Slow Growing

June 24, 2011

Published tuition and fees at private colleges and universities will be an average of 4.6 percent higher this fall than last, according to a survey of 429 institutions by the National Association of Independent Colleges and Universities. This marks the third consecutive year of hikes of about 4.5 percent. While that rate still outpaces the consumer price index, a key measure of inflation, it represents a drop-off from the 10 years leading up to the recession, when tuition rose by a national average of 6 percent.

The survey also found that independent colleges and universities will increase what they spend on student aid by about 7 percent this year, following a 6.8 percent increase last year and a 9 percent increase in 2009-10. These increases in aid have helped drop inflation-adjusted net tuition (the amount students and families actually pay) at private colleges by 11.2 percent over the last 5 years, to $11,320 in 2010-11, according to the College Board.

Officials at NAICU said the smaller tuition increases and the upticks in student aid are a balance that colleges and universities are striking between the economic realities of families considering college and the need to maintain educational quality. "Our schools are being realistic about circumstances that students are in," said NAICU President David L. Warren. "And it looks like it's going to stay this way as far as we can see."

The three years of smaller tuition hikes at private colleges and universities, including some tuition freezes and decreases, contrast dramatically with the situation at public four-year colleges and universities, which have seen unprecedented tuition increases to compensate for cuts in state funding.

Public universities in Washington are considering tuition hikes of more than 10 percent, including a potential 20-percent rise at the University of Washington. University of California officials are saying students could see a "double-digit" increase on top of an 8 percent increase that has already been approved. Despite the large tuition increases, rates at public institutions will still be generally lower than published tuition prices at private universities.

While the average tuition increase at private institutions will hang at around 4.6 percent, there will be some diversity among colleges. At the high end will b Texas Christian University, which increased tuition by about 8 percent to $32,400 for the 2011-12 school year. In an e-mail, officials said the increase would help improve faculty, academic programs, research, academic advising, student services and facilities, and that the university would continue to ensure that students received aid to help offset tuition hikes. The university is in the middle of a campaign to raise $100 million for educational scholarships.

The University of the South, meanwhile, decided this past year that it was through with the high-tuition, high-discount model. For next year, it will cut its 2010-11 rate of $46,000 by 10 percent, and officials said they would also reduce the university's spending on non-need-based financial aid.

Sewanee Vice Chancellor and President John McCardell said he made the decision to cut tuition for several reasons. The university was losing students to public institutions rather than to other private institutions, and giving away a significant amount of revenue in financial aid. At the same time, its enrollment growth had come to a standstill.

Since February, when the announcement was made, the cut has helped stop or reverse those trends and has brought the university some publicity. The tuition decrease will create a budget hole of about $1.6 million that the administration is trying to patch through fund-raising and larger endowment payouts. That's a tradeoff that McCardell said he is willing to make to help set the university apart. "We are determined to be the value proposition in our market and among our peer group," he said.

McCardell said private colleges or universities that find themselves in direct competition with public universities, or institutions that are discounting tuition at a rate greater than 50 percent, should consider following his university's lead.

While Sewanee was the most high-profile cut, other private institutions either froze tuition for the coming year or decided on very small increases. Princeton University will increase tuition by only 1 percent next year, its smallest rise in 45 years.

Some individuals worry that large increases in aid and small increases in tuition will actually hurt some colleges' bottom lines. A report by the National Association of College and University Business Officers released last month found that institutions discounted tuition at a rate of 42.4 percent in 2010-11. The report said that increases in financial aid “have come at a cost to a large number of institutions. Net tuition revenue has recovered for some institutions, but the rate of growth in net revenue remains below the average achieved before the onset of the downturn. Many institutions have implemented hiring freezes and other austerity measures to make up the resulting budget gaps.”

Warren said he doesn't see the recent slowdown in tuition hikes as indicative of a "peak" tuition rate having been hit. Instead, he said it merely reflects universities' sensitivity to the needs of the market and attention to how much students can and should pay.

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