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Hoping the Price is Right

March 2, 2009

Bryce Jessup is looking to keep the family business going during hard times, and it’s fair to say he’s operating on faith these days. Jessup, whose father founded William Jessup University 70 years ago, is banking on the possibility that a recent decision to cut tuition rates will help keep the Christian college afloat, and perhaps even grow enrollment during an economic downturn.

“Being a faith-based institution, of course faith is what we built our institution on,” said Jessup, president of the Rocklin, Cal.-based university. “We can’t help but think when we’ve made it through the wilderness we’ll get through to the Promised Land. But there are some giants that need to be conquered.”

As with many private college leaders, Jessup isn’t quite sure how to attack the “giant” that is the faltering economy. Do you raise tuition to shore up revenues, and risk losing valuable students in the process? Do you instead cut or freeze tuition, or at least minimize increases, in the hopes that doing so will keep the students coming back?

While few colleges have actually announced tuition cuts or freezes, such moves have not even been on the table for most private colleges in the past. Many colleges are making a point of slowing the rate of tuition increases this year, and all signs suggest that approach will be a common one during this recession, according to Tony Pals, spokesman for the National Association of Independent Colleges and Universities.

“We’re anticipating seeing tuition increases on average being lower than they have been in recent years,” he said. “It’s simply a matter of needing to enroll enough students this coming year. Our institutions have always been able to compete very well on value, but given the economy it only makes sense that price might be a bigger component this year.”

While a trend is starting to take shape for private colleges, tuition at many public colleges will not be final until state legislatures approve state budgets. In past recessions, economic downturns have prompted some states to insist on minimal increases. On the other hand, severe state shortfalls of the magnitude some now expect have resulted in double-digit tuition increases at many public institutions.

For Jessup, cutting tuition was both a symbolic gesture and a business strategy.

“The main driving force [for cutting tuition] was we are wanting to send a message that we’ll work with you,” he said. “The business side of the issue is that we’re hopeful that [decision] will also bring us increased student enrollment. That’s just the financial metrics of it all. If it doesn’t [work], we’ll take a hit for it.”

William Jessup’s tuition will drop 2.5 percent or about $500, to $19,900. But the university already competes directly with nearby community colleges, which are likely to be even more of a draw this year. For William Jessup to break even after the tuition cut, the university will need to retain all of its 500 students and bring in 18 new ones.

Across the country, private college leaders are grappling with the same variables that have Jessup and his board of trustees in knots. For the most part, tuition is still likely to go up, even if it does so more gradually than in recent years. In a December survey, nearly 70 percent of private colleges indicated plans to increase tuition for 2009-10, according to a survey conducted by NAICU.

As for the colleges that are slowing tuition increases, they're eager to let the public know about it. Each passing day seems to bring a new press release:

  • Carnegie Mellon Raises Tuition 2.9 Percent, Lowest Increase Since 1975”
  • Drake holds tuition increase to lowest percentage in a decade”
  • "Penn Announces Lowest Tuition Increase in 41 Years"
  • "[Worcester Polytechnic Institute] Undergraduate Tuition Increase Lowest in University’s Recent History"
  • "Cost to Attend Duke to Rise 3.9 percent, among lowest increases in recent years"

Seeking Good Press

The latest efforts to hold down tuition increases coincide with both an economic crisis and a period of increased scrutiny on college costs. With the passage of the Higher Education Opportunity Act of 2008 comes a new list that will track colleges with the largest tuition increases. It’s a list no one wants to be on, particularly when students and their families are struggling financially.

Moreover, private colleges with the largest endowments and no shortage of applicants are also trying to show restraint this year. Even though their endowments are smaller than they were a year ago, many remain worried about Congressional scrutiny of their endowments, and about the possibility of legislation if these institutions are perceived as being insensitive to families facing tuition bills

Robin McDermott, vice president of enrollment management at Lake Erie College, said the college’s decision to freeze tuition was strategic, designed both to retain students and generate positive publicity at a time when colleges are taking heat for tuition hikes.

“Did we talk about what kind of media coverage we would get? Yes, absolutely,” she said.

So far, Lake Erie admissions officials say they feel good about enrollment prospects. The college has received a record 1,050 applications, a 35 percent increase compared to the same time last year. At the same time, however, McDermott acknowledged that there simply isn’t a formula for predicting how enrollment might shake out in such a volatile economy.

“We’re all nervous,” McDermott said. “Are the paper applications going to convert into the number of bodies or students we need in the fall?

“This [tuition freeze] is a move really to send a message to our market that we’re going to do what we can to calm your fears and to let you know that a quality private education is within reach.”

Survival Tactics

For tuition-driven private colleges that operate on thin margins with relatively small endowments, recent weeks have been taxing. Discussions about tuition have taken on a new gravity, as some college leaders consider the possibility that enrollment declines could seriously affect the long-term viability of the institutions they serve.

At Wheeling Jesuit University, a Roman Catholic institution located outside of Pittsburgh, Pa., officials recently approved a tuition freeze. Serving the Appalachian region, Wheeling has a large population of first-generation students who come from blue collar families that have been particularly hard hit by the economic crisis. While college officials hoped to help these families, they also said that holding tuition at its current rate of $23,590 might be necessary to keep Wheeling afloat.

“It’s altruistic and we’re trying to make sure the student is successful, but it also is [about] making sure we can be around to educate more students,” said Letha Zook, the university’s academic vice president. “It’s one of these discussions we have to have; it’s not a fun discussion.”

Concerns at Wheeling have created a sort of “tension,” Zook said. Faculty are aware that preserving student numbers is paramount to the viability of the institution, and yet they have a duty to preserve the university’s academic integrity, she said.

“[Faculty] know there’s a tension there,” she said. “They know that if they fail a student that student may not come back. But they know that they need to fail the student in order to uphold the rigor of the academic enterprise.”

History Shows Varied Response

Even colleges that tend to serve a more well-heeled population are holding back on tuition hikes this year. Trustees at Sierra Nevada College, which is situated on 18 wooded acres at the north shore of Lake Tahoe, recently voted to defer a previously approved 4.9 percent tuition increase.

“This was not a PR gimmick” said Robert Maxson, the college’s president. “Honestly, so many people are suffering; they’re just going through tough times. I would guess most of our kids come from … middle class families, but middle class families are struggling.”

“I think it was the notion of showing the college had a heart,” he added. “It was that simple.”

In recent history, private colleges have approached recessions with varied responses. Tuition increases accelerated during recessions in the early 1970's and 1980's, but increases slowed slightly in the recession of the early 1990's, according to data collected by NAICU. In the recession that followed the Sept. 11, 2001 attacks, tuition accelerated again.

Even with lower increases and some tuition freezes, private colleges should brace for the possibility that families may simply have to pursue other options in the near term, Maxson said.

“We don’t know what the future’s going to bring,” he said. “If parents’ businesses are suffering, there is no question community colleges are going to become very viable options for them, and I don’t blame them.”

 

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