Rebates and Reversals

As more colleges announce online fall terms, some are also reducing tuition rates. Wealthy families are likely to be the biggest beneficiaries of those discounts.

July 24, 2020
 
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This spring was characterized by a quick, and sometimes panicked, rush to online learning for most colleges and universities. Though students demanded housing and tuition rebates, only some institutions coughed up the refunds, with relatively few rebating tuition.

Now, after April's wave of announcements from college administrations saying fall terms will be in person and on campus, the tide is slowly beginning to reverse. Several prominent traditional institutions, such as Spelman College, the University of Delaware, Harvard University and the University of California, Berkeley, have announced they will be offering undergraduate instruction primarily online this fall.

But this time, many have also announced they will be discounting tuition or slashing fees for those studying at home.

A number of institutions have said they will discount tuition by 10 percent for those taking classes online. Georgetown University, Princeton University, Lafayette College, Spelman College and Clark Atlanta University all coalesced around the 10 percent cut, in some cases reversing planned increases in tuition and additionally slashing student activity fees.

Some institutions have said they will cut fees even more deeply. Southern New Hampshire University has offered incoming freshmen full tuition scholarships and will cut tuition by 61 percent for the next academic year. Williams College, which is inviting some students back to campus, will be reducing cost of attendance for all students by 15 percent and cut activity fees. 

Other universities, such as Dickinson College and Rutgers University -- both of which announced online fall terms -- said they will not cut tuition but will discount student activity fees that support campus life.

Different Motivations

While a trend may be afoot, it's worth noting that other colleges are still pushing full steam ahead for in-person semesters. Cornell University, which is planning to open in person, is also going ahead with its planned tuition increase.

Robert Massa, vice president emeritus of enrollment at Dickinson College, said whether or not colleges are able to cut tuition will be different depending on their resources and market position.

Nonselective institutions with small endowments may need to cut to remain competitive. "Those schools, in some ways, have to do this in order to ensure enrollment," he said.

Wealthier institutions, Massa said, can afford the cut and are not worried about losing students. "Their endowments are large and their wait lists are deep," he said.

Why those well-heeled universities would choose to discount tuition is likely a mix of altruism and pressure from students.

Colleges that have traditionally sold a residential college experience are recognizing they're offering something different this year, said Craig Goebel, a partner at Art & Science Group, a higher ed consulting firm.

More importantly, Goebel said, students are saying the experience is different from what they thought they were paying for.

Research from Art & Science Group found that two-thirds of prospective four-year college students said they expected to pay much less for online instruction.

In some cases, students have also taken those demands to colleges directly.

At Georgetown University, for example, a petition circulated asking the administration to discount tuition.

“Once your experience is being vastly diminished, you expect the cost, the value to be diminished as well,” Jackson Butler, a rising Georgetown senior who started the petition, told The Washington Post.

Colleges also are recognizing families' reduced ability to pay. An Art & Science study found in April that 52 percent of prospective four-year students had at least one parent who lost a job during the pandemic.

David Strauss, a partner at Art & Science, said at one college he has been in touch with, "the number of admitted applicants appealing their aid awards this year is three times what it was last year."

Institutions that run in the middle of the pack in terms of resources and market position, such as Dickinson, Massa said, can't afford a cut and are less likely to lose students for refusing to make one. Dickinson, which Massa no longer works for, is scrapping a planned tuition increase and waiving its student activity fees but not offering a tuition discount.

Massa said he personally feels cutting fees but not tuition is the right approach for the fall.

"If there's a real financial concern," he said, "because breadwinners are unemployed in families, then that's something that has to be worked through financial aid. And I think institutions need to be helpful to families that no longer can afford what they were paying last year because of unemployment. That's how you deal with the COVID issue, not by reducing tuition for everybody."

Tuition revenue largely goes toward instruction, he said, which pays the same professors to teach the same curriculum. Institutions also have increased costs due to the pandemic, such as those associated with building and supporting online infrastructure or enhanced sanitizing for students and staff members on campus.

Strauss said that addressing the crisis with more generous financial aid rather than tuition discounts has been the more common approach, and in the grand scope, tuition discounts remain mostly limited.

As for why 10 percent has been a common discount choice, Strauss and Goebel said colleges are likely following one another with little empirical evidence to suggest 10 percent is an optimal choice.

How tuition discounts will affect individual students and their families depends on circumstances, but the biggest beneficiaries are likely to be wealthier families who pay full tuition, Goebel and Strauss said. Those institutions discounting tuition have relatively high shares of families paying full price.

"When you reduce the cost of something, you are also therefore reducing the demonstrated need, and therefore probably also reducing the award in most cases," Strauss said.

Students who are receiving significant financial aid would then not likely see a full 10 percent decrease in their personal costs.

Looking Forward

Downward pressure on tuition was apparent before the crisis, with the pandemic only tightening an already existing squeeze on price.

"The crisis will pass and institutions are going to need to look ahead to think about how they should be pricing themselves in a more steady-state future. They're going to need to think about how to compete better in a future post-COVID-19," Strauss said.

Net tuition revenue, the amount colleges take in after discounting, has remained flat over recent years, research has shown. Demographic and economic changes, such as a declining number of American high school graduates and stagnant household incomes, have joined with public criticism about the value of a college degree to put significant pressures on institutions around price and competition for students.

"Those things were getting worse before this ever hit," said Strauss. "After this eases, those challenges will be worse still, not better."

A previous version of this article said that Williams College will be cutting tuition by 10 percent. Williams will be cutting the cost of attendance by 15 percent and cutting student fees. 

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