Tuesday, February 23, 2010

Tuition Caps, Cost Cutting...Working with Less

Preliminary steps taken by two prestigious New England colleges in the past week may signal new trends in higher education. One week ago Middlebury College announced a plan, pending board approval, that would limit annual cost of attendance increases to one percentage point over the Consumer Price Index. This week Brandeis University released its proposed cuts to academic programs as part of ongoing efforts to address its financial issues. The timing of these announcements has interestingly coincided with the publication of a joint study by two non-profit policy organizations, Public Agenda and the National Center for Public Policy and Higher Education, regarding public disatisfaction with colleges. Roughly two-thirds of the survey participants said that federal stimulus money should be used by colleges to hold down tuition, even at the cost of program cutbacks. Middlebury and Brandeis are apparently ahead of the curve and taking that message to heart.

Middlebury’s announcement may not seem like much, especially with inflation at an historic low. But in fact, it is a big deal for a college to commit to a cap for an "indefinite" period when average annual cost increases at four-year colleges have exceeded 4 percent. Other schools have imposed one year tuition freezes, only to raise price more than the rate of inflation the following year. Middlebury’s move obviously won’t improve its bottom line, though if one believes that demand for a college education is not inelastic (in other words, an increase in price will negatively affect demand), then this action should certainly raise the school’s desirability. But that’s what makes this move so noteworthy: as one of the most selective colleges in the country, Middlebury has only seen applications increase in recent years, even while its tuition has risen.

Brandeis’ move is gutsy, though born out of necessity. Imagine the premier Jewish-sponsored university in the U.S. abandoning Hebrew as a major. However, if the proposed reorganization is adopted, there is probably truth to the school’s claim that the impact on undergraduate studies will be minimal. For example, many departments will be merged rather than completely eliminated and changes will be phased in so as not to disrupt the education of current students or impact those applying for the coming fall. The biggest losers will be graduate students, as university-sponsored PhD programs are cutback or terminated (a topic for another day: the fate of university funded doctoral programs). Hebrew may no longer be a major; however, students will still be able to study the language while majoring instead in Near Eastern and Judaic Studies. What Brandeis has done is likely to become more prevalent at colleges across the nation. Programs with few degree candidates will be cut if determined that they may no longer be justifiable.

What does this imply for trends in higher education going forward? Middlebury’s move may likely put pressure on its peer institutions to do the same. Yet many well-endowed colleges are feeling the pinch even without slowing tuition increases. The lost dollars will have to come from somewhere. Expect financial aid to take a hit. Williams’ move to end its no-loan policy opened the door for Dartmouth…others will no doubt follow. Middlebury, by the way, was not among the 40 or so universities that did away with loans in need-based aid back in 2007-2008.

Colleges have for the past two years examined all possible ways to cut costs, so Brandeis’ announcement is not that surprising. Staff layoffs, salary freezes, and varsity team eliminations have become more commonplace news. What makes Brandeis’ step so notable is where it has chosen to reduce expenses. I offer up advice I have shared in the past. Students should do their homework when researching colleges. If they have an interest in a highly specialized major that may have few degree candidates, inquire about the ‘safety’ of that program. If academic programs are eliminated, hopefully others will follow Brandeis’ example and phase them out over time so that current students are not impacted.

Are colleges finally getting the message that controlling costs and making education affordable, even at the expense of some programs, is among the top concerns of families with college age students? In the case of tuition caps, one school does not make a trend, but I will remain optimistic.

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