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Increase in Published Tuition Price at Private Colleges and Universities for 2004-05 Holds Steady at Six Percent

July 8, 2004

Campus Affordability and Cost Control Initiatives Help
Temper Growth in Actual Student Out-of-Pocket Costs

WASHINGTON, DC—The lingering fallout from the economic recession on endowment returns and institutional fund raising have contributed to a projected 6 percent rise in the average published tuition price at private colleges and universities for the 2004-05 academic year, according to a recent survey of the nation’s independent, nonprofit higher education institutions. Other factors include quickly rising costs for insurance premiums, energy, periodicals and other educational resources, and information technology.

The rate of increase in published tuition prices held steady at last year’s 6 percent rate, and closely follows the annual increase of 5.5 percent seen during the economic boom of the 1990s. According to the College Board, the average tuition price published by private institutions (before student aid is considered) was $17,040 in 2003-04.

Student Aid Rises at a Faster Rate than Published Tuition

Over the last decade, student aid from private colleges increased by more than twice as much as tuition—197 percent vs. 86 percent. The result? “Net tuition” at private colleges (published tuition minus grant aid) declined by $100 over the past 10 years, when adjusted for inflation, according to data from the U.S. Department of Education.

Last year, institutional aid at private colleges and universities increased 15 percent (compared to 6 percent growth in tuition). It grew 11 percent in the previous year.

“In nearly 9 of 10 cases, published tuition overestimates the out-of-pocket costs that students and their families end up investing in a college education,” said David L. Warren, president of the National Association of Independent Colleges and Universities. “No student should rule out a college or university simply because of its published price. Student aid is the other key factor in the college affordability equation.”

Eighty-six percent of undergraduate students at private colleges pay less than list price. In 1999-2000, these students received an average of $13,700 in aid from all sources.

“The student aid resources and policies of individual colleges, the achievements and demonstrated talents of students, and family financial circumstances all play crucial roles in helping to determine the final out-of-pocket cost that families will face,” Warren said.

Factors behind Tuition Increases

The average college endowment earned just 3 percent for 2003, according to the National Association of College and University Business Officers, following losses of 3.6 percent and 6 percent in the two previous years. Despite the small increase, an inflation rate of 2.2 percent and an average withdrawal rate of 5.4 percent meant that most institutions experienced a decline in the overall value of their endowments.

Philanthropic support of education has faltered in recent years. Gifts to higher education dropped 1.2 percent from 2001 to 2003, according to the Council for Aid to Education. The drop from 2001 to 2003 was the first decline in 14 years. When inflation is taken into account, the buying power of gifts to education declined by 3.3 percent.

Health insurance premiums rose 13.9 percent between 2002 and 2003, marking the third consecutive year of double-digit increases. Liability insurance has increased between 20 and 30 percent over the same period.

Periodicals and other library materials routinely increase by double-digit rates each year, and the cost to institutions of keeping up with information technology has doubled in the last decade.

Enhancing Affordability and Controlling Operating Costs

Recently announced loan reduction initiatives at Harvard, U. of Maryland, U. of Virginia, and U. of North Carolina-Chapel Hill have gotten significant press coverage. At the same time, more private colleges and universities across the nation are launching their own innovative approaches to enhance affordability, better control rising costs without sacrificing academic quality, and maintain their value to students. NAICU lists examples of these institutional initiatives on its Web site at http://www.naicu.edu/news/campusinnovations.asp.

“The bottom line is that it isn’t inexpensive to provide a world-class academic experience for students who will be America’s future leaders and innovators in industry, business, science, and public service,” said NAICU President David L. Warren. “But private colleges and universities are using innovative cost-cutting and affordability initiatives to keep the impact of tuition increases on student out-of-pocket costs as low as possible, without cutting into the academic quality that makes them the envy of the world.

“There is no one-size-fits-all approach to affordability, because of differences in mission, student population, and fiscal resources, but that hasn’t stopped private colleges from taking creative steps,” Warren said.

• Some private colleges and universities have cut tuition, while others have locked in the tuition rate for a student’s four- or five-year enrollment. A handful allow families to barter products and services for tuition.

• Several have lowered expected family contributions and replaced loans with more grants.

• Others offer three-year bachelor’s degree programs, or four-year graduation and employment guarantees.

• More than 200 private institutions participate in a national prepaid tuition plan (the Independent 529 Plan).

To control operating expenses, more institutions are:

• Entering into consortial arrangements to reduce administrative and academic redundancies, and leverage their purchasing power to obtain lower costs for energy, insurance, information technology, and other services;

• Outsourcing campus services, such as grounds and facilities maintenance, alumni relations operations, residence hall management, billing and other “back office” functions, and bookstores; and

• Turning to environmentally friendly systems to lower energy consumption, streamlining staff, and consolidating offices and programs to enhance efficiency.

Contact

• Tony Pals
  (202) 785-8866
  tony@naicu.edu