Amid all the uncertainty of the Covid-19 pandemic for higher education, two things are becoming clear. Most students yearn to come back to campus in the fall, in spite of the risks. And if, instead, students wind up receiving online instruction come September, they don’t want to pay full tuition.
They can discount tuition for online classes and take a hit to the bottom line, or they can stick with full tuition and still probably take a hit to the bottom line.
An anonymous, high-ranking college official
These two factors are driving the decision-making of millions of students and their families. In response, many institutions are frantically making elaborate and expensive plans to open up classrooms and dorms, in part because they feel like they have to. Surveys show that an overwhelming majority of students don’t want to pay full cost for another semester of Zoom meetings, and that some incoming freshmen who have been admitted to colleges that choose to extend online learning into the fall might defect to colleges that decide to open their campuses. Substantially fewer students equals plunging tuition revenue, which equals financial disaster at a time when many colleges are already at the fiscal brink.
Colleges that are going with online instruction are playing it safe with the virus, but running the risk of losing enrollment — and tuition revenue — to institutions that promise a semester with dorms and classmates and maybe even a little fun.
All of which presents a no-win dilemma to colleges planning to offer mostly or wholly online instruction. They can discount tuition in hopes of keeping students happy, despite the hit to their bottom line. Or they can stick with full tuition for the fall, and brace for the possible hit to their bottom line.
A number of colleges have offered reduced, deferred, or even free tuition since the spring, but midsummer has raised a new crop of similar announcements. Williams College said this month that it would discount tuition payments for the fall by 15 percent, and Princeton University plans to offer a 10-percent break. Both elite universities plan to offer some classes on campus. Hampton University and Paul Quinn College, both historically Black private institutions that will offer classes online this fall, announced tuition deals. Hampton, in Virginia, will take off 15 percent of tuition, and Paul Quinn, in Dallas, will suspend several of its fees, shaving more than $2,000 from the official $8,321 price for tuition and fees.
Price breaks could make a huge difference on enrollment in a volatile fall, according to research by the Art & Science Group, a company that consults with colleges. Surveying current and admitted students for one of its clients, a private college, Art & Science researchers found that if that particular college chose to go online only, it could lose 30 percent of its enrollment yield for admitted freshmen and 25 percent of its current students.
As part of the same survey, researchers surveyed the effects of a one-time 20 percent institutional grant to students enrolling online-only for fall. At this college, a 20 percent grant would cut the expected hit to enrollment yield for freshmen to about 15 percent, and cut the projected retention drop to about 15 percent.
But the majority of colleges seem to be staying with their sticker prices for the fall of 2020, even those going all or mostly online. Some institutions don’t have much choice. Public colleges’ tuition is often determined by the state or system office, and many institutions are bracing for cuts to state support. The California State University system, for example, which enrolls nearly a half million students across 23 institutions and will be mostly online this fall, is not reducing tuition. The system lost $337 million in forgone revenue and unexpected costs this spring, and faces a $300-million cut to state support for the 2020-21 fiscal year.
Private colleges often have more autonomy in setting their prices, but many of them are already struggling to bring in enough tuition revenue as a result of the increased competition for students. The cost of instruction, even online, hasn’t decreased — and may have increased because of the costs of adapting to Covid-19.
The question of how to set the price of a college education has posed a complex problem for colleges for the past decade. The current crisis promises to make that question more existential than ever.
Choices and Trade-Offs
Colleges that have offered tuition breaks were driven by two key factors. First, many students and their families are suffering hardships, financial and otherwise, because of the pandemic. Second, the student experience will not be the same this fall, even if some classes are held face-to-face.
Williams will be bringing students back to campus gradually, mandating masks, limiting the size of gatherings, and teaching in remote and hybrid modes in addition to in-person classes. The 15-percent discount “reflected a tradeoff between a policy that was both financially sustainable for us and also felt like it really reflected the academic and co-curricular year ahead for our students,” says David (Dukes) Love, the provost.
That’s not a tradeoff most institutions feel comfortable making. Williams’s $2.9-billion endowment is “the only reason we were able to have this conversation at all,” says Love.
Many institutions that follow a high-tuition/high-aid model operate on slim margins of revenue that have grown even slimmer in recent years. The costs of Covid-19 adaptations and refunds for room and board have pitched some colleges into even more precarious financial states. Williams’s leaders felt the discount was the right thing to do for students and their families, but acknowledge that it “creates pressure” on colleges that might be expected to offer similar discounts, says Love. “We worry, frankly, about the impact of that decision on other institutions.”
It is unusual, in some respects, that more institutions haven’t cut tuition in the wake of announcements by elite colleges like Princeton and Williams, says Elizabeth Popp Berman, an associate professor of organizational studies at the University of Michigan. “Institutional isomorphism” is the term for the phenomenon of colleges’ tending to adopt similar policies and practices. “But there’s no jumping on the bandwagon” so far with tuition cuts, she says. “Maybe the reason we’re not is mostly just because it’s all happening very quickly.”
Wealth is not a deciding factor for Paul Quinn. The college’s finances have been so rocky in years past that it lost its accreditation temporarily in 2009. Its endowment is less than $10 million. But Michael J. Sorrell, the president, says he felt strongly that the college needed to respond to the extraordinary stress its students and their families were under.
The crisis also touched on one of Sorrell’s pet peeves: the mysterious nature of college tuition and fees. The college’s Covid-19 response turned into “an opportunity for us to simplify how we are articulating cost and what we’re charging people for.”
Since the college planned to teach all classes online, Sorrell held tuition flat and kept a technology fee and a fee for a 24-hour telehealth service for students. “After that, it’s pretty hard to defend some of the old charges,” he says.
