Wednesday, January 27, 2010

Changing the Way Public Universities in New York Set Tuition

Did you know that the New York State Legislature controls tuition policy, setting rates and increases for the entire State University of New York system? This means that every four-year SUNY school charges the same tuition, whether it is a highly competitive and selective research institution or a small local college with more limited programs. However, that may all change if Governor Paterson has his way.

The Governor's budget proposal to the legislators last week included a measure that would allow SUNY colleges as well as the City University of New York, or CUNY, to finally determine their own tuition increases. Those advocating for maintaining the close oversight now held by Albany believe that centralization of decision making authority ensures consistent quality across the system. Critics, however, assert that lack of control over something as basic as tuition policy is detrimental to an institution’s ability to respond effectively to the changing needs of students and the community, and to efficiency deliver academic excellence.

My last blog posting discussed the Kiplinger report on the top 100 best values in colleges. Many of you will recall that two of the SUNYs, namely Binghamton and Geneseo, ranked in the top ten for both in-state and out-of-state residents. Would freedom to manage their own tuition rates move them out of the top tier for value? Proponents of Paterson’s plan would argue to the contrary. Competitive and highly sought programs in areas such as business, engineering and information technology are currently not priced according to their caliber or to the demand. Flexibility to increase tuition, while still remaining competitively priced, should only lead to an improvement in quality and value.

Currently the tuition at nearly all of SUNY’s 64 institutions is $5,070, a 14% increase over the prior year. Unfortunately, the SUNY colleges saw very little of that increase. The legislature has traditionally used such hikes as a tool to plug the State’s budget gap which was the case in 2009. Only 20% of the increase actually found its way to the SUNY system. Paterson’s proposed change would discontinue that practice, preventing the use of public college tuition as a state budget management tool. Rate hikes would also be capped as a function of the Higher Education Price Index, keeping tuition rise in check.

That said, it isn’t clear exactly how the proposed changes will impact New York State colleges, from a quality or cost standpoint. Some fear that the larger research institutions will price themselves in a way that makes them no longer accessible to middle income students, similar to what we have seen with many private institutions. The cap on tuition increases should moderate that somewhat. Furthermore, the trend toward diversification of financial resources (i.e., seeking funding beyond just the state) is likely to gain momentum, especially with the severity of the budget deficit issues facing Albany and in fact, all state governments. Greater freedom to manage tuition and raise private capital may be just what the SUNY colleges need to maintain and even possibly improve quality and value.

Monday, January 18, 2010

Best Values in Public Colleges

In my November 23, 2009 blog posting I wrote about finding value in public colleges and universities. As a follow up, I wanted to share the link to Kiplinger’s Personal Finance magazine which recently published its 100 Best Values in Public Colleges 2009-2010. You can find the full list at

The Kiplinger report also includes a one page guide to the methodology used in the rankings, explaining that both academic quality and affordability come into play. The first cut to make the list was academic quality, which for purposes of the listing includes SAT or ACT scores, admission and retention rates, student-faculty ratios, and four and six-year graduation rates. Academics, in fact, are weighted almost two-thirds more than affordability. The schools were then ranked based on cost and financial aid. The cost assessment takes into consideration total expenses for in-state students, and then looks at the average cost for both need and merit aid recipients after subtracting grants. A similar exercise was done to determine out-of-state rankings.

Why is the primary emphasis on academic quality rather than cost? Following the old adage, “you get what you pay for,” Kiplinger is rightfully concerned that state schools are following prudent strategies to maintain or even improve quality while keeping costs down. Are colleges successfully eliminating the fat in their budgets or rather, cutting into their core mission initiatives (reducing or eliminating academic programs that benefit students, for example)? That is an important factor in the quality assessment.

In my prior posting about state universities, I mentioned that many of these institutions, in an effort to increase revenues, are trying to grow their out-of-state enrollment for obvious reasons: non-resident students pay more. As a result, several public “Ivies” and other flagship state universities, unlike some of their private, highly selective counterparts, offer merit aid to entice top non-resident students (A topic, perhaps, for another posting is the criticism public universities have recently received as a result of these policies: see the January 14, 2010 Washington Post Schools such as the University of Maryland and UNC-Chapel Hill seek to increase non-resident enrollment and are using merit aid to bring in out-of-state tuition and to shape a class (though North Carolina has an 18% cap on the percentage of students from outside the state).

