Higher Education

Bending to the law of supply and demand, some colleges are dropping their prices

Cuts to advertised tuition come in the face of an enrollment drop and consumer backlash

Tuition is being cut by about $25,000 this year to attract more students to Mills College in Oakland, California, one of several colleges and universities freezing or reducing tuition this fall in the face of an enrollment decline and consumer backlash.

Tuition is being cut by about $25,000 this year to attract more students to Mills College in Oakland, California, one of several colleges and universities freezing or reducing tuition this fall in the face of an enrollment decline and consumer backlash.

It may have been one of the biggest back-to-school sales ever: a 36 percent drop in the advertised cost of a college education.

That’s what awaited students this fall at Mills College, one of a growing number of higher-education institutions that have started freezing or dropping their prices in the face of a years-long enrollment decline and heightened price sensitivity.

The 1,300-student private college in Oakland, California, which like many private colleges has been having trouble attracting students, dropped its sticker price from $45,000 to $29,000 a year.

“We listened to our prospective students and their families, who said the cost was prohibitive for them,” said Mills President Elizabeth Hillman. “We want more students to apply.”

It’s an increasingly common example of market forces finally coming to bear on college costs, which have consistently grown much faster than prices for other goods and services thanks to a steady supply of students. In the 10 years ending in 2016, college tuition and fees rose 63 percent, or three times the rate of everything else tracked by the Consumer Price Index, the U.S. Bureau of Labor Statistics reports.

Today, however, because of a decline in the number of 18- to 24-year-olds and an improving economy that is sucking people straight into the workforce, colleges have 2.9 million fewer customers than they did at the last peak, in 2011, according to the National Student Clearinghouse, which tracks this.

Related: Eligible for financial aid, nearly a million students never get it

Meanwhile, almost seven in 10 parents said in a survey that they had eliminated colleges from consideration for their children because of the cost. In another survey, only 44 percent of Americans said private, nonprofit universities and colleges are worth what they charge.

More colleges are realizing there’s no point having high sticker prices if they’re discouraging prospective applicants and few students are actually paying them, said Sandy Baum, an independent higher-education consultant and retired economics professor.

“It’s very much a strategic decision,” Baum said. “They’re looking at, will we get more applicants if we lower our sticker price? It works for some of them and it really doesn’t work out for others.”

More and more are giving it a try.

Drew University, Sweet Briar College, Birmingham-Southern College, Benedict College and the University of Sioux Falls all reduced their advertised tuition starting this year. Old Dominion University is lowering the price of undergraduate tuition for active-duty military service members. Champlain College cut tuition in half for students in its online program, part of a strategy to increase enrollment.

Related: Can ‘work colleges’ in cities become a low-cost, high-value model for the future?

The University of Colorado at Boulder is eliminating millions of dollars in student fees. Several public universities are among those responding to a declining supply of students by freezing or reducing their prices.

The University of Colorado at Boulder is eliminating millions of dollars in student fees. Several public universities are among those responding to a declining supply of students by freezing or reducing their prices.

Concerned about Illinois high school graduates leaving for colleges in other states, the University of Illinois system is in the fourth year of a tuition freeze. The University of Colorado has cut fees. Five South Dakota universities are offering lower in-state tuition this fall to freshmen and transfer students from Nebraska; the University of Nebraska at Kearney will extend the deal next year to residents of Colorado and Kansas. The University of Missouri-Kansas City, meanwhile, is offering lower resident tuition to students from Kansas and other midwestern states.

Some of the seeming price drops are sleight of hand. Most students don’t pay the advertised price for college, but, after receiving discounts and financial aid, end up owing a lower “net price.” At private colleges, that comes to about half as much, said Lucie Lapovsky, a pricing consultant. And as the stream of students has dried up, those discounts have been getting deeper.

Colleges like Mills are simply changing their advertised prices to something closer to the average of what students actually pay, though Mills says most students will still see their costs decline.

Related: With enrollment sliding, liberal arts colleges struggle to make a case for themselves

Birmingham-Southern spent 14 months doing research before cutting its tuition, said President Linda Flaherty-Goldsmith. The 1,283-student Alabama college, which was already giving its students discounts that reduced its advertised price by an average of more than two-thirds, found that 80 percent of local families would not consider a college with tuition as high as the amount it said it charged.

“We were missing a huge part of our potential market,” said Flaherty-Goldsmith. “The sticker price was keeping people away — the perception, rather than the reality.”

The same was true at New Jersey’s Drew University, where the sticker price is dropping from $48,336 to $38,668 this fall. The high price was “completely disproportionate” to the market, said President MaryAnn Baenninger.

“Higher-income students were saying, ‘You cost the same as Princeton. If I can get into Princeton, why would I choose Drew?’” Baenninger said. “The sticker price was untenable.”

Several private colleges have seen such price cuts pay off quickly. Utica College, which reduced its tuition in 2016, lowered its dropout rate, President Laura Casamento said. Sweet Briar College, which nearly shut down three years ago, expects that its tuition cut will increase the number of new students on the campus by 42 percent this fall over last fall, said Melissa Richards, vice president for enrollment management.

Related: Embattled colleges focus on an obvious fix: helping students graduate on time

The last time this happened on a large scale was when law schools froze or lowered their tuition beginning in 2011 in response to a dramatic enrollment decline that followed a downturn in the demand for lawyers.

One reason private colleges have not cut prices in the past is because families equated high prices with high quality.

That attitude appears to be changing: Student loan provider Sallie Mae found last year that families were less likely than in 2008 to perceive expensive colleges as necessarily being better than less-expensive ones.

Yet when the University of Charleston in West Virginia cut prices by more than 20 percent in 2012 — and cut scholarships too — the small private college suffered an unexpected sharp drop in enrollment. The school quickly reversed course, in 2014, by raising tuition sharply and reinstating scholarships, and its enrollment bounced back.

Families had trouble understanding why Charleston was offering less of a discount than its competitors, said Joan Clark, the school’s chief admissions and marketing officer, even though its price had dropped below those of its competitors.

“It was difficult to get them to look at the bottom line,” Clark said. “People want to be proud to say, ‘I got this $5,000 scholarship.’ We really thought people would understand we were more affordable.”

Casamento, in a 2016 doctoral dissertation, found that cutting tuition helped bring in more revenue for about half the schools she studied — not less.

Still, said Casamento, it doesn’t work for everybody. “You have to have a good story to tell the market,” she said. “If price is your only story, that’s not a good recipe for success.”

Will more colleges lower prices in coming years?

“My instinct is yes,” Lapovsky said, “but people are afraid of change.”

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