to persuade would-be applicants that loans are a good investment, recruiters can say the students will graduate debt-free. If anything, Ms. Rojas adds, she wishes North Carolina were doing more to publicize its policy.
Mr. Summers says the ultimate goal should be to repeat the success of affirmative-action policies. Affirmative action has become so ingrained that black students with a given SAT score are more likely to apply to Harvard than white students with the same score, according to a university analysis. High-achieving poor students, however, are much less likely to apply to elite colleges than their affluent counterparts.
Closing that gap will require more than just money. “Increasing financial aid is terrific,” as Mr. Summers says. “But as important or more important is recruitment and the way students are admitted.”
If admissions officers were to give poor students more credit for what they had overcome, colleges would become considerably more diverse. But they would risk angering alumni, whose children would face tougher competition to be admitted. Recruiting more low-income students would also bring a big price tag, because the newly expansive aid policies would then apply to many more students.
It’s easier for college administrators to be generous with financial aid when their campuses don’t have very many poor students to begin with.
THERE are several arguments for increasing economic diversity at elite colleges. For one thing, it makes the universities more consistent with their self-image as meritocracies. In recent decades, as colleges have become more diverse geographically, racially and religiously — changes they regularly celebrate — they have also become less so economically, according to the Higher Education Research Institute at the University of California, Los Angeles.
At the same time that their campuses were becoming more affluent, the colleges have come to play arguably a larger role in American society.
George H.W. Bush, George W. Bush and Bill Clinton all graduated from elite colleges (Yale, Yale and Georgetown). So did Barack Obama (Columbia) and Hillary Rodham Clinton (Wellesley). The number of United States senators and Supreme Court justices with Ivy League degrees has risen in recent years.
Recent research also suggests that lower-income students benefit more from an elite education than other students do. Two economists, Alan B. Krueger and Stacy Berg Dale, studied the earnings of college graduates and found that for most, the selectivity of their alma maters had little effect on their incomes once other factors, like SAT scores, were taken into account. To use a hypothetical example, a graduate of North Carolina State who scored a 1200 on the SAT makes as much, on average, as a Duke graduate with a 1200. But there was an exception: poor students. Even controlling for test scores, they made more money if they went to elite colleges. They evidently gained something like closer contact with professors, exposure to new kinds of jobs or connections that they couldn’t get elsewhere.
“Low-income children,” says Mr. Krueger, a Princeton professor, “gain the most from going to an elite school.”
Given all this, some have argued that Harvard, Yale and other universities are mistaken in giving financial aid to upper-middle-class students rather than using the money to recruit more low-income students. Awarding a $30,000 scholarship to someone whose parents make $180,000 a year doesn’t exactly reduce economic inequality. But it does have two other benefits.
For one, it gives the new financial aid a more solid base of support among alumni. Anthony W. Marx, the president of Amherst, has been talking about the importance of making the college more economically diverse since his inauguration address in 2003. But he says he received more congratulatory e-mail messages after announcing last summer that Amherst would eliminate loans for all students than after any of his announcements about recruiting poorer students.
Expanding the pool of aid recipients may also make the policies more popular among students. It would be rather counterproductive if the children of midlevel corporate executives, who were paying $50,000 in tuition and fees, ended up resenting the children of police officers, who were paying nothing.
The most important issues facing higher education still have relatively little to do with this small group of colleges. Those issues involve preparing more low- and middle-income children to attend college, lifting the graduation rates at community colleges and at four-year colleges that educate large numbers of these students, and simplifying and expanding federal financial aid.
That said, what happens at the country’s best-known universities still matters, both because of their role in society and because of how they shape the discussion about higher education. Yes, the new policies have flaws, and they are likely to make life more difficult for administrators at other colleges. But just imagine if, five years ago, somebody had said that Harvard, Amherst and their peers would soon be using their endowments to reduce costs to almost nothing for most families making less than $60,000 — and to give large scholarships to families making as much as $180,000. Would anyone have argued that this sounded like a bad idea?
David Leonhardt writes the Economic Scene column for The Times.