Tucked away in a bucolic suburb of Philadelphia, Rosemont College has the kind of close-knit community and intimate academic setting that puts many parents at ease. That is, if they can get past the $44,520 annual sticker price.
Although enrollment at the Catholic college has been steady, president Sharon Hirsh worried that the price tag might scare off cost-conscious families whose children could thrive on the 1,103-student campus. Barely 1 percent of students at Rosemont pay the published price, with a majority receiving enough federal, state and institutional aid to cut the bill in half. So why not change the sticker price?
On Wednesday, Hirsh did just that. She announced a 43 percent reduction in tuition from $32,620 to $18,500, and a 14 percent reduction in room and board from $13,400 to $11,500 for the 2016-2017 academic year.
“We want to be an accessible choice for families,” Hirsh said. “The old model is broken and not doing any good for families or us, so we’re taking this step to get back to where we should be.”
Rosemont joins a small but growing list of private colleges casting off the widespread practice of setting published prices artificially high and then offering deep discounts. In the last few years, at least a dozen schools have announced these so-called tuition resets, including Utica College in New York, Ashland University in Ohio and Converse College in South Carolina.
Colleges portray the move as a way to bring clarity and simplicity to an opaque pricing model, but not necessarily as a way to save students any money. In most cases, the reset prices are just closer to what students are already paying after financial aid is taken into account, known as the net price. And at many of these schools the dramatic reduction in price also comes with a dramatic reduction in aid.
Rosemont anticipates that students will see savings in the range of $100 to several thousand dollars depending on family income. To make the changes more salient, the school is giving its 597 undergraduates individual worksheets detailing how the reset with affect them. Graduate students will not benefit from the reset.
“We want to make sure that our students know that this does not mean financial aid is going away. It will just be done in a logical way,” Hirsh said. “The institutional aid will be less, but proportionate to the real price.”
For sophomore Mary Manfredi, news of the price reduction was simply “amazing.” She said there was a collective roar in the audience at the jam-packed school auditorium where Hirsh announced the change Wednesday morning.
Although Manfredi has a full academic scholarship that covers tuition and fees, the history major has still had to take out loans to help pay for room and board.
“My parents contribute what they can, and I worked three jobs over the summer,” she said. “The scholarship has helped, but I’m very grateful for this whole new initiative to lower costs. It will help me out a lot.”
It used to be that discounts were only based on financial need. Wealthy families were expected to cover the cost of sending their kids to college, while schools focused their resources on students with limited means.
But to lure top students away from gold-plated competitors colleges began offering more need-blind scholarships. And to ensure the scheme didn’t hurt their bottom line schools ratcheted up the sticker price to bring in enough net-tuition revenue –the money earned from students after schools provide aid — to offset the discount.
But the strategy is fizzling. Analysts at Moody’s Investors Service say net-tuition revenue is flat or dwindling at many small private and public colleges as enrollment wanes and families grow more concerned about affordability.
Those headwinds should encourage a wave of tuition resets, but many small private colleges are wary of slashing prices, said higher education consultant Lucie Lapovsky.
“The concern that some schools have is that people associate price with quality,” she said. “But many students won’t even look at a school with a sticker price higher than what they think they can afford…so schools may be lowering their potential demand.”
Lapovsky has studied several schools that have enacted tuition resets and found the strategy is most successful at colleges that lower their discount rate and advertise to a wider pool of students. She points to Muskingum University in Ohio, which first cut tuition from $14,000 to $10,000 in 1996.
Since then, the school has seen a fairly steady increase in enrollment, said Jeff Zellers, vice president for enrollment. Prices have risen, but it took nearly a decade before tuition returned to where it was before the reset. And ultimately, the price reduction attracted more students.
“If you’re able to fill your institution with mostly full-pay students, you are discounting only for need and don’t have excess capacity, then this probably isn’t the strategy for you,” Lapovsky said.
There is no need for elite schools like Harvard or Yale to reset prices. They enroll an outsize proportion of wealthy students, sit on multibillion-dollar endowments and have no trouble attracting applicants. It is a lot easier for those elite schools to cover the full cost of attendance for lower-income students, which typically make up less than 15 percent of their population.
In contrast, Rosemont has a high percentage of students with financial need, with over half qualifying for federal Pell Grants aimed at the neediest college students. Eighty percent of the aid the school offers is based on need, not merit.
“Changing the [pricing] model fits our mission and commitment to be accessible to those families,” Hirsh said.
Cutting sticker prices won’t solve the problem of rising costs, and there’s no guarantee that lower costs will attract more students. But the status quo is not sustainable. Tuition has risen faster than inflation at a time when wages have remained relatively flat. Families are sensitive to price increases in this uneven economic recovery, while schools can only discount so much before hurting their bottom line.