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In Tuition Game, Popularity Rises With Price - New York Times
December 12, 2006
In Tuition Game, Popularity Rises With Price
By JONATHAN D. GLATER and ALAN FINDER
COLLEGEVILLE, Pa. — John Strassburger, the president of Ursinus College, a small liberal
arts institution here in the eastern Pennsylvania countryside, vividly remembers the day that
the chairman of the board of trustees told him the college was losing applicants because of its
tuition.
It was too low.
So early in 2000 the board voted to raise tuition and fees 17.6 percent, to $23,460 (and to
include a laptop for every incoming student to help soften the blow). Then it waited to see what
would happen.
Ursinus received nearly 200 more applications than the year before. Within four years the size
of the freshman class had risen 35 percent, to 454 students. Applicants had apparently
concluded that if the college cost more, it must be better.
“It’s bizarre and it’s embarrassing, but it’s probably true,” Dr. Strassburger said.
Ursinus also did something more: it raised student aid by nearly 20 percent, to just under
$12.9 million, meaning that a majority of its students paid less than half price.
Ursinus is not unique. With the race for rankings and choice students shaping college pricing,
the University of Notre Dame, Bryn Mawr College, Rice University, the University of Richmond
and Hendrix College, in Conway, Ark., are just a few that have sharply increased tuition to
match colleges they consider their rivals, while also providing more financial assistance.
The recognition that families associate price with quality, and that a tuition rise, accompanied
by discounts, can lure more applicants and revenue, has helped produce an economy in
academe something like that in the health care system, with prices rising faster than inflation
but with many consumers paying less than full price.
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Average tuition at private, nonprofit four-year colleges — the price leaders — rose 81 percent
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from 1993 to 2004 , more than double the inflation rate, according to the College Board, while
campus-based financial aid rose 135 percent.
The average cost of tuition, fees, room and board at those colleges is now $30,367. Many
charge much more; at George Washington University, the sum is more than $49,000.
But aid is now so extensive that more than 73 percent of undergraduates attending private
four-year institutions received it in the school year that ended in 2004, not even counting
loans.
“We can cushion the sticker shock,” said Amy Gutmann, president of the University of
Pennsylvania, which distributes aid on the basis of financial need. “We focus on both middleincome
and low-income families.”
So net prices vary widely on a given campus. On some, as many as 90 percent of students
receive support, primarily from the college itself or the federal government.
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And financial need is not the only basis for it. Many colleges, competing for the students with
high grades and standardized test scores that help a college rise in rankings guides, offer merit
aid ranging from a few thousand dollars to a full scholarship.
But officials of private colleges and universities say they fear that unless other steps are taken,
the middle and upper middle class could ultimately be squeezed out.
“Eventually, if we’re going to keep raising tuition at rates much more than the increase in
family incomes, then something has to be done to make the places more accessible to the
middle class,” said Ronald G. Ehrenberg, director of the Cornell Higher Education Research
Institute.
As it is, some students may not even apply to private colleges, scared away from the start by
tuition and unaware of the available discounts. After all, tuition and fees at public colleges and
universities — though growing recently at a faster pace than those at private institutions —
remain vastly lower, at an average of $5,836, the College Board says.
It can be argued that everyone studying at a private liberal arts college is getting a discount. At
institution after institution, officials say they offer an education costing tens of thousands of
dollars more than even the college’s “sticker price.”
Take Swarthmore, the elite college half an hour’s drive from Ursinus. With an annual budget of
$106 million to educate just under 1,500 undergraduates, Swarthmore spends about $73,690 a
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In Tuition Game, Popularity Rises With Price - New York Times
student. But its tuition, room, board and fees in the last academic year were little more than
$41,000.
“The half of our student body whose families are paying the full sticker price are paying
$41,000 for something that costs $73,000,” said Suzanne P. Welsh, the treasurer. “So they’re
getting a great discount.”
The other students receive a bigger subsidy: on average, aid totaling more than $28,500, most
of it from the college itself. (Swarthmore limits its aid to students with financial need, but that
can mean those from families earning $150,000 a year if, for instance, there are circumstances
like having multiple children in college.)
What makes it all work is Swarthmore’s $1.3 billion endowment, which throws off enough
income to cover 43 percent of the operating budget.
The biggest expenditure at liberal arts colleges is for salaries and benefits. With competition for
big-name professors becoming more intense, faculty salaries have increased. So has the pay of
college and university presidents, more than 100 of whom now receive at least $500,000 a
year.
Then there are the amenities sought by students: coffee bars, lavish new dormitories, state-ofthe-art
science laboratories and fitness centers.
