Tuition reductions, or “tuition resets”, have been in the news lately, with Birmingham-Southern College, Drew University, and Sweet Briar College all embracing a reduced sticker price. Robert Massa, senior vice president of enrollment and institutional planning at Drew University, chatted with Edmit about why Drew decided to cut tuition by 20 percent.
Edmit: What was the rationale behind Drew University’s tuition reset?
Massa: The price of tuition at colleges has gone up significantly over the past 30 years. At the same time, the College Board just released their study on college costs, and while financial aid over the course of those years has certainly increased, it recently has not kept up with the increases in price.
We always look at what’s affectionately called the “sticker price” or “published price” as the cost of college. But cost is different from price: Cost is what it costs us [colleges and universities] to provide the education, not what you [the students and families] pay. Price is what you pay, but most students don’t pay that [full] price because of financial aid.
In the recently released College Board study, net undergraduate tuition and fees fell from an average $15,270 in 2007 to 2008 to $13,210 in 2012 to 2013, even though published prices were rising by an average of 2.4 percent annually in private nonprofit four-year institutions.
In other words, financial aid is still making up the difference. So why am I giving you all this background? Because most students do not pay the published price at most institutions. This is not true for the uber-selective schools, the Ivies and near-Ivies and the top 50 or so US News & World Report colleges and universities. It is true, however, for the bulk of the other 2,300 four-year nonprofit public and private universities: Most students do not pay the published price.
That said, numerous studies, most recently by the firm Ruffalo Noel Levitz, show that at least half of families that look at colleges and universities cross schools off their lists based on the published price alone. In other words, they don’t dig deeply enough to find out what the net price would be, what the average price with financial aid would be. They don’t go on the [schools'] websites, they don’t look at the net price calculator to find out what it could cost them. They simply say it’s too expensive.
[With a tuition reset at Drew], we’re not lowering the cost of attendance. If we significantly cut our cost, we impact our quality. So we’re not cutting costs, we’re cutting the price that we charge. We need to get the attention of more students who are looking for colleges. We’re doing that by bringing our published price more in line with what most students pay after financial aid.
Think of it this way: If you’re selling a commodity and most people pay $100 for it, and you’re selling it for $350, but nobody really pays that price, people look at it say “I’m not paying $350 for that”, and move on to the next thing. Why would you continue to have your price at that level if most people aren’t paying it? You’re disincentivizing potential buyers, if you will, from actually considering your product.
Edmit: How can colleges like Drew afford the tuition reset?
Massa: Here’s the deal: Most colleges, like Drew, very fine liberal arts colleges, have a very small percentage of students who are paying the full price. Of Drew’s 1,550 students, only 75 were paying the full price without any financial aid. So when we cut the price by almost $10,000, that’s a loss of $750,000 or so.
That can be recovered with increased enrollment, and increased enrollment is the expected result of cutting the price. That’s why you reduce the price to begin with, particularly if you’re under-enrolled, which we are. You want to get the attention of students who hadn’t even considered Drew--because of the list price being so high--but for whom Drew would be an excellent alternative.
Edmit: For prospective college students and their parents, what advice can you offer them in terms of figuring out what they can afford?
Massa: Families have to decide for themselves what is worth it and what isn’t. Look at the programs, the place, and the people to determine the value of [the colleges they’re considering]. The average student is going to pay roughly $20,000 to $21,000 [per year] in tuition; at Drew, we’re charging $39,500. The average student is going to get a 48 percent discount from our new price; before they were getting a 62 percent discount from the higher price. So it’s still expensive,and we’re still going to be providing both need- and merit-based aid to help bring the price that families pay down to the affordable range.
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