The recession has sent tuition-discount rates at private colleges soaring to record highs, reaching 41.8 percent in 2008. But some small colleges have managed to buck that trend, lowering their discount rates while raising enrollment. They’ve done so by figuring out smarter ways to distribute aid dollars and effectively market themselves to prospective students.
Tuition is the lifeblood of most small private colleges. Without sizable endowments, a bevy of generous donors, or public funds, they run largely on what students pay. A key factor in whether the colleges succeed financially is their discount rate, or the average amount of tuition covered by merit and need-based student aid from the college’s own coffers. Setting that rate is a delicate balancing act. If a college raises its discount rate, it can earn less per student. But with a lower rate, the admissions office risks losing students who get more financial aid elsewhere.
The Chronicle looked at how some private four-year institutions were able to defy the discount-rate logic this fall. We found three institutions—California Lutheran University; Centre College, in Kentucky; and the College of Notre Dame of Maryland—with particularly compelling stories. Their approaches are described below.
The strides those colleges have taken are impressive considering that, given the recession, the overall student population is needier and more likely to choose a college based on its price. Median family income dropped 6.4 percent from 2007 to 2009, a shift that was reflected in the rise of the average discount rate at private colleges. Rates are likely to continue climbing, college-tuition experts say, so colleges that follow the examples set by these institutions could put themselves in position to be more prosperous than their peers.
Centre College: Trading on a Rising Reputation
The first years of the recession were unkind to Centre College: Its already small endowment lost about a quarter of its value between 2007 and 2009. And the Class of 2013 proved to be the neediest in years, with significantly more students qualifying for need-based aid than in the past. The discount rate for that class was bumped up six points, to 53 percent.
But Centre, a college of about 1,200 undergraduates in a rural setting, set out to regain financial stability with this year’s incoming class. Though the class was even needier than the one before it, the college brought its discount rate down by two percentage points, giving each student less aid, on average. Centre also decided to admit its largest freshman class ever, driving up total tuition revenue.
By cutting aid, the college hopes that students will pay more to attend Centre. With an $85-million capital building project recently completed, and an increase in the average freshman’s ACT score over the past decade, Robert M. Nesmith, dean of admission and student financial planning, says, “We are betting that the increased value of what we have to offer gives us a little bit of power.”
Centre, ranked the No. 1 college in the South by Forbes magazine this year, relies on a marketing campaign to convince prospective students of its value. At the core of its pitch is the “Centre commitment,” which guarantees students an academic internship, study abroad (for which it will buy students their passports), and a degree in four years. If students who have stayed on track academically do not graduate within four years, Centre will pay for their fifth year—though the college has not yet had to do so.
Richard Ekman, president of the Council of Independent Colleges, thinks clear-cut messages like Centre’s help attract today’s students, who he says are more likely to have parents who did not attend college.
Centre is being more selective with its aid, saving it to court top students who will further enhance the college’s academic profile. “We had some students at the high end of our pool who might, in other years, have gone to a more expensive private university, higher on the totem pole than us, and, in a recessionary year, decided that Centre was a really good value,” says John A. Roush, Centre’s president. “Those students came with big scholarships.”
California Lutheran: Aid Amid Public Woes
This master’s-degree-granting university of about 2,300 undergraduates depends on students for 90 percent of its revenue and had a discount rate as high as 54 percent during the past decade. But for the incoming class in 2009, the rate was about 45 percent. And it dropped to just over 40 percent this fall.
Changes in the university’s financial-aid process helped lower the discount rate while improving California Lutheran’s academic profile. So did the plight of the state’s public universities, better outreach to prospective students, and appealing new buildings, says Dane R. Rowley, associate director of admission.
After offering initial awards, the university invites the top admitted students to the campus to interview with the faculty for further merit awards. If they are willing to come, that helps demonstrate their interest.
Admissions officials also use aid to compete with public universities, offering students who are admitted to any of the top five University of California campuses the opportunity to attend California Lutheran for the price of a public college. As the state’s public universities furloughed staff members, cut programming, and reduced their enrollments last year, California Lutheran saw a 70-percent increase in applications. The size of this fall’s freshman class shot up 13 percent from the year before, and the incoming class’s average GPA went from 3.53 in 2008 to 3.62 in 2010.
California Lutheran’s comprehensive plan to attract students was key to building the strongest freshman class in recent years, say university officials. Once students are admitted, the admissions office begins an onslaught of personal contact in which parents of current students call parents of prospective students, and professors write letters to students who are interested in their department. “We’re getting more of the top students by doing this,” says Mr. Rowley.
A new fitness center and residence hall have also helped make the campus more attractive. “The curb appeal, if you will, had gone up dramatically,” says Christopher Kimball, the president. “The discount rate is a proxy for your reputation. If it’s going down, that means your reputation is going up.”
College of Notre Dame of Md: Consultants’ Help
Dwindling enrollment became a problem at the College of Notre Dame of Maryland during flush economic times. In 2007 the college’s freshman class had 106 students, down from 124 the year before. The size of incoming classes stayed around that level until this fall, when Notre Dame of Maryland enrolled 119 first-year students. “For us that’s a huge change,” says Heidi Roller, vice president for enrollment management.
To get more students to enroll, the master’s-degree-granting institution, which has an all-women’s undergraduate program, remade its financial-aid program. It hired consultants who helped allocate aid dollars better and sent staff members into the field to convince students that they could afford a private education. Those efforts also succeeded in lowering the college’s discount rate by three percentage points, to 47 percent.
The financial-aid office now considers the probability of an admitted student’s enrolling, directing money toward the most-interested students. As of last year, top-tier admitted students were offered 60 percent of their potential aid package upfront; to receive additional merit money, they had to interview with faculty members on the campus.
The new process gives more merit aid to good students who are sincerely interested in attending, and less to star students who applied to the college as a safety school. “We’re able to interest that strong, B-level student who wasn’t ignored but wasn’t financially enticed to come to our school,” says Ms. Roller.
Enrollment Research Associates, a consulting firm, helped the college keep its financial-aid budget balanced. After giving out this year’s aid awards, “we got down very close to ‘Here’s a dollar-fifty left,’” says Ms. Roller.
The College of Notre Dame of Maryland is also educating prospective students about how to apply for financial aid. Admissions counselors and financial-aid staff go to high schools statewide to teach students how to fill out the complicated Free Application for Federal Student Aid. “First-generation students don’t necessarily understand the process,” says Ms. Roller.
Once students are admitted, officers work with them to find outside scholarships to supplement their official aid packages. Last year about a third of the incoming class received such scholarships, an increase of 16 percent from the year before.
The college plans to keep its new financial-aid program in place. Says Ms. Roller: “We have a much better handle on our prospective students.”