Sorrell says that Paul Quinn is able to give up the remaining revenue because it’s a lean operation to begin with — a legacy of the rebuilding that took place after it regained accreditation in 2011. He says the college is heading into “uncharted territory” with its new fee structure, but he thinks the institution’s finances can withstand the strain. In the end, he says, “we believe in choosing the harder right over the easier wrong.”
For most colleges, the choice remains tougher. Scripps College and Pomona College, two private institutions in Southern California that are part of the Claremont Colleges group, recently announced that they would be conducting classes online this fall. While they rescinded planned tuition increases to remain at 2019-20 levels, neither college plans to offer further discounts. “We still are employing all the same faculty,” says Lara Tiedens, president of Scripps. “None of our costs go down in terms of producing that educational experience.” Students will still enjoy small classes and lots of individual attention from professors, she adds, albeit remotely.
Tiedens disputes the notion that a college holding classes online exclusively is offering something much different, educationally, from colleges that bring students back to campus. Most of the institutions that are opening up will rely heavily on remote education as well. “These decisions that are getting announced are much more about what the nature of residential life is going to be on that particular campus,” she says.
The Hard Math
The fiscal math behind a tuition cut in the time of Covid-19 seems like it should be simple, but college finances rarely are.
Some colleges may be able to compensate for the revenue lost from reducing tuition by increasing the number of students enrolled, says Robert Kelchen, an associate professor of higher education at Seton Hall University. If each student brings in slightly less tuition, but there are more of them, a college might squeak by. After all, many colleges have used tuition discounting for decades to bring in more students who pay less. Many colleges will respond to the current crisis by increasing aid to individual students rather than adjusting their official prices, Kelchen adds.
The Art & Science Group has been recommending that many of its clients reduce the cost burden on students and their families, either through tuition discounts or increased aid to students.
While the short-term financial pain from a discount might be intense, it could benefit the longer-term financial health of the institution. “If you enroll a student, or you retain the student, you will have her post-pandemic, when your pricing and your aid reverts to normal,” says Nanci Tessier, a senior vice president for the group. “But if she doesn’t come back and goes to her local state institution, you’re never going to get another dollar of revenue from her.”
Some colleges hope to hold on to those students and their future tuition dollars by allowing them to defer should they decide not to attend an online fall. Scripps College informed its incoming students that it “would have a more generous and flexible deferral approach than we normally do” for the fall, says Tiedens, and its students can also request a leave of absence.
But there are limits to the good that deferrals can do. Highly selective institutions with long waitlists are likely to fill their classes, but less selective institutions run the risk of being overwhelmed by deferrals. Tessier says that some colleges are capping deferrals because they’re “not willing to hold 300 spaces for students a year from now.” More affluent students are considered more likely to defer, and since they’re also more likely to pay higher tuition, that could be a double hit to a college’s bottom line.
It’s possible that Covid-19 could create a sea change in how institutions and students and their families look at the price of a college education.
Most colleges increase tuition slightly every year to keep up with rising expenses, but that option may not be as viable in the years to come. Some institutions went ahead with planned tuition increases for this fall — the University of Kentucky increased tuition by 1 percent for in-state students, for example — but many have reverted to 2019-20 tuition, even as their expenses continue to rise. If the economic effects of the pandemic continue to drag on for years, as many expect them to, colleges may find it difficult to float any substantial increases.
Some college leaders have resisted further discounting their tuition for the fall because they’re worried they won’t be able to return it to pre-Covid levels once the pandemic is under control, says Teresa Valerio Parrot, principal of TVP Communications, a company that consults with colleges. Leaders she’s spoken to are concerned that “it’s going to be very difficult, if not impossible, in the future to justify that higher price, even if we say it now comes with all of the experiences that we had before,” she says.
Part of the current challenge arises from how colleges have typically let the term “tuition” stand in for the cost of all the experiences a student has on campus. “We’re having a hard time, now that we’re changing that experience, to have it reflect what it is that people are buying,” Parrot says. Tuition pays for knowledge and experiences, but it also pays for the credits and credentials students carry away at the end of the semester. Framing the discussion around the tangible benefits students get from college, other than sitting in an actual classroom, she adds, is “a much different conversation than just having the focus be on what the delivery method is for the coursework.”
Long Overdue
Covid-19 has upset almost everything about everyday life, so it shouldn’t be a surprise that it’s making many people rethink their priorities — including college. Tiedens, of Scripps, understands the uncertainty students and families are experiencing. “Is it still what they want to do? Is this the right price tag for it?” she says. “I think we all feel that way about so many of the things we’re involved in.”
That uncertainty could have profound implications for higher education. If colleges’ costs remain the same, but the market for a college education won’t support those costs, “we will have a much bigger problem on our hands,” she says.
But the pandemic could force academe to rethink a business model that many consider unsustainable, and colleges are long overdue for examining their costs, says Richard Staisloff, principal of the Rpk Group, a company that consults with colleges.
Staisloff believes that many institutions need to re-examine their operations to “move towards a more cost-effective solution for making quality learning happen, and therefore reset its price, and therefore increase the value, real and perceived, in what it’s offering.”
That might sound like a tall order for institutions racked by uncertainty and facing prolonged financial hardship, but the disruption colleges are experiencing might be the best opportunity to actually reimagine how they do what they do.
Dropping tuition for a semester or two is a worthy gesture, Staisloff says, but it still operates as if “the traditional model is fine. ‘We’ve just got to get through this and then we’ll all be OK and we can we can just go on our merry way.’ And I just don’t buy that.”
