Shame led St. John’s College to slash its tuition charges.
“We just ended up realizing we were actually embarrassed by our sticker price,” says Mark Roosevelt, president of the two-campus college. For all the college’s distinctiveness, beginning with its “Great Books” curriculum, St. John’s had joined higher education’s drift into exclusive tuition costs.
This fall, at its campuses in New Mexico and Maryland, St. John’s is reducing its annual tuition and fees from more than $54,000 at the New Mexico campus and more than $53,000 at the Maryland campus to $35,000 — far less than that for most students, thanks to financial aid.
Most colleges balk at price reductions. They fear losing income, and prestige. They also believe they can achieve enrollment diversity only if wealthy students underwrite it by paying high full fees.
Helping St. John’s be bold is a $50-million challenge pledge from the Winiarski Family Foundation, established by the wine-making couple Warren and Barbara Winiarski, who are alumni of St. John’s. The gift has sparked additional gifts, and St. John’s already has $200-million in commitments to a $300-million capital campaign. St. John’s can, at least for some years, cover any difference between what students pay and the nearly $60,000 a year it costs to educate them.
Roosevelt frames the price reduction as a rebuke to “prestige pricing” — the belief, illustrated by continuing national admissions scandals, that price equals quality.
Are colleges that charge more than $50,000 in tuition commonly in the thrall of “prestige pricing” — of signaling “You cannot afford to come here"— as St. John’s has tacitly admitted it was?
Not us, says Catherine McDonald Davenport, vice president for enrollment at Dickinson College, in Pennsylvania, where tuition and fees this year are $54,661. “Our process of setting tuition is neither arbitrary nor based on prestige,” she said via email. She cited “the cost of providing the type of personalized education and high-touch services we offer.” That, she said, “exceeds our tuition price, but is offset by scholarships, alumni giving, and the endowment.”
At Dickinson many students pay less than do students at colleges with much lower sticker prices. Its net price for first-time, full-time undergraduates who receive federal aid — the sticker price for the full cost of tuition and fees, books and supplies, and living costs, minus the average grant and scholarship aid — is $28,464, according to the U.S. Department of Education’s College Scorecard. It costs less, by that count, than many private nonprofit colleges.
Not less than your Princetons, Stanfords, or Harvards, certainly. Enormous wealth allows those to have net costs of attendance under $15,000 for federal financial-aid recipients.
In 2011, Dickinson officials laid out online, as part of its strategic plan, an extensive explanation of why its tuition charges were high, and acknowledged they were confronted by an “arms race” to recruit “desired prospective students” and admit them on a highly selective basis.
The “formidable challenges” they identified included dwindling numbers of students in the college’s “primary pool,” the Northeast, and the need to achieve the diversity that is “critical to our stature as a national liberal-arts college.”
Also among many logistical considerations: More families, nervous about economic instability, were requesting institutional aid even if on paper they didn’t need it. That was happening at a time when Dickinson really needed to find more takers from a “highly sought-after” cohort that few colleges can hope to attract in sufficient numbers: “students of color with both high academic ability and means to pay all or a significant portion of tuition.” The college also sought to reach more students from the Jewish community, foreign countries, and the military.
And could it discount tuition more — or less? Its level, after being 28 percent in 2007, had risen to 53 percent for first-year students in 2018, as reported on its website.
Since considering its options and developing its strategy, Dickinson has managed to increase enrollment from its then-stated desired range of 2,200 to 2,300 up to a 2018-19 figure just shy of 2,400.
Between 2014 and 2018, Dickinson’s website says, the college increased its proportion of international students to 14 percent from 10 percent, and its domestic students of color to 21 percent from 19 percent.
How does a college make a tuition charge work? That’s a mind-boggling optimization exercise.
