The Price of College, or how one college sets its tuition

In a recent post, The Price of College, or how a $60,000 tuition can be dubbed a discount, I described college pricing as complicated, individualized, and opaque. Upon occasion college administrators shed light on the process. A couple of years ago, W. Kent Barnds, Vice President for Enrollment, Communication & Planning at Augustana College, wrote about the steps Augustana follows to determine a price.

Old Main, Augustana College, Rock Island, IL

Old Main, Augustana College, Rock Island, IL

Augustana is a very well-regarded small, private liberal arts college in Illinois. Barnds’ post opens the door to the enrollment management perspective of admissions, a perspective internal to a college. While prospective students and their families may look at admissions as the team selecting the few who will be invited to attend, the college administration may look at admissions as the team charged with filling classroom seats and dormitory beds. If you’re interested in understanding the college’s perspective, I recommend you read Barnds’ post, Establishing the price (and cost of a college); here’s the introduction:

This is in no way a complete description of the many considerations that go into the decision-making process, but it’s a start. My goal is to keep it simple and provide the perspective of an enrollment leader. Another goal is to reinforce the idea that establishing price (and by virtue of establishing price, determining net cost) is neither as haphazard as tossing darts at a dartboard or a scientific certainty. It’s complex and somewhat idiosyncratic.

Not surprisingly, the process begins in May, after deposits are received and the admissions yield is determined, with an evaluation of how well the college recruited its fall class. (See What happens when, the college admissions calendar.) Barnds also mentions that the past several years have caused an increased focus on:

…a family’s willingness and ability  to pay …the changes in demographics in the Midwest that brings more first-generation and multicultural applicants to our pool …our position within the broader marketplace (publics, community colleges and high-quality, more selective privates that we know many of our accepts will pay more to attend) …far more conscientious about what the market will tolerate, rather than what we “need” to run our operation

Those demographic changes also include a smaller pool of high school graduates, especially in the Midwest. See Dwindling Midwest High School Grads Spur College Hunt, via Bloomberg:

A waning number of high school graduates from the Midwest is sparking a college hunt for freshman applicants, with the decline being felt as far away as Harvard and Emory universities.

Back to the considerations Augustana (and most other colleges) faces; these questions [pulled from Barnds’ post] will directly affect offers of admission and financial aid to potential students:

  • How much did we spend in financial assistance in an effort to attract the class?
  • And, how much total revenue did the class generate?
  • What size class do we desire?
  • How many students from out of state?
  • What is the academic profile we seek?
  • How much aid can we afford to offer?
  • How little financial aid can we afford to offer and make the class?

And here’s another piece of Augustana’s process:

We typically discover that we can’t afford to do what we want to do. In this discussion we involve members of the admissions and financial aid staff and the chief financial officer (CFO), who provides guidance about “how much more revenue we need” to accomplish our financial goals for the coming year (think pay raises, new hires, programming, physical plant improvements, etc.). Hopefully, we get close enough to the targets during this process that we make the CFO and President happy and we think we can accomplish our goals. It is also during this stage that we begin to model a couple of different % tuition increases based on CFO recommendations.

Though Augustana is a nonprofit college, it still has to function as a well-managed business, balancing the needs of the college operations with the desire to attract a strong cohort of new students, leveraging financial aid and merit funds as efficiently as possible.

I appreciate the opportunity Barnds offers with this glimpse behind Augustana’s meeting room door.
Still more on the price of college to come.
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1 Comment

Filed under Paying for College, Reports

One response to “The Price of College, or how one college sets its tuition

  1. Reblogged this on CollegeDirection's Blog and commented:
    Rarely does any family pay the full cost of a college education, but here is a twist on how one college decides how to set its tuition.

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