A Big Tuition Hike ... Requested by Students

Augustana College plans to up charges substantially and create grants for juniors and seniors to use for educational experiences they might not otherwise have.
December 13, 2007

There has been a steady drumbeat in Washington of late about college costs. Tuition is too high. Parents are worried. Access is endangered, and so forth. Some members of Congress want to create annual lists of colleges that increase tuition rates above averages for their sectors.

While there can be no doubt that many families are worried about college costs, an announcement by Augustana College on Wednesday illustrates how the economics of higher education markets don't necessarily reflect what the pundits say about tuition. Augustana is increasing tuition by about 11 percent for next year, almost certain to be well above the national average for private liberal arts colleges. The increase isn't generating protests -- and in fact is based on specific ideas put forth by students. And experts on college pricing say that there is considerable evidence that the move won't cost the college students, and may well attract them.

At Augustana, total charges this year are $33,717, about $1,000 more than the national average for private, four-year colleges, and well below the most elite colleges and universities, where expenses for a year are starting to reach $50,000. Augustana, in Rock Island, Ill., is known for a strong liberal arts program, but it doesn't compete with the Amhersts and Swarthmores of the world, nor does it have a billion dollar endowment (the total is $118 million).

What it does have is an environment where a student's unconventional idea (raise tuition) can have an impact. The main enhancement Augustana plans with the additional money is a new program to be called "Augie Choice" in which students will receive a $2,000 grant during their junior or senior year for use in a range of projects. They could use the money for study abroad costs, or independent research, or to support themselves during an unpaid internship, among other things.

While the grants would have to be approved by a faculty panel (funds wouldn't be approved for spring break trips), the idea is to give students wide latitude in selecting the use of the funds. In addition to Augie Choice, other parts of the tuition increase are designated for faculty lines, new facilities, and efforts to make the campus more environmental -- also all priorities encouraged by students. (Financial aid will also go up so that those who can't afford to pay are not hurt.)

The idea for Augie Choice came from Thomas Williams, who graduated last year and who as a senior was selected by the student government to be its representative on the college's Educational Policies Committee. In an interview Wednesday, Williams said that he started to think about proposing the grants for students to use as he participated in discussions about expanding study abroad and various independent study programs. He said he realized that the college was adding various options that were great opportunities for students, but that they all had costs on top of tuition and fees. Talking to fellow students, he said it became clear that these were opportunities that were largely overlooked by those of financial aid.

"Cost was a real deterrent," Williams said. So he wondered if things might be different if students "could pre-pay for it." He put together a small group of students and they did research that found that some colleges cover such expenses for students and that many of the liberal arts colleges that Augustana considers competitors cost a lot more to attend. If funds for off-campus and other special experiences are built in to tuition, Williams reasoned, financial aid could be applied to them, and students might be attracted to the idea of attending an institution where they would get these funds to create programs for themselves. After more research, Williams made his pitch to Steve Bahls, the president, and a year later, the idea is being adopted.

Bahls said that he thinks a lot about college costs, but that he was swayed by the idea for several reasons. First, he said that he believes Augustana costs about $3,700 less than its peer institutions, so it could go up in tuition without losing its market. But he said that he would have opposed an 11 percent increase without the proposal for Augie Choice. Augustana probably would have been seeing prices go up by 5-6 percent in a regular year, he said.

"The question in my mind and the mind of the board was: Will we be delivering substantial additional value to students in exchange for the tuition increase?" Bahls said. He said that he sees Augie Choice as meeting several key educational goals: encouraging more study abroad, encouraging student research projects and making the senior year of college more meaningful. So he sees the plan as one that will "create a better education," not just as one that will be more expensive. In particular, he said he liked the idea of Augie Choice creating a defining experience about the college -- where all students would plan and execute a significant educational experience and have the budget to do so.

While Bahls said he was surprised the day that Williams proposed that the college increase tuition, the reasoning made sense to him and to trustees. In the end, he said, "it's not a matter of providing the cheapest education, but best value. Students may pay more, but they will receive more for what they pay."

While above-average tuition increases may seem counterintuitive at a time of much debate over college costs, consultants who work with colleges say that these strategies frequently work -- regardless of the rhetoric about tuition.

Kevin W. Crockett, CEO of Noel-Levitz, an enrollment consulting company, said that "the markets sort these things out," and that private colleges that opt for large increases generally succeed if they meet two criteria. One is that they have to be seen as "good stewards" of the money, such that people believe that there is something positive happening with the tuition check. The other is that they generally aren't on the high end of tuition rates for their sector to start with. (Noel-Levitz has done work for Augustana on financial aid models, but was not involved in developing Augie Choice.)

"Normally you will see this strategy when a college wants to make its program more attractive," he said.

As for concerns about the gap between a college raising tuition and other institutions, especially public institutions, Crockett said that public and private prices are already different, as are the sources of funds to support college operations at public and private institutions. A college might also find, he said, "that that's not the comparison a family is making."

Christopher Small, executive vice president of GDA Integrated Services, another enrollment consulting company, said that despite all of the discussion of college costs, many parents do not appear to be focused on price. "We do surveys of families on a regular basis regarding willingness to pay and perception of quality vs. price, and whether or not they are willing to pay for program enhancements, and there is no question, based on five studies we've done, that families realize that quality costs, and if they like the program enhancement, they are willing to support it."

Some years back, many colleges were criticized for embracing the idea of the "Chivas Regal effect" -- that colleges are perceived as high quality by their high prices. In going with that approach, some private colleges were seen as raising prices just for the sake of raising prices. That would be "a bit risky today," Small said. But big tuition increases tied to program improvements work.

A case in point might be Hendrix College, a liberal arts institution in Arkansas where total costs this year are about $31,300. Two years ago, the college increased tuition by $5,000 -- or 23 percent. At the same time, the curriculum was redesigned, with much of the emphasis on the Hendrix Odyssey, in which students have three experiential learning units that may take them abroad, involve them in research or working for nonprofit groups, or designing independent study. Despite the substantial tuition increase, enrollment is going way up. This fall's freshman class had a record 386 students, while the college was fluctuating around 300 before the tuition increase and creation of the new programs. So far this year, applications are running 30 percent ahead of last year.

Karen Foust, vice president for enrollment, said that when she speaks to high school counselors, there is much more interest in the academic program than the tuition increase that paid for it. "It's hands-on experiential learning," she said, and "there's a buzz about it."

Given that so many policy makers are insisting that college costs are out of control and that Americans are fed up with tuition increases, why do some colleges with large increases find themselves attracting record numbers of students? "I understand that there's concern that costs will continue to go up," Foust said, noting that Hendrix added a lot to its aid budget when it increased tuition. But those who are demanding tuition cuts, she said, "think that all schools are alike, and we aren't all alike."

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