It need not entail slashing tuition charges. Washington College, located since 1782 on Maryland’s Eastern Shore, is not in the highest echelon of cost, but it now charges $48,000 after adjusting its tuition and fees charge. To align more closely with institutions it considers peers — those between 80 and 100 in national rankings — it held its tuition steady for academic 2016-17, barely inched it up the following year, and now holds to cost-of-living increases. Meanwhile, it has vigorously added programs and facilities.
The approach, which entailed “a great deal of effort,” is a matter of trying “to make sure you have some unique selling advantages,” says Washington’s president, Kurt M. Landgraf. That has included emphasizing that Washington students historically graduate with manageable debt. “What we’re trying to do is to sell our value proposition,” he says.
After dropping a few years ago, enrollment is now “coming back in a vibrant way,” he says. Just as important, says Victor Sensenig, chief of staff and vice president for planning and policy, is that after curbing tuition growth, “we saw more of an impact in our retention rate than in recruitment.”
“Each college has a different set of variables it must look at, and I believe we do a very good job here,” Landgraf says.
St. John’s must, too. Its plan for being a $35,000 college is looking inspired, so far. It’s not just the flood of donations — applications have leaped 20 percent, Roosevelt says. And even though money from students who would have paid more than $35,000 has dipped, “it looks like we’ll have slightly more net tuition revenue under the new model,” Roosevelt says.
He says the tuition cut, adopted within one year of being proposed at an institution that changes its curriculum about once every 30, was designed to catch alumni and supporters’ attention, to say: “We used to get 80 cents out of the dollar to run the college, and we now get about 45 cents,” so: “we’re going to need 50 cents or more of the dollar to run St. John’s, from you.”
Well beyond a year of good publicity and a rush of applicants, $300 million should stand in good stead two campuses of only 900 undergraduate and graduate students, total. But fingers are crossed, Roosevelt says. He concedes: “We wanted to lower tuition substantially,” but when it came to fixing the figure, “a lot of it was just what felt right.”
St. John’s approach, he cautions, “may not be right for other schools.”
Among some other institutions that have gone their own way, Concordia University at St. Paul cut its tuition by one-third in 2013. That, officials say, moved Concordia from a high-tuition/high-discount model to a low-tuition/low-discount model, and to “transparency in pricing.” It helped that Concordia made its change from a position of strong enrollment demand and a long-term “culture of fiscal prudence,” according to its just-retired president, Tom Ries.
Similarly, Franklin University, says its president, David R. Decker, is framing a 24-percent tuition cut that took effect in the fall of 2019, to $398 from $526 per credit hour, as “wysiwyg” — “what you see is what you get.” No hidden fees! Not for parking, nor student services. His institution’s undergraduate students, older than the average entering college student, with 79 percent enrolled exclusively in online courses in the fall of 2017, have little patience with opaque models, he says. “We’re not involved in the discount-rate merry-go-round.” At a time when the average institutional discount rate for first-time, full-time freshmen at private nonprofit colleges is 52 percent, “our discount rate is 3 percent.”
In making such a change, using modern data-analysis tools is crucial, he says, echoing many other tuition strategists. In a “revolutionary” way, those allow institutions like his to “test out hypotheses about how different segments of the market will respond,” including to cost variance, he says.
William Eilola, vice president for enrollment management at Ohio Northern University, says that the institution found in a 2013 review “that our tuition rate had exceeded our group of benchmark institutions by probably an uncomfortable degree,” creating a competitive disadvantage. The outcome: a 24-percent tuition reduction, and a four-year graduation guarantee (after that, undergraduate students attend at no cost).
Eilola offers this caution to anyone considering entering the tuition-setting game: “It’s stressful, in that oftentimes the success of the institution annually and in the long term is dependent on being able to find those key points of pricing and differentiation.”
He enjoys mulling over variables and tactics with colleagues at other institutions. But bear in mind, he says, that that’s both a collegial and a competitive “bit of a poker game about how much you’re going to reveal.”
Peter Monaghan is a correspondent for The Chronicle.
Ruth Hammond contributed data analysis for this article, which introduces the Finance section of Almanac 2019.
