Here is a guest post from Cornelius “Kip” Darcy, vice president of marketing, communications and enrollment at Kettering University in Flint, Mich. Kettering recently introduced fixed-rate tuition, a policy that holds tuition rates constant for a four-year college education.
An educated guess? Based on my experience and conversations with students and their parents, it’s not simply how they will manage the cost of a four-year degree; but more specifically, how they will deal with the unpredictability of rapidly rising costs.
Let me explain. Every consumer who has financed “big-ticket" purchases like a house or a car knows in advance what the monthly payment will be to amortize the purchase over three, five or more years. The cost of a college education is not so clear-cut, despite the best efforts of college administrators to make the sticker price more transparent. Tools such as net-price calculators help folks to estimate total costs, but in reality, all students and their families generally know is how much the first year will cost. This unpredictability is often the biggest source of angst for students and their parents, as they contemplate ways to find additional money each year to cover increased tuition and fees. Tuition at U.S. universities last year increased, on average, by 8 percent. The percentage increase over four years is much higher due to compounding and additional supplemental student fees. These factors make it exceptionally difficult for families to create an accurate four-year budget for college expenses.
Private colleges and universities have the ability to control this unpredictability and, I would argue, a social obligation to exercise control so higher education is accessible to as many students as possible. As an industry, higher education holds all the cards. We tell parents and students, “We can't tell you how much tuition will cost next year, or the year after that, or the year after that, but trust us, sign here anyway.”
What we ask parents to do is become experts in risk management and to become prognosticators of university tuition increases. All while they are balancing other financial responsibilities.
Some institutions are working toward eliminating the unpredictability by creatively shouldering the burden of risk management. Kettering University recently unveiled a fixed-tuition guarantee that not only assures the same tuition rate throughout four years of study, but also eliminates all academic fees. While Kettering is the first STEM (science, technology, engineering and math) institution in Michigan to do this, other institutions have effectively instituted fixed-tuition guarantees, the most prominent of which is George Washington University. Mount Holyoke College, one of the most prestigious women’s colleges in the United States, recently announced a tuition freeze, a move that earned praise from the Boston Globe for “for breaking the cycle of endless rate hikes, and recognizing the central responsibility higher education institutions have for addressing the nation’s ballooning student debt crisis.”
Public universities, which have been under increased federal pressure to keep tuition rates down, unfortunately lack the freedom we in private higher education have. Because of the appropriations process at the state level, publics can never accurately predict fluctuations in tuition and fees. For privates, though, exercising the control and expertise we possess means we can tell parents, up front, how to budget for four years of an undergraduate education. Students can plan for how to best allocate savings from employment to help them minimize the total cost of their degree.
And, in the process, we can help reduce the anxiety parents and students feel as they face an uncertain economy and the rising cost of most everything else.