University Business May 2018 - 49

PROFESSIONAL OPINION

Let privates talk to
each other about tuition
Educators need to collaborate-not collude-on pricing solutions that make sense for families
and institutions
By Wendy B. Libby

T

he cost of college, a daunting
concern for many American
families, is now the central
storyline of a Hollywood movie.
In a short-lived summer movie
release called The House, Will Ferrell
and Amy Poehler, a middle-class couple, open an illegal casino to cope with
their personal gamble: how to pay for
their daughter's college tuition.
The movie's blend of satire, farce
and desperation is sometimes difficult
to watch-especially for those of us
who work in higher education.
Here is welcome news for college
hopefuls: U.S. college tuition is growing at the slowest pace in decades,
Labor Department figures show.
Tuition at college and graduate
schools-after factoring in scholarships and grants-rose just 1.9 percent
last year, in line with overall inflation.
To put this in perspective, college
tuition has been growing at roughly
double the rate of inflation for decades. At last, the trend of annual tuition hikes appears to be cresting.
Missed opportunities
As the president of the private Stetson
University, I am heartened that a
small but growing number of colleges
are exploring collaborative approaches
to keeping costs down.

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We all want to make the dream of
higher education more attainable, and
soon. Too many students and their
parents really have no idea of the true
cost of college.

For every dollar in gross
tuition revenue from firstyear students, institutions
used nearly half for
grant-based financial
aid, funded largely from
operating budgets.
Wary of student loans, they automatically rule out schools based on
an artificially high sticker price that
masks the real tuition after factoring in scholarships, grants, loans and
other types of aid.
It's a self-destructive cycle of misunderstanding that feeds many missed
opportunities.
Explaining this high-tuition, highdiscount pricing model to families is
an ongoing challenge.
Recent headlines like "Tuition Is
Too Damn High!" add to the anxiety
about runaway costs, even price gouging. Despite the media's continued
coverage of the "high cost" of higher
education, many people aren't aware
that private colleges are skating on
thin margins due to increasing financial aid budgets and declining attendance-and despite cost-cutting and

program consolidations.
Net tuition revenue from first-time,
full-time students grew a modest 0.4
percent this academic year, down from
1.5 percent in 2015-2016, and 2.1 percent the year before, according to the
National Association of College and
University Business Officers.
Not sustainable
In reality, many tuition-dependent institutions find themselves trapped in a
financial corner. The root of the problem is revealed by simple economics:
An abundant supply of educational
options is bumping up against reduced
demand from a shrinking pool of traditional college-age Americans.
To entice students in a competitive
market, schools are offering hefty discounts and financial aid packages.
The widespread practice of discounting tuition has hit a historic
high, according to NACUBO. In
2015-16, the average discount rate for
first-time, full-time first-year students
reached 48 percent and climbed to an
estimated 49.1 percent in 2016-17, the
highest level ever recorded.
The discount rate for all undergraduates in 2016-17 rose to an estimated
44.2 percent, another all-time high.
For every dollar in gross tuition
revenue from first-year students, institutions used nearly half for grant-based
financial aid. The bulk of these funds
often come from operating budgets,
not earnings on endowments.
Many of the chief business officers
May 2018 | 49


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