Same Numbers, New Calculations

March 1, 2012

While the conversation about paying for college has a familiar unhappy ring to it every year, families of students at a few private colleges can at least use the same numbers this time.

Mount Holyoke College announced Wednesday that it would not increase tuition for the 2012-13 school year -- an uncommon step, particularly for an elite college such as Mount Holyoke, which faces no shortage of demand, a strong financial position, and a large number of students who can pay the full sticker price. The college’s Board of Trustees voted last weekend to keep the college’s $41,270 tuition – high even among elite liberal arts colleges – in place for next year, and to do the same for room and board.

Mount Holyoke is not alone. At a time when most public universities are increasing tuition by more than the rate of inflation, at least seven private institutions have announced cuts in sticker price and at least 15 have announced tuition freezes for 2012-13, according to the National Association of Independent Colleges and Universities.

While the number of colleges taking such a step is only a small fraction of the total number of colleges and universities, and the group serves an even smaller fraction of the total student population, the list of institutions enacting freezes for next year is longer than in past years. This year's list also contains some more elite members, including Mount Holyoke and the University of the South. Historically, many of the colleges that have frozen or cut tuition rates have been institutions where hardly anyone paid full price, so few people at those institutions actually saw much change.

Higher education observers said such steps could be the beginning of a change in how families approach paying for college, and reflect a realization that demand for college might not be as inelastic as was once assumed. A recent survey by Sallie Mae found that the average family spent 9 percent less on higher education in 2010-11 than it did the year before.

“During the recession, families began to shop,” said John R. Curry, managing director of Huron Consulting Group. Curry said elite colleges have begun to offer more generous financial aid policies, families have started to turn to cheaper state flagships in lieu of costlier privates, and colleges have begun to offer more competitive non-need discounts. All of these reflect the idea that families have become savvier in shopping for college and may not be willing to pay increasing prices.

For Mount Holyoke’s president, Lynn Pasquerella, the decision had a personal aspect. One of the college’s ideals has been to provide a quality education to students regardless of their economic background, and increased tuition prices and debt loads that the college has seen in recent years run counter to that, she said. Pasquerella, now in her second year as president, has also advocated publicly against the rising cost of higher education. “It was somewhat disingenuous to continue to raise tuition while I was out there giving this message,” she said.

The college meets full demonstrated need, and about 70 percent of students receive some sort of financial aid. In 2009, when the college charged almost $40,000 for tuition, it only collected an average of $20,042 per student in tuition revenue after aid. Pasquerella said the decision to freeze tuition will not affect the college’s aid or admissions policies.

She also noted that the college did not make the decision because it was having a hard time enrolling or attracting students. The college had its largest number of applications ever this year, and its $600 million endowment, which, like that of many private colleges, took a hit in 2009, has begun to recover. The college funds about 20 percent of its operating budget through endowment returns. “We’re making this decision from a position of strength,” Pasquerella said.

Pasquerella, who jokes that she wants to be commissioner of Major League Baseball, likened her college’s situation to that of the 2002 Oakland Athletics, whose season was chronicled in Michael Lewis’ book Moneyball and the movie of the same name released last year. “We can’t compete with the big teams. The small liberal arts colleges can’t afford the big players, so we have to invest strategically,” she said. “That’s what I mean when I say we can’t continue to raise tuition and spend resources, because there’s always something more to do with tuition revenue.” Even if the demand is there, she said, the college shouldn’t continue to raise tuition just because it can. It should focus on what it does best and charge for that.

While the freezes are notable, many students do not pay the full sticker price, particularly at private colleges, so it is not clear how many students end up being affected by such freezes. The freeze does benefit families who pay full cost, since they were likely expecting an increase next year.

Previous attempts by market leaders to freeze tuition have not been shown to lead to big changes in the long run. Williams College, which froze tuition in 2001, charged $42,938 for tuition for the 2011-12 school year, more than Amherst College and Swarthmore College, two other leading liberal arts colleges. Many higher education observers speculated that Princeton’s 2007 tuition freeze would drive others to do the same. But for 2011-12 it too charged more for tuition ($38,650) than its closest competitors, Harvard ($36,305) and Yale ($33,400) Universities.

One university does stand out. The University of the South, often called Sewanee, announced a 10 percent cut for the 2011-12 school year and guaranteed that students entering next fall would not see their tuition go up for four years.

Pasquerella said she hopes Mount Holyoke’s freeze is the start of a long-term shift for the college, though. “Our goal is to have this as a continuing practice,” she said. But she noted that “in balancing the competing needs of the college,” holding the line on 0 percent tuition increases may not be possible indefinitely.

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