Up and Down on Tuition

May 31, 2005

Conventional wisdom has it that tuition rates will go up every year at private colleges by a little more than the rate of inflation. Some colleges struggling for enrollment will cut rates every now and then, but the norm is a steady increase -- but not too much in any one year. This year, many leading private colleges are announcing increases in the 4-5 percent range.

Two private institutions this year, however, have prepared for substantial changes in tuition policy for the next academic year. The University of Richmond, which aspires to join the top ranks for private colleges, is increasing total charges by 27 percent for freshmen, to  $40,510, effectively ending a longstanding policy of being thousands of dollars less expensive than its competitors. (Current students will face only a 5 percent increase and their base will be grandfathered while they are students.) Roosevelt University,  a Chicago institution that serves many nontraditional students, is cutting tuition -- and linking the cut to how many courses a student takes, so that students have an incentive to take more courses and to graduate sooner.

Data from the admissions and registration cycles just completed suggest that both colleges are achieving some of the financial and academic goals of their unconventional tuition policies. Richmond has commitments from a comparably sized freshman class for the fall, despite its huge tuition increase. And Roosevelt students have signed up for more courses in the fall than in previous semesters. Officials at the two colleges say that their experiences suggest the extent to which price does and does not influence student choices.

Price Insensitivity at Richmond

William E. Cooper, the president at Richmond, says he realizes that his university's cost increase "superficially seems outrageous." But he said that he became convinced that Richmond "was about $7,000 underpriced" and that the additional revenue would allow for more financial aid and improvements in facilities and academic programs. "We could dink around with this and ramp it up a little each year, but we decided it was better to bite the bullet, to realign this and stay in place, rather than looking confused."

But what of student choices, and the widespread public and political fear that high prices discourage students? With certain student segments, that's flat out false, Cooper says. Richmond found, he said, that it was losing students to more expensive institutions and enrolling students whose parents were willing to spend more than Richmond was charging.

"We were leaving money on the table," Cooper says. "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."

Cooper also rejects the idea that a low price can be a recruiting tool. He acknowledges that Richmond probably picked up a few students over the years who might have been too wealthy to qualify for financial aid at a Duke or Vanderbilt or Emory, but who were attracted by the lower prices at Richmond. "The question is, are they going to be there for us in the future" as alumni donors? Cooper says. "They are too finely tuned to the financial," he says.

The results of the first admissions cycle suggest to Cooper that the tuition increase worked. Final numbers will shift a bit as Richmond gains or loses a few students due to other colleges' wait list decisions. But right now, 770 students have paid deposits to enroll as freshmen in the fall, the same number as last year. Applications were down (to 5,779, from a record 6,236). So the admissions rate rose (to 47 percent from 40 percent) and the yield -- the percentage of admitted students who enroll -- was down a bit (to 28 percent from 31 percent). Minority enrollments appear down slightly, to 12 percent from 13 percent.

But Cooper points out that measures of academic quality didn't change. Last year, the middle 50 percent of SAT scores was 1250-1390 and the average high school grade-point average was 3.52, and figures from this year's admitted class suggest that the figures will be almost identical.

"There was bound to be a one-year shakeout," Cooper says of the drop in the number of applications, but the class entering is not only as smart as the previous class, but appears to have many families that can afford Richmond's new rates and want to pay them.

"One of the strong philosophical bents of this change was the price insensitivity of people who really care about higher education," Cooper says. "Just like people buy the best cappuccino maker if they really care, so with higher education. If you really care, a couple thousand bucks isn't in the decision maker and that's the student and family we want."

Price and Graduation Rates at Roosevelt

At Roosevelt, the students aren't necessarily buying a lot of cappuccino makers. And enrollments have been healthy for the institution, at about 7,500 head count, with 60 percent of students as undergraduates, many of them working adults.

Mary E. Hendry, vice president for enrollment and student services, says that the university's problem is with graduation rates. Currently only about 40 percent of students graduate within six years, and the university would like to raise that proportion to 50 percent.

Hendry says that it is better for students and the university if they move through the academic programs at a brisker pace. "We decided to use tuition to encourage them to take more so they would graduate within four years," she says.

Historically, Roosevelt has charged tuition on a per-credit basis, and for next year, the per-credit figure will go up 7.3 percent, to $755. But the university is setting special fees to discourage students from taking almost enough courses to graduate on time, and to encourage them to instead take enough to earn their degrees.

Students taking 12 credits a semester will be charged at a rate that would equal $14,180 for a year, an increase of 10.2 percent over last year's per-credit rate. But those who take 15 credits will be charged the exact same amount for a year of courses, a decrease of 11.8 percent in what students would have paid last year. (Students who take 16 credits will pay a little more, but will also be paying 11.8 percent than in previous years.)

Typically, students register for about 30,000 credit hours in a semester at Roosevelt. For the fall, the first semester under the new plan, it appears that there will be an increase of 1,000 credit hours -- while enrollment is holding steady.

"I think this shows that we are reaching students," says Hendry. "We can use these policies to change graduation rates over the long run."

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