"How Recession Will Change University Financing" (Bloomberg)

[tokenadult]

<p>How</a> Recession Will Change University Financing - Bloomberg </p>

<p>It's harder and harder to assume these days that all college degrees have valued added equal to the cost of gaining the degree.</p>

[barrons]

<p>Agree. Time to separate colleges that pay versus those that issue worthless paper. Averages are useless junk.</p>

[dadx]

<p>

It’s harder and harder to assume these days that all college degrees have valued added equal to the cost of gaining the degree.

</p>

<p>College degrees have never been equal, and neither have people. They won’t be in the future, and thats what makes the world go 'round. </p>

<p>I’d love to see what Sewanee’s results looked like in actual numbers. If their approach is working, they would be smart to keep quiet about it. Everything that works works better if everyone else isn’t doing it. :)</p>

[b_r_um]

<p>

I’d love to see what Sewanee’s results looked like in actual numbers. If their approach is working, they would be smart to keep quiet about it. Everything that works works better if everyone else isn’t doing it.

I think their approach needs publicity. It’s the act of lowering their tuition, not the lower tuition itself, that seems to attract more applicants. </p>

<p>It’s been well-documented that more expensive colleges are perceived to be of higher quality. Lowering tuition (after it’s been high) makes families feel that they are getting a bargain. Keeping it low from the start is more likely to make families feel like they are settling for the cheap option.</p>

[xiggi]

<p>

I’d love to see what Sewanee’s results looked like in actual numbers. If their approach is working, they would be smart to keep quiet about it. Everything that works works better if everyone else isn’t doing it.

</p>

<p>From the article:</p>

<p>

Sewanee wants to address the spiraling costs of higher education, the lingering effects of the recession and the siphoning-off of prospects by state schools where student costs are rising in many cases due to cuts in state funding, even though costs remain lower than at private colleges. The tuition cut and freezes also reduce the pressure to buy attractive students with merit scholarships and help Sewanee compete with other private schools, where tuition and fees continue to rise much faster than the consumer price index. Sewanee now plans to concentrate its financial aid on needy students. </p>

<p>The marketplace has responded very positively to these actions. Applications for this fall have risen 15 percent from last year, and the quality of applicants has improved. The entering freshman class in 2011 numbered 433, up from 401 in 2010. </p>

<p>The school has also become more selective, offering admission to 56 percent, compared with 60 percent earlier. It will be interesting to see if other colleges follow Sewanee’s lead.

</p>

<p>Not really sure what Sewanee’s novel idea is. Except for concentrateing financial aid on the needy, there are hardly any changes in the past three years. High admit rates, very high early admit rates, very low interest by early applicants, and very low yield. A bit of Tulane and IvY League need based aid? Perhaps the author of the article got an inside view on the Class of 2016. and … assumed the final numbers are close to today’s crystal ball. </p>

<p>For the Class of 2013
Sewanee—Univ. of the South (TN)<br>
Overall Admits 2,481 1,688 68%
Early Admits 189 137 72%
Yield 22%</p>

<p>For the Class of 2014
Sewanee—Univ. of the South (TN)<br>
Overall Admits 2,767 1,723 62%
Early Admit 110 73 66%
Yield 23%</p>

<p>For the Class of 2015
Sewanee—Univ. of the South (TN)<br>
Overall Admits 2,920 1,793 61%
Early Admit 105 80 76%
Yield 24%</p>

<p>For the Class of 2016
A polished crystal ball is needed</p>

[b_r_um]

<p>

Not really sure what Sewanee’s novel idea is. Except for concentrateing financial aid on the needy, there are hardly any changes in the past three years.

Cutting tuition rates by 10% and freezing that lowered rate for 4 years seems to happen rather rarely, don’t you agree?</p>

<p>The tuition cuts were announced in February of 2011, after the application deadline for the Class of 2015. The tuition, room and board guarantee is valid for the class entering in 2012. I wouldn’t expect those measures to have an impact on the numbers you quoted.</p>

[xiggi]

<p>

Cutting tuition rates by 10% and freezing that lowered rate for 4 years seems to happen rather rarely, don’t you agree?

