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Understanding the Effects a Tuition Freeze Can Have on Colleges

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2020-08-26T17:15:33+00:00August 26, 2020|

It’s nearly impossible to discuss higher education today without acknowledging rising tuition costs. Students, parents and institution leaders themselves all face struggles related to the cost associated with earning a degree. It’s no wonder some colleges are considering enacting a tuition freeze for one or more years.

Appeasing cost-sensitive students is certainly nothing new. But as an increasing number of learners find themselves facing an unstable financial future, colleges are reconsidering their posted tuition rates for the coming years.

“In the current economic climate, most college tuition pricing is simply too high,” says Bob King, executive vice president of partner strategy at Collegis Education.

“The cost of tuition has always been a barrier to enrollment, but now more than ever, it is also a barrier to an institution’s ability to thrive if they can’t meet student expectations,” King adds.

Perhaps holding the price steady will encourage more students to apply and enroll in the near term, but this doesn’t address the larger issue. The fact remains that a reckoning for college tuition pricing is on the horizon – even raising fees in the current economic landscape is rife with risk. While implementing a tuition freeze is a good start, it should be accompanied by many other considerations.

Methods institutions use to freeze tuition

While the concept of keeping tuition steady is fairly simple, it isn’t always straightforward in practice. For starters, a freeze can last for just one semester or for multiple years. It’s also important to illustrate that the definition of this tactic can vary across institutions.

Brad Frank, chief marketing officer at Collegis Education, offers a number of examples. The first option is to keep the total cost of attendance for students the same. Another variation involves charging students the same rate for every year throughout their education. Some colleges even go the route of charging students the same amount, but only if those students pay for subsequent years upfront. It’s also worth noting a freeze could mean that tuition costs stay the same from one year to the next, but other expenses are still subject to change.

“Tuition is only a portion of the cost of attendance,” explains J. Michael Locke, higher education consultant and Collegis Education board member. This is clear in the cost breakdowns illustrated in a report from the College Board. “Room, board and other fees can account for 50 percent or more of the total cost,” Locke adds.

How a tuition freeze could affect institutions

It’s true there are numerous ways a tuition freeze could affect an institution. However, private nonprofit schools will likely find themselves under increased financial strain if they don’t adjust other expenses. This is not only because tuition accounts for a large share of total cost, but also because there’s a high likelihood that school is offering tuition discounts. A report from the National Association of College and University Business Officers (NACUBO) shows the discount rate among private nonprofit institutions has grown more than 10 percentage points over the last decade.

“What this does, in effect, is cause some students to pay more while the average student is still paying the same price,” Frank says.

Further complicating the situation, many colleges and universities are already facing financial difficulties. Some are doing away with varsity sports. Others are closing academic departments. Yet, as Locke points out, some institutions are limited in how many changes they can make that affect faculty employment due to labor contracts as well as politics.

Unfortunately, some institutions have recouped losses by raising other student-facing costs. That could materialize in the form of higher fees, housing that is more expensive and other hidden expenses. Some schools have even offset tuition adjustments in the past by reducing the amount of institutional aid they award students.

Schools that are thinking about enacting a tuition freeze in the immediate future have the right idea. But those institutions would be wise to start thinking about a long-term plan that has a more permanent impact.

“Tuition freezes may not be that effective,” Locke suggests, “but I do think that, fundamentally, we are going to need a reset of pricing in higher education.”

Creating a sustainable plan for tuition pricing

Making a good-faith effort to keep higher education costs down for students is commendable. To truly make a change that will attract students, though, institutions need to differentiate themselves and start developing longer-term pricing strategies. This is important, because economists predict there will be a steep decline in the college student population in the next five or so years. This means those learners will have more say in the cost of higher education than ever before.

“The power is going to shift to the consumer because of shrinking demand,” Frank says. “Students are going to start negotiating better prices for themselves.”

More than ever, schools need to convey what it is that makes them stand out. Some institutions will inevitably charge more for tuition than others. The only way this remains feasible, though, is if schools are able to prove their price points.

“Consumers make decisions not just on price, but on what they get for that price,” Locke says. “Schools need to show the return on investment that students get by explaining what happens to alumni and conveying how they deliver a better student experience.”

Institutions also have a real opportunity to rethink the way tuition is priced. This is especially true as more classes move to fully online and hybrid models. Some institutions have already found ways to leverage technology to create more affordable online versions of their residential offerings. The right tools can also reduce costs elsewhere across institutions since, as Locke points out, investing in technology solutions drives labor efficiencies. However they go about it, colleges need to take a radically different approach to tuition pricing.

“Institutions need to have a long-term financial plan and understand how they’re going to make it work without increasing the cost to the student,” Locke says.

A new approach to tuition

Individual schools clearly need to assess how a tuition freeze could affect their students and the institution as a whole. Regardless of whether this particular tactic makes sense, it is wise to start thinking about different approaches to pricing and how to be more affordable.

Tuition has always been a major point of concern, but the pandemic has amplified this factor even more. In these challenging times, colleges need to prove the value of their price points now more than ever.

Collegis Education has developed a guide to help you navigate this process, called “Higher Ed Program Pricing in a Post—COVID-19 World.”

Get your copy of the guide today!

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About the Author
Christine Skopec
Christine Skopec is a senior content specialist for Collegis Education. She holds a Master of Science in Journalism from the Medill School of Journalism, Media, Integrated Marketing Communications at Northwestern University.