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Keeping (Tuition) Up With the Jones

January 24, 2007

On Sunday, Princeton University shocked many higher education observers by announcing that it would freeze tuition next year, prompting speculation on whether other institutions would follow. Some experts believe that Princeton's move could prompt similar decisions from the relatively few private colleges that compete with that university not only for students but in terms of wealth.

Regardless of whether anyone follows Princeton, another college's shift in tuition strategy may be more reflective of what competitive private institutions tend to do. Grinnell College is getting ready to move its tuition -- currently significantly below that of Princeton and Grinnell's competitor liberal arts colleges -- up to that level, for all new students. Grinnell officials say that their move will finance a range of policy shifts that will make the college more affordable and more equitable for low-income students.

But the Grinnell counterpoint to Princeton also illustrates the tricky economics and campus politics of tuition policy. Students at Grinnell are generally unhappy with the shift, feeling that it will hurt access -- regardless of what college administrators say. And while experts on higher education have been reluctant to criticize Princeton's move, a number make the point that its decision -- popular with students and generating lots of good press -- will most help the wealthiest families.

While Grinnell students aren't thrilled, they also aren't taking over buildings -- and that's because Grinnell plans to carry out its increase in the politically astute way that colleges have made similar hikes: The big increase will be paid by new students, not the continuing students who are there now. Tuition at Grinnell is currently $28,566. The plan calls for continuing students to pay only a typical increase (probably 4 to 5 percent when finalized). Freshmen next fall will pay an additional $4,200 (or 15 percent) plus whatever regular tuition increase is approved. The $4,200 figure is designed to bring Grinnell up to where Carleton, Oberlin, Macalester and similar colleges are, and Princeton too, for that matter. (Fees for room and board are also expected to go up by standard amounts, although Grinnell officials say that they didn't lag behind their peers there.)

Like Princeton, Grinnell has an endowment that is the envy of its peers. At $1.47 billion, Grinnell has more money than any other liberal arts college (and ranks No. 36 among all colleges and universities, beating many institutions with 10 times or more Grinnell's enrollment of 1,500). So why is Princeton citing its endowment to freeze tuition while Grinnell is going up in price?

"We have been motoring along for about 20 years at a tuition figure and fees that was about 10 percent below the average of our peer schools, and we didn't have a view that being lower was doing great things for us," said Russell K. Osgood, president of Grinnell. About half of the money from the additional tuition will be used by Grinnell for various academic enhancements. But the rest will go back to students in the form of aid enhancements that Grinnell officials say they couldn't otherwise afford:

  • The college's estimates for costs of books and other expenses beyond tuition, room and board have been revisited for the first time in years. Osgood said that they have been "inaccurately low," so the change will result in larger aid packages for every eligible student. A typical student will see an increase in aid of $1,000 from this change.
  • The college, which normally expects students to contribute $2,000 in summer earnings for college expenses for the next year, will waive that requirement for one summer of a degree program if students want to do "socially productive" work that doesn't pay well. In other words, for the first time, it will be possible for the financial aid student to take that non-paying internship or do academic research for a major project -- opportunities often available only to those not on financial aid.
  • The college will increase by 200 percent, potentially up to $500,000, the total of loans it plans to forgive each year at graduation.
  • Over five years, the college hopes to phase out the need for any student to borrow anything to pay for Grinnell.

Osgood said that he realizes that many people associate tuition rates with actual cost, and so are quick to applaud a move like Princeton's and criticize one like Grinnell's. But he argued for an emphasis on what students actually pay -- in which case he said that his college's tuition increase will be a benefit for low-income students. "I believe the focus ought to be on guaranteeing access for people who have need," he said.

There are limitations, he added. Public institutions have different missions, so such a policy may not be appropriate. And Osgood said the course of action he is taking would give him pause if Grinnell hadn't been charging less than its peers and if it didn't have an aid policy of meeting full need of all admitted students, and admitting students without regard to need. And while Osgood is confident that Grinnell should be raising its prices, he wouldn't go too far -- whatever good the money might provide. "If you wanted to charge $200,000, which no one is doing, you would run the risk of scaring all customers away."

Many students don't like Grinnell's approach. Benjamin Weyl, editor-in-chief of The Scarlet and Black, the student newspaper, said that many students feel that they don't know where the new money will be going and worry about whether future students will enroll. Weyl said that he liked the idea that Grinnell cost less than some of its peers and wished that were seen as a point of pride. "No one can accuse Cooper Union, which is free, of being a lackluster school," he said. Weyl said that some students have been chatting on a Grinnell Web site about the viability of the college following the Cooper Union model.

The reality is that what Grinnell is doing now is far more typical of the behavior of elite private colleges than are the policies of either Princeton or Cooper Union. There is a tradition -- derided by some as the "Chivas Regal effect" -- of colleges that are below the price of their peers or even would-be peers raising their prices, in some cases dramatically. The theory is that prospective students associate quality with price. The University of Richmond in 2005 increased its tuition by 27 percent (only for new freshmen -- continuing students had only modest increases) as part of a campaign to improve academically.

At the time, President William E. Cooper said bluntly that Richmond was "leaving money on the table" by charging less than other institutions. “We had all these people with a kid at Dartmouth or a kid at Syracuse, and a kid here, and we were the cheap school.”

Northwestern University is another institution that once had tuition significantly behind its peers. But rather than play that up as an advantage, the university determined that it was missing the chance to make academic improvements. So in the fall of 1998, it increased tuition by one rate for new freshmen (who were charged $22,2392) and another rate for continuing students (who paid $20,244). The extra funds generated by the freshmen (and over time, from all students) paid for smaller classes, new technology, more on-campus housing, and a range of other improvements. Northwestern didn't lose students.

One analyst of higher education policy, who asked not to be named, said that the "why leave money at the table?" argument was quite valid. By "hammering the very well to do," as Grinnell will be doing, a lot more money opens up for programs to help low-income students, he said. He noted that as more public flagship universities seek permission to raise tuition substantially, in part to pay for financial aid, they are essentially making the same philosophical argument.

Princeton has -- prior to the announcement of the tuition freeze -- made a series of changes in financial aid policy over the years that have greatly increased grants and eliminated loans. But the analyst said that the question for a Grinnell or Princeton is really whether "you are soaking or benefiting the high income people," although few in higher education like to talk about it that way. In fact, because Princeton is as generous as it is to people of modest means, those paying full freight at Princeton aren't terribly needy, he said. "One could argue that the Princeton decision just gave a lot of very well to do people a very big break."

Meanwhile, of course, Princeton is getting a lot of favorable attention. Osgood, of Grinnell, said he wishes Princeton well.

 

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