Jan. 22, 2007

Princeton Freezes Tuition

Princeton University announced on Sunday that it would keep tuition level — at $33,000 — for the next academic year, thanks to gains in its endowment.

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The move is highly unusual. While some private colleges periodically freeze or even cut tuition rates, it is almost unheard of for such a decision at competitive private colleges. In recent decades, the only comparable example is that of Williams College, which had a one-year freeze on tuition for 2000-1. Some observers of higher education praised Princeton’s announcement and said that they hoped it could do what the Williams move did not: lead other elite, expensive, wealthy institutions to question whether they need to increase tuition every year.

But while the concept of a tuition freeze in elite private higher education is alluring, Princeton students and others should be careful before assuming that their bank accounts are about to be much flusher. Princeton accompanied its tuition freeze by an unusually large increase in room and board.

And experts on college finance say that Princeton’s move could be viewed in multiple ways by other top colleges. Some may be moved to adopt similar policies. After all, Princeton’s moves on financial aid have set off competition among Ivy and similar institutions, much to the benefit of low-income students at those institutions. But colleges may also look at Princeton’s endowment — at $13 billion, large by any standards, and especially on a per-student basis — and conclude that the move is too expensive for them to mimic.

Princeton’s announcement cited favorable investment returns and a desire to minimize student costs as motivating factors for the freeze, the first at the university since 1967-8. And the announcement stressed that the university had enough money to freeze tuition and to improve and add various other programs, such as a new child-care benefit for employees and new financial assistance for those who have a child while pursuing a Ph.D.

But the university also increased room and board by so much that total costs will be up 4.2 percent, compared to 4.9 percent last year, which was the size of the the tuition increase as well. Last year’s dollar figure for increase in room and board was $437. This year’s increase, for those on full board plan, will be $1,780. So the freeze will result in families paying only $207 less next year than the increase they paid this year. A Princeton spokeswoman said that the additional funds for room and board were not to make up for lost tuition revenue, but to reflect the true costs of room and board and to pay for improvements in dormitories

Cass Cliatt, the spokeswoman, said that room and board have “been heavily subsidized by the university, so the increases will help bring income and expenses in line. As part of our residential college improvements, designers and architects are renovating our dining facilities and chefs are developing special menus to improve the college dining experience, and the new board charges will support these improvements in quality.”

From outside Princeton, the impact of the university’s announcement was viewed as positive — with caveats not to expect everyone to follow suit.

David Ward, president of the American Council on Education, said he saw the announcement as “quite dramatic” and one that he hoped would change the way some institutions and the public relate issues of quality, endowment and costs. Ward said that he feared that too many institutions viewed endowments as tools only to grow institutions and add programs. “It’s simply taking what I call a different view of the endowment. I think we’ve got to be proactive that endowments aren’t just to grow but are part and parcel of getting students a quality education,” Ward said.

He added that the size of Princeton’s endowment gives it choices that may not be widely available: “Not everyone can do this.” But Ward added that the university might break other assumptions that extend well beyond institutions with top endowments.

Many institutions — and many members of the public — have assumed that the most prestigioius institutions are the most expensive, he said. “You have a whole different approach here, and I think that’s pretty important,” Ward said. “We’ve justified the upward pressure for 20 years by saying that we are subsidizing those who can’t afford it and that the market will bear it. Perhaps the market is telling us we can’t bear it.”

What is unclear is whether Princeton will start a trend. Williams officials hoped that others would follow their lead in 2000, and others did not. Williams resumed tuition increases and its costs aren’t much different from similar institutions today.

Gordon C. Winston, an economics professor at Williams and director of the Williams Project on the Economics of Higher Education, watched his college’s experiment play out and he is excited about the potential that Princeton might prompt other colleges to follow. Stressing that he was commenting as a professor and not speaking for the college, Winston said that he thought when Williams froze tuition that there was a 50-50 chance that other colleges might follow, and he thinks the odds are higher now.

“I think [Princeton’s move] really is a very serious recognition of the extraordinary wealth that these places have and the need for us to think really seriously about the arms race we’ve been engaged in in tuition levels,” WInston said. “With Princeton’s clout, this could induce reflection on the part of other extremely wealthy schools on what we’re doing with tuition increases, how they fit with extraordinary wealth, and extraordinary returns on wealth, and I think that could be all to the good of society.”

Williams froze tuition at a time of public scrutiny of college costs and record growth in college endowments — and both scrutiny and endowments are growing now. “Politically, we are just charging on in a way that is politically dubious and is hard to justify,” he said.

There are about 25 or 30 private colleges, Winston said, that have endowment-per-student ratios such that their administrations and trustees should be taking serious note of the Princeton decision and ending the attitude of “of course we increase tuition every year by another 5 percent.” For these colleges, Winston said, “their trustees should be thinking hard that there is such a thing as too much tuition revenue.”

— Scott Jaschik

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