Overview of Guaranteed Tuition Plans

12 

Loading....

Loading....

Loading....

Loading....

Loading....

Full text

(1)

ACADEMIC AFFAIRS FORUM

Overview of Guaranteed Tuition Plans

2012

December

Custom Research

Literature Review

Research Associate

Anna Coll

Research Manager

Nalika Vasudevan

(2)
(3)

Table of Contents

I.Research Methodology ... 4 Project Challenge ... 4 Project Sources ... 4 I.Executive Overview ... 5 Key Observations ... 5

II. Overview of Guaranteed Tuition Plans ... 6

Structure of Guaranteed Tuition Plans ... 6

III. Benefits and Drawbacks of Guaranteed Tuition Plans ... 7

Benefits of Guaranteed Tuition Plans ... 7

Drawbacks of Guaranteed Tuition Plans... 8

Appendix: Master’s Colleges (Larger Programs) with Guaranteed Tuition Plans Between 2008 to 2011 ... 11

(4)

I.

Research Methodology

Leadership at a member institution approached the Forum with the following questions:

 What institutions have offered guaranteed tuition plans?

 Have institutions abandoned guaranteed tuition plans?

 How do administrators calculate guaranteed tuition rates?

 What are the benefits and drawbacks of guaranteed tuition plans?

The Forum consulted the following sources for this report:

 Clark, Kim. “How to Cut College Costs by $5,000.” U.S. News and World Report, May 24, 2010. http://www.usnews.com/education/articles/2010/05/24/how-to-cut-college-costs-by-5000.

 DeVise, Daniel. "Fixed-rate tuition can minimize college-price angst." The Washington Post, July 17, 2012. http://www.washingtonpost.com/blogs/college-inc/post/fixed-rate-tuition-can-minimize-college-price-angst/2012/07/17/gJQAxlCarW_blog.html.

 Diamond, Jed and Moore, Sarah. “Transitioning