Does a school ever lower its tuition?
Over at the University of the South (commonly called “Sewanee”), that's what they're doing — cutting total student charges (tuition plus room plus board) by about 10 percent.
There's a well-written article about Sewanee's price cut here by Scott Jaschik, the excellent reporter at Inside Higher Ed. But Jaschik's reporting is almost outshone by an easy-to-miss letter to the editor appended to the bottom of the article. In that letter, Miami University president emeritus Jim Garland offers his take on what's behind the tuition cut, and some important considerations for other schools that are thinking of taking this drastic step.
Here's a portion of Garland's letter:
Sewanee's decision to cut tuition by 10 percent reflects basic economic principles that, unfortunately, are not well appreciated by many private college administrations. In essence, Sewanee aims to pump up its enrollments by cutting tuition, hoping that its total revenues will increase, even though each student pays lower tuition. This strategy will be successful only if certain conditions are met:
- The school must have a very tuition-sensitive applicant pool…
- The school must have reserve capacity in its student body…
- The marginal cost of educating each additional student must be lower than the average cost of educating that student…
It is essential to analyze carefully any proposed tuition change in terms of its fiscal implications. Any private college, especially the thinly endowed schools operating in a highly competitive environment, which fails to do so are headed straight for the bankruptcy court.
Read the full article here. Be sure to scroll down to read the entire letter by Jim Garland, where he explains his bullet points in greater detail.