If you are exploring public colleges for value, then certainly take a look at the Kiplinger list. However, I will offer my usual caveat about rankings. Determining “value” based on a selection of criteria that include such measures as standardized test scores will probably yield results that should be viewed with a critical, if not skeptical eye. The conclusions drawn are not scientific. As I have stated in the past, “value” will largely be influenced by how good a fit the school is for the students attending. Student engagement is often what contributes most to value.

Thursday, January 7, 2010

Planning for College - Understand the Cost First

College is expensive! That comes as a shock to all of you, right? Of course not. Then why do so many families appear to first experience the college cost sticker shock after their child has been accepted? I’ve given some thought to this in recent days, having received calls from parents wondering if I can find them money for college after their children have been accepted.

Why are so many of us surprised to learn just how much college will cost us? Call me a cynic, but I have always been bothered by the websites, articles and other media forms that continually tell students and families that college is more affordable than we think. After all, schools give grants, the government provides grants and loans, so in the final analysis your net cost should be far less than the sticker price. There is definitely some truth to these assertions, but the problem is that the gap between the cost of attendance and what a family thinks it can reasonably afford to pay is often far greater that the financial assistance available to most middle income families. Expanded tax credits, additional federal grant money approved by the Obama administration…these are a start in helping to make college affordable. However, many families do not qualify to take advantage of these, and even for those that do, the actual benefits will likely make a small dent in the cost of a private four-year college education.

Here are the facts:
- The federal government is the single largest source of financial aid. However, to qualify for federal government grant money, your income must be less than $50,000 a year.
- Loans are available through the federal Stafford loan program even for those who don’t qualify for need-based aid. Yet the maximum amount for a college freshman is $5,500 ($6,500 for a sophomore, and $7,500 for juniors and seniors). If the school isn’t giving you merit aid, you may still need to close a $45,000 gap after borrowing up to the maximum limit. And loans, of course, must be paid back. Unsubsidized Stafford loans (non-need based) require that you pay interest while in school or capitalize it, which means that your child will graduate with a larger amount than initially borrowed.
- Education tax credits will reduce your taxes due, but not by much in the grand scheme of financing a college education. The American Opportunity Tax Credit, which the federal government recently approved to replace the Hope Tax Credit for 2009 and 2010, allows families to deduct up to $2,500 from their taxes due if they have education expenses during the tax year. Filers will receive a credit of 100% for the first $2,000 they pay in eligible college costs (tuition, fees and books paid during the tax year), and 25% of the next $1,000. The income cap, to fully take advantage of these credits, was also raised to $90,000 for single filers and $180,000 for couples that file jointly.
- Yes, the net cost at each college is less than the actual price quoted, but don’t assume that this means you won’t be paying the full amount. Net cost takes into consideration those who get need-based aid and the few who qualify for merit scholarships. At many schools, especially the highly selective ones, most students pay the full freight if they are not eligible for financial aid.
- There are numerous scholarships available to students willing to take the time to research them and to apply, which often means additional essays. However, hitting the jackpot and winning a five figure scholarship requires as much luck as work. I would never discourage students from seeking scholarships. I just want families to be aware of the effort and time involved, as well as the odds of winning one and the timing. Don’t wait until January of senior year when most of the more coveted ones have already been awarded.

My intention is not to dampen your post holiday spirit, but rather to re-visit a point I have made in the past. Do your homework and know how much you can afford to pay. Have the family conversation about affordability before the college search begins. That means looking at income, savings, possible aid, and reasonable borrowing, which of course must be repaid with interest.

This does not mean that students shouldn’t apply to expensive private colleges which may offer more robust financial aid packages. However, getting merit money generally means that the student has something special that the college wants, whether it is academic, artistic, athletic talent or diversity. If affordability is an issue, make sure your son or daughter includes a few financial safeties on the college list. Take the time to find out the types of students a college seeks and what special talents your child would add to a class. That is still the best way to find money for college.