University of the South Slashes Tuition, Cites Economy

Daily News Article   —   Posted on March 10, 2011

(by Kevin Helliker, The Wall Street Journal, WSJ.com) – In a move likely to reverberate among America’s top-tier private colleges, the University of the South [announced in February] it will slash tuition and fees for the coming school year by 10%, or about $4,600.

Commonly known as Sewanee, for the Tennessee town where it is based, University of the South said the cut represents an acknowledgment of “new economic realities.”

“Higher education is on the verge of pricing itself beyond the reach of more and more families,” John M. McCardell Jr., the university’s president, said in a press release.

If not the first, Sewanee is the largest private school to institute such price cuts in recent years, said Tony Pals, director of communications for the National Association of Independent Colleges and Universities.

“It’s a bold move that will have the potential to put competitive pressure on Sewanee’s peer institutions,” said Mr. Pals.

In 2010-11, tuition at private colleges rose at an average rate of 4.5%, the second-smallest increase since 1972, Mr. Pals said. The smallest increase since that year-4.3%-came in 2009-10.

University of the South raised tuition by 5% last year but decided to change course this year.

Asked if the cut-which applies to students in all classes-represented a challenge to other private universities, Sewanee spokeswoman Laurie L. Saxton said, “It’s not an explicit challenge. But we’ve actually heard from some board members of other universities that I think will bring it up with their respective boards.”

Owned by 28 dioceses of the Episcopal Church, University of the South ranks among the nation’s top liberal arts colleges, having produced 25 Rhodes Scholars. It was ranked 32nd among liberal arts schools by U.S. News and World Report.

Sewanee’s Ms. Saxton said the university wouldn’t need to dip into its endowment to accommodate the cuts. [Endowment is the part of an institution’s income derived from donations.]  Already, she said, news of the impending move had precipitated [brought about] an increase in financial support from alumni and supporters of the university.

She said Sewanee also expected the move to increase awareness of the college and possibly boost the number of applicants for the school year starting in the fall of 2012. For 425 spots in next year’s freshman class, Sewanee received about 3,000 applications, she said.

Sewanee junior Kelly O’Mara said the tuition decrease would lower the amount of debt she and her parents will carry beyond her graduation in 2012. “When you’re paying for college, even a decrease in my final year will help,” said Ms. O’Mara, a studio-art and American-studies major who also holds a job on campus.

Some higher-education experts say the strategy could bring Sewanee accolades without actually costing it much money. That’s because financial aid is so prevalent at many colleges that few students actually pay the full tuition price.

“Institutions that are already discounting for most students have a reasonable opportunity to cut their sticker prices without actually diminishing their net revenues,” said Sandy Baum, a senior fellow at George Washington University School of Education. “I suspect some other schools will do something similar,” she add, “But I don’t expect it to be the most popular strategy.”

Write to Kevin Helliker at kevin.helliker@wsj.com.

NOTE:  This article was first published at wsj.com on February 17, 2011.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved.  Reprinted here for educational purposes only.  Visit the website at wsj.com.


Questions

1. By how much is the University of the South (Sewanee) reducing its tuition?

2. Why has Sewanee decided to reduce its tuition?

3. By how much did private college tuition increase in 2010-11?

4. How many Rhodes Scholars have graduated from Sewanee?

5. How has Sewanee’s announcement affected donations?

6. Read the information under “Resources” below. Ask a parent if he/she agrees with the assertions made here about college tuition, and to explain his/her answer.

 


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Background

THE UNIVERSITY OF THE SOUTH:

  • The University of the South is a private, coeducational *liberal arts college located in Sewanee, Tennessee.
  • It is owned by twenty-eight southern dioceses of the Episcopal Church and its School of Theology is an official seminary of the church.
  • The university’s School of Letters offers graduate degrees in literature and creative writing. Often known simply as Sewanee, the school has produced 25 Rhodes Scholars and was ranked 32nd in the annual US News & World Report list of liberal arts colleges.
  • In 2009, Forbes ranked it 94th of America’s Best Colleges.

Visit Sewanee’s website at sewanee.edu and read about the tuition reduction at the school website at news.sewanee.edu/academics/2011/02/16/tuition-reduction.

*LIBERAL ARTS COLLEGES:

  • Liberal arts colleges are American institutions of higher education which have traditionally emphasized interactive instruction (although research is still a component of these institutions).
  • They are known for being residential and for having smaller enrollment, class size, and teacher-student ratios than universities.
  • These colleges also encourage a high level of teacher-student interaction at the center of which are classes taught by full-time faculty, rather than graduate student teaching assistants who often teach classes at large research-oriented universities.
  • The colleges may be coeducational or single-sex; private or public; and either secular or affiliated with a religious body.

Resources

From “The Tuition Aid Trap” posted at cato.org/pub_display.php?pub_id=3262:

  • …A new report from the House Committee on Education and the Workforce, The College Cost Crisis, …released to herald the reauthorization of the Higher Education Act — quickly identifies the tuition rocket’s likely fuel: “Beginning with the Higher Education Act of 1965, the federal government … has provided significant funding to help ensure that low- and moderate-income students and families are not prevented from receiving a postsecondary education simply because of financial circumstances.”
  • This year, thanks to the Education Act, “roughly $90 billion [was invested] in higher education, with the bulk of that money, about $65 billion, [going] directly to students….”
  • Consider that $65 billion going directly to students and its effect on demand: A student will “purchase” education at a price he can afford. Extra education money enables him to pay a higher tuition.
  • In [total], multiple billions in student aid artificially inflate demand — and average tuition — as students who might not have gone to college do, and others attend more expensive institutions than they otherwise would have.
  • The College Cost Crisis acknowledges that federal aid has produced just such an effect: Pell Grants alone, it boasts, have “made the dream of college a reality for millions of students” by helping to “defray the cost of higher education.”
  • On the supply side, this federal aid makes universities less sensitive about their own costs.
  • “[I]ncreases in financial aid in recent years have enabled colleges and universities blithely to raise tuitions, confident that Federal loan subsidies would help cushion the increase,” then-Secretary of Education William J. Bennett said in 1987.
  • The “Bennett hypothesis” — the theory that as long as the government ensures the bills will get paid, colleges will raise tuition — makes sense, especially in light of Washington’s guarantee of an affordable college education for all who want one.
  • It’s a reality corroborated by Murray State University President Dr. F. King Alexander, who in a recent hearing centered around Crisis, told the House Subcommittee on 21st Century Competitiveness that some schools do, in fact, raise tuition because government will cover it.

Also consider the following:

  • The New York Times reports that, “college tuition and fees increased 439% from 1982 to 2007 while median family income rose 147%. Student borrowing has more than doubled in the last decade.”
  • In 2007, the net cost of a four-year private university came to 76% of the median family income while costs at public four-year schools took 28% of median family income.
  • There was a time when students simply could not attend colleges and universities that were too expensive. They would reduce their expectations and attend state schools instead. But now the caps have gone off student lending. Under new student loan programs, students can borrow as much as they like through private lenders without federal guarantees.
  • So many students borrow way beyond their subsequent ability to pay, as youthful optimism and enthusiasm leads them to make commitments that compromise them severely throughout life. Among students who graduated from four-year colleges owing more than $15,000 in debt, the default rate is running 20% (from dickmorris.com)