Colleges take aim at high tuition costs
As college tuition continues to outpace inflation year after year, many schools are experimenting with ways to help more students afford the potentially crippling costs.
Spurred in part by increased competition for the best students, a number of colleges have launched new programs for this fall that include freezing tuition, offering more grants instead of loans, and tinkering with financial-aid formulas to reduce the amount families are expected to contribute. Unlike past aid efforts, which mainly helped financially needy students, the latest moves also stand to benefit more-affluent families.
Many colleges today can afford to be more generous, as their endowment coffers are flush from strong stock-market gains. And they are under pressure to do so as growth in federal financial aid has been dwarfed by rising school costs. College costs, including tuition, fees and living expenses, can top $45,000 a year at some private institutions, and tuition and fees are expected to rise a further 5.5 percent to 5.8 percent this year, according to the National Association of Independent Colleges and Universities. State school costs are lower, averaging close to $13,000 if room and board are included, according to the College Board, but increases from year to year can fluctuate sharply, depending on a state’s fiscal health.
The new programs are luring students. Victoria Tran of Colleyville, Texas, was accepted by her top choice, Baylor University, and four other colleges. But she chose the University of Texas at Dallas largely because of its lower tuition and new guaranteed-tuition program, which allows new and returning students to pay the same tuition — $8,554 for a full year — for as long as they are enrolled. “The guarantee makes it more attractive,” says Victoria’s father, Binh Tran, a computer programmer. “We know for the next four years, we are going to pay the same rate.”
At Emory University in Atlanta, a new program called Emory Advantage is giving out grants in lieu of offering federal need-based loans to students whose families earn up to $100,000 a year. Brandon Bedford of Ocala, Fla., says he doesn’t expect to have to take out any student loans because the school offered to cover the bulk of his $46,000 annual total school costs through grants and work-study programs. Mr. Bedford says he turned down an offer from another prestigious college that would have required him and his parents to take out $27,000 in loans.
“That was definitely too much,” says the 18-year-old.
More schools also are starting to give a break to homeowners. A group of 28 elite private colleges, calling themselves the 568 Presidents’ Group, after the federal antitrust exception that allows them to set joint-aid rules, began using a more generous financial-aid calculation this year that is expected to reduce the expected contributions for families whose homes have appreciated.
The group, which includes schools such as Duke University, Dartmouth College and the University of Pennsylvania, had previously asked financial-aid officers to count the market value of a house, up to 2.4 times a family’s income, as an available asset, regardless of how large a mortgage the family was carrying. Starting this fall, the schools will count only home equity, which is market value minus mortgage debt, and cap that at 1.2 times income. It “allows us to focus on the reality of a family’s financial strength,” says Jim Belvin, Duke’s financial-aid director and chairman of the technical committee for the 568 group.
Stanford University, which isn’t a member of the 568 group, also said recently it would begin capping the amount of home equity assessed in the calculation of a parental contribution to 1.5 times the family income. The move is expected to reduce parental contributions for families with significant home equity by $2,000 on average, Stanford says. The university also created new guidelines for middle-income families that would reduce the amounts students are expected to borrow, and replace the balance with grants and scholarships.
“Middle-income families feel particularly impacted by the lack of financial aid or the fact that (they) are not getting as much attention,” says Daniel Walls, associate vice provost for enrollment management at Emory.
Some relatively affluent students don’t bother to seek aid. Leslie Heffez, an oral surgeon in Deerfield, Ill., figured that because of his income level it was a waste of time to apply for financial aid for his son, Adam, who will begin attending Georgetown University this fall. “I think a lot of middle to well-to-do people don’t bother to do it, because they know it’s not available to them,” says Dr. Heffez, who plans to pay the full cost of Georgetown, an estimated $46,989 a year, including tuition, fees, room and board.
For smart, affluent kids who don’t qualify for financial aid, some of the best deals can be found at smaller, middle-market schools, many of which are offering merit-based scholarships that discount tuition 10 percent to 50 percent to a majority of their incoming students, says Paul Hamborg, vice president at Human Capital Research Corp. in Evanston, Ill., which advises colleges on enrollment strategies. That’s a big shift from a few years ago when schools typically offered scholarships to only a handful of students.
At Knox College, a private school in Galesburg, Ill., that charges $35,478 for tuition, fees and room and board, over half of admitted applicants receive some type of merit-based scholarship, which can range from $2,000 to $15,000 a year. About half the students at Rhodes College of Memphis, Tenn., where the full cost of attendance is $38,120 a year, qualify for merit-based scholarships.