</p>

<p>The tuition reduction was announced in February 2011. The tuition freeze for the entering class will not be applied to the same 2011 tuition.</p>

<p>The gross tuition catches the attention; the net tuition and exact COA are more important. Schools can freeze the tuition and increase room and board and fees. </p>

<p>

I wouldn’t expect those measures to have an impact on the numbers you quoted.

</p>

<p>No impact on the number of applications, perhaps. But admissions and enrollment (think yield) decisions came later and did have an impact on the statistics for the Class of 2015.</p>

[b_r_um]

<p>

The gross tuition catches the attention; the net tuition and exact COA are more important. Schools can freeze the tuition and increase room and board and fees.

Room and board are frozen as well. </p>

<p>

The tuition reduction was announced in February 2011. The tuition freeze for the entering class will not be applied to the same 2011 tuition.

That’s a good point. I did not realize that the frozen charges for entering students are $3K higher than the charges for returning students. I did a bit of math. The total cost of attendance over 4 years with frozen charges would come out the same as a 4.8% yearly tuition & fee increase of the current charges for returning students. (My own private liberal arts college increased fees by an average of 4.5% per year between 2007 and 2011.) </p>

<p>That makes the tuition freeze sound like a bad deal for many. (Students who are attending for less than 4 years are overpaying, and everyone else is giving an interest-free loan to the university.) </p>

<p>Now I am surprised that Sewanee is not receiving more bad press for the stealthy tuition hike.</p>

[bluebayou]

<p>

That makes the tuition freeze sound like a bad deal for many.

</p>

<p>Exactly. It’s a Marketing ploy.</p>

<p>

Now I am surprised that Sewanee is not receiving more bad press for the stealthy tuition hike.

</p>

<p>Journalists aren’t exactly econ majors, nor analysts of any kind. :D</p>

[barrons]

<p>Exactly…Well said.</p>

[b_r_um]

<p>I was curious how Sewanee would explain their policies when challenged. I contacted the PR office in response to a [press</a> release](<a href=“Sewanee News | The University of the South | Sewanee”>Sewanee News | The University of the South | Sewanee) announcing the tuition freeze. An excerpt from the press release: </p>

<p>“Sewanee’s tuition guarantee represents a considerable savings over what families might have expected to pay across four years, based on the national trend of ever-increasing college costs,” said Vice-Chancellor John McCardell.</p>

<p>I pointed out that the frozen tuition hides a yearly tuition of 4.8%, which is national average according to their own report. Here’s part of the response I got:</p>

<p>

Among the group of institutions against whom Sewanee competes for students (including Davidson, Rhodes, and Washington and Lee), the Sewanee totals are significantly lower. For sophomores, they compare favorably with out-of-state tuition charges at Georgia and Tennessee public universities. We may disagree over the precise definition of “considerable savings,” but our families would probably agree with us that, measured against our competition, our price is a relative bargain. When we include liberal arts institutions outside the South, institutions whose tuitions now fall in the $55,000 range with annual increases, Sewanee’s claim would seem to be further strengthened.</p>

<p>For students entering in 2012-13, the university will charge $44,600, and that tuition is guaranteed for four years. This means that a student in the Class of 2016 will have paid a total of $178,400 over four years. Again, we may not agree over the degree to which this represents a “savings,” but if any of our competitors were to make a similar guarantee, which they have not – and thus their families may anticipate annual tuition increases – Sewanee families would STILL be paying less over four years. Add to this the fact that a four-year guarantee both rewards success and allows families to plan, and you will understand why we saw a 15% increase in applications this past year.

</p>

<p>Let me get this straight: their defense of the tuition freeze for freshmen is </p>

<ul>
<li><p>that sophomores are not paying much more for Sewanee than out-of-state charges in Georgia and Tennessee (FYI: it appears that Sewanee is still $5K/year more expensive than the public universities for out-of-state sophomores), and</p></li>
<li><p>that freshmen will save money if you factor in future tuition increases from competitors? This seems false. The public competitors would have to increase their tuition by A LOT to undo the initial $8K/year difference. By about 14% per year just to break even.</p></li>
</ul>