Competing With Publics on Price

March 24, 2009

With each passing day, as the economy turns down and Americans' financial uncertainty ramps up, the competitive environment for higher-priced colleges grows tougher. They will continue to make longstanding arguments about their relative quality compared to less-expensive competitors, particularly when factoring in the likelihood that students will get through in a shorter time period. And they will make the point that the gap in the actual price of attending is a lot narrower than the difference in sticker price. But in a world of simple messages, higher prices are still a hurdle.

In recent weeks, two private colleges have introduced or expanded programs in which they match the tuition price of local or regional public universities for some portion of the potential applicant pool. Their reasons for doing so are different -- California Lutheran University is very directly trying to take price out of the equation for a group of high-quality students, while officials at Davis & Elkins College say they are focusing on making higher education a more viable option for place-bound students in their Appalachian West Virginia region.

But in both cases, the colleges hope that a simple message -- quality private higher education at a public college price -- will get through the information clutter and financial jitters of this era.

"This allows us to very directly compete on price and have a very direct conversation about what it takes to get an education like the one we offer," says Matthew Ward, vice president for enrollment management and dean of admission at California Lutheran, which expanded to transfer students for 2009-10 its year-old program -- none-too-subtly titled "CLU Guarantee Scholarship: Private Education, Public Price" -- that matches the price for students admitted to the University of California's nearby campuses at Los Angeles and Santa Barbara. "For those students, we want to take price out of the equation."

In the highly competitive environment of Southern California, Cal Lutheran is fighting for many of its best students with UCLA and UC-Santa Barbara, which cost students about $16,000 less to attend (about $25,000 vs. Cal Lutheran's $41,000). "We're trying to reach out to students who are interested in a flagship public," says Ward. "The quality of those institutions is something we want to get our names in the same conversation with."

In late 2007, Cal Lutheran announced that it would let any freshman student admitted to one of the two nearby UC campuses enroll at the university "for the cost of attending the public university." Twenty of the 25 students who applied to Cal Lutheran under the program wound up enrolling, and of those, 11 were first-generation college students, and 11 were Latino. That is no coincidence, Ward suspects.

"When you're working with families that don't have a tradition of going to college, and particularly, in the case of Latinos, groups that are averse to debt, it was really helpful to have a simple message making it clear to families what we're putting on the table," he says. "We're saying, 'If you get in there, you can pay the same cost here. The quality of the education at CLU is going to be higher, and we're going to do a better job preparing you for your next step in life.' Taking price out of the equation seems to have made a difference."

Most of the students qualifying for the grant would already have qualified for almost as much institutional financial aid from California Lutheran under normal circumstances, so the university absorbed little additional cost in creating the scholarships. "We were just repackaging what is reality" for the most part, Ward says.

California Lutheran officials are uncertain how many more scholarships they are likely to award when they expand the program to transfer students. There is a natural cap on the size of the program because of the selectivity of the institutions the university is competing against -- transfer students must have attained a 3.0 transferable grade point average and completed 60 transferable units at one of the two UC institutions. But Cal Lutheran hopes to benefit from the fact that it is growing (opening a new residence hall, etc.) at a time when the University of California is talking about capping if not cutting its enrollment.

Access in Appalachia

The broad outline of Davis & Elkins College's "Highlands Scholar" program is roughly similar to California Lutheran's approach. It, too, will discount tuition by more than $14,000 to match the price that a student would pay at two West Virginia public institutions, West Virginia University and Fairmont State University. (This being West Virginia instead of Southern California, though, the dollar figures are much lower: The discount comes off Davis & Elkins's roughly $26,700 annual sticker price, as opposed to Cal Lutheran's $41,000.)

But while college officials are clearly positioning the institution in contrast to the nearby publics, they insist that aspects of the program make clear that access, not competition, is their goal. The seven-county area that surrounds the college is a relatively depressed, former coal mining region from which the college traditionally draws only a handful of students. (Last year the college had no freshmen from the region, while two years ago it enrolled seven.) Some locals travel the 110 miles to Morgantown, where the state flagship is, but many in the area do not go to college at all.

Davis & Elkins is making the lower tuition rate available only to students from the 10 high schools in the seven-county area, with the idea that "it is enabling people to come to college and get a very individualized educational experience, as opposed to having either no opportunity or one that was at considerable difficulty for them," says G.T. (Buck) Smith, the college's president. "We see this as a way to reach out to reach out to people in ways that they might never have had the chance before."

So far, 30 students from the area have submitted deposits at Davis & Elkins through the scholarship program, part of a general pattern of enrollment growth at the college that Smith says makes the reduced-tuition scholarship idea workable in a way that it might not be at other private institutions, where cutting prices might require a drop in quality. The college is on its way to growing from about 600 students to nearly 1,000, aiming to add 100 students a year, and the students added through the tuition lowering program -- about 30-35 a year -- would require the college's student-faculty ratio to grow only to about 11-1 from the current 10-1.

The fact that Davis & Elkins also has extra capacity in its residence halls for those who choose to live on the campus means that the discount will have little if any impact on the college's bottom line. "And while there's a benefit here of roughly $15,000 for each student, from our economic point of view, they are still bringing with them $5,000 we wouldn't have had otherwise," says Smith.

"I had to make sure that this doesn't work to the economic disadvantage of the college, and it doesn't," the president says. "We're doing this primarily as a way to help enhance the future of this region and its residents, but there's nothing soft-headed about it. We've been part of this community, been sustained by this community, and now we're at this time where many of the citizens of this area need us."

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