Does college sticker price still matter?
Have net price calculators, merit scholarships and tuition discounts rendered sticker price meaningless? Not according to numerous surveys on the topic.
The findings of three separate surveys over the past two years on the topic of cost and decision to apply suggest that students and parents give strong consideration to advertised price. A 2012 studentPOLL survey, a joint venture between the College Board and Art & Science Group, reported that more than one-half of families ruled out colleges based on sticker price alone.
In RuffaloCODY’s 2014 Rising Seniors’ Perceptions on Financial Aid, 40 percent of students said they had already ruled out colleges based on costs, and another 15 percent didn’t know yet whether they would. Sallie Mae’s “How America Pays for College 2013” survey includes six years of data on when students and parents eliminated colleges based on cost.
During that six-year span, an additional 10 percent said they eliminated colleges based on cost after admission, but prior to receiving a financial aid package.
So, it would seem that the answer is a resounding yes—sticker price still matters. Not surprisingly, it matters differently to students from different income levels. Two of the three surveys (studentPOLL and RuffaloCODY) segmented responses by family income level.
Students from higher-income families ruled out colleges based on sticker price alone less often than did students from lower- and middle-income families. However, a somewhat surprising result reported in both surveys is that students from middle-income families eliminated colleges based on cost at higher rates than did lower-income families. In addition, the Sallie Mae survey found that Hispanic students eliminated schools based on costs at a higher rate than did black or white students.
Taken together, these findings have implications for how and when colleges should be communicating about cost and affordability:
- Don’t wait until it’s time to file the FAFSA. Students and parents in the inquiry pool need to hear affordability messages earlier, before they whittle down their lists based on perceptions about cost. Sharing affordability messages with rising seniors in the summer is advisable.
- Information about costs and financial aid should be easy to find on your website. Case studies and a chart showing the distribution of income levels of the most recent entering class should also be included so families can identify whether students from similar financial backgrounds are attending.
While sticker price matters, it raises another question. For colleges that provide aid to nearly 100 percent of their students, does it make sense to reduce aid and reduce sticker price? There have been a number of colleges and universities that have “reset” tuition prices in the past few years.
It is instructive to review the mixed results of six of those schools—private, not-for-profit institutions that have now completed at least one admissions cycle since reducing tuition. Public data from the Integrated Postsecondary Education Data System (IPEDS) database show freshman admissions results in the year the tuition was reset at five schools.
The first of the five schools to announce a change was Sewanee: The University of the South in Tennessee, where tuition fell 10 percent for fall 2011. Later that year, three other institutions dropped sticker prices for 2012: William Peace University in North Carolina by 7.7 percent; Cabrini College in Pennsylvania by 12.6; and University of Charleston in West Virginia by 21.8 percent.
A year later, Concordia University in Minnesota announced a reduction of $10,000—a 33.7 percent drop in tuition and fees—resulting in a 20 percent increase in applications. In fact, all but one institution’s freshman class size increased. Class size at William Peace almost doubled. (Concordia’s first year of reduction information was not available in IPEDS, however, local news outlets reported record-size freshman and transfer classes.)
Three of the four colleges that have now been through two admissions cycles saw decreases in the number of applications while enrollment results have been mixed.
Three of the five institutions, even after the tuition reset, provide aid to nearly 100 percent of incoming freshmen and have discount rates above 50 percent (fall 2012 discount rate data are the most recent available in IPEDS). Concordia aided 99 percent of incoming freshmen prior to the tuition reduction. However, their post-reduction discount rate will not be available in IPEDS until next summer.
Sewanee is the outlier in the group, with 71 percent of freshmen receiving institutional aid and a discount rate below 40 percent. Sewanee’s costs have increased at a rate of about 3 percent per year since the reset, and their sticker price for fall 2013 was about the same as the pre-reset tuition in 2010.
The sixth, and most recent, tuition reset was at Ohio’s Ashland University, which cut its price by 36.6 percent. In a state where competition is fierce among both private and public institutions, Ashland is one of two private colleges that announced a tuition reduction in fall 2013, with expectations of increasing applications and enrollments for fall 2014, when the resets take effect.
Scott Van Loo, Ashland’s vice president for enrollment and marketing, says his institution modeled numerous scenarios as they studied the possibility of reducing tuition. Their data suggested that applications could increase 10 to 20 percent with a significant reset. Part of the challenge for Ashland was modeling potential application increases in light of the declining number of high school graduates.
Just a few weeks before the start of the fall 2014 semester, Ashland reported a 10 to 12 percent increase in applications, says Van Loo. However, the number of incomplete applications increased somewhat, reflecting what Van Loo describes as a softer application pool. Ultimately, Ashland’s fall 2014 freshman class size was similar to the fall 2013 class.
There is, however, a silver lining in year one for Ashland. The university was anticipating a 15 percent increase in enrolling transfer students. Instead, the increase turned out to be closer to 25 percent. Because aid for transfers at most private institutions is generally lower than it is for new freshmen, Ashland’s sticker price reset makes it more affordable than other privates are for transfers, Van Loo says.
Van Loo says he and other administrators at Ashland have considered whether they would reset the price again. In short, their answer is yes. Still, he says, they have to wonder what the application pool would have looked like had they not lowered tuition. And, he adds, they know the discount rate would have been more problematic.
But sticker price definitely still matters, Van Loo says, adding that he knows the university must now shift from discussing the tuition reduction to a message of affordability and value.
Mary Piccioli is an enrollment management consultant at Scannell & Kurz.