“You’re trying to create the best educational experience for your students, and that costs
money,” said Tom Tritton, president of Haverford College. “I sometimes say to parents, ‘I can
make it cheaper if you want.’ ”
Still, none of this explains why colleges like Swarthmore and Ursinus — with different studentfaculty
ratios, endowments and reputations — end up with tuition and fees only a few hundred
dollars apart, or less. Or why Harvard’s tuition and fees, at $33,709, are virtually the same as
theirs.
One big reason is that institutions of higher learning watch one another.
In November, the finance committee of Swarthmore’s board of managers gathered at a
Manhattan law firm and pored over a chart of tuition, room and board at more than 30
prestigious colleges and universities. They were pleased to see that Swarthmore was charging
somewhat less than most of its competitors.
That kind of scrutiny led Bryn Mawr to a contrary sentiment, causing the college to raise
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tuition and fees this year by about 9 percent, their biggest jump in several years. Bryn Mawr
officials say they made the decision after their research showed that the college charged less
than its rivals and awarded more aid. The officials concluded that raising tuition would not
deter applicants, because prospective students already assumed that Bryn Mawr cost the same
as comparable colleges.
“The question was, Does that make sense?” said John Griffith, Bryn Mawr’s treasurer and chief
financial officer. “Have we benefited at all from being the low price point? And the answer was
no.”
Some of the nation’s bigger institutions have also found an incentive to raise prices. As part of
an effort to improve its academic offerings and transcend its renown for football, the University
of Notre Dame has raised tuition and fees by an inflation-adjusted 27 percent since 1999, to
$32,900. In setting tuition, Notre Dame watches 20 other colleges and universities, including
the University of Chicago, Emory and Vanderbilt.
“We’re setting it by our competitors,” said the Rev. John I. Jenkins, the institution’s president.
But Notre Dame’s financial aid has increased even more over the same period, with
undergraduate scholarships up 107 percent after adjustment for inflation. This year the
university is distributing $68 million.
Facing stiff competition, Hendrix College, a small liberal arts institution in Conway, Ark.,
decided two years ago to bolster its academic offerings, promising students at least three
hands-on experiences outside the classroom, including research, internships and service
projects. It also raised tuition and fees 29 percent, to $21,636. Most of the increase went back
to students as aid.
As a result, 409 students enrolled in the freshman class this year, a 37 percent increase.
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“What worked was the buzz,” said J. Timothy Cloyd, the Hendrix president. “Students saw that
they were going to get an experience that had value, and the price positioning conveyed to
them the value of the experience.”
Other colleges have tried the opposite. Muskingum College in New Concord, Ohio, cut tuition
and fees drastically in 1996, to $10,285 from $14,240.
“We believed that if we lowered tuition, we would open access to the middle class” and “that we
would continue to serve the higher socioeconomic-background students by becoming a best-
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In Tuition Game, Popularity Rises With Price - New York Times
buy institution,” said Anne C. Steele, Muskingum’s president.
Revenue increased, with enrollment of more students who could pay full price. Muskingum has
also grown, to 1,600 undergraduates from about 1,000.
Yet the same strategy proved disastrous for North Carolina Wesleyan College. Ten years ago
that college cut tuition and fees by 22 percent, to $7,150. But it attracted fewer wealthy
applicants and more poor ones, who needed more aid even as the revenue generated from
tuition declined.
“It didn’t work out the way it had been hoped,” said Ian David Campbell Newbould, the
college’s president. “People don’t want cheap.”
But they do apparently want a deal, or at least the perception of one. Lucie Lapovsky, a
consultant who was once president of Mercy College in New York, conducted a study asking
students to choose between a college charging $20,000 and offering no aid, and one charging
$30,000 and offering a $10,000 scholarship. Students chose the pricier option.
“Americans seem to like college on sale,” Dr. Lapovsky said.
Many administrators say that without raising prices, they could not maintain or expand
economic diversity among the student body. In other words, making college more expensive for
some enables less well off students to go.
But Brian Zucker, president of the Human Capital Research Corporation, a consulting firm that
works with colleges, is suspicious of that argument, particularly given the growth of merit aid.
He points out that many middle-class students borrow tens of thousands of dollars to attend
liberal arts colleges and that at some, they may be helping defray the cost of a merit scholarship
to a wealthier applicant.
“It’s not a given that the subsidy is going in any predetermined direction,” Mr. Zucker said.
“We don’t know.”
TOMORROW: Students, recent graduates, college presidents and others talk about whether
they think a private college education is worth its cost.
Jonathan D. Glater reported from Collegeville, Pa., and Alan Finder from New York.
Copyright 2006 The New York Times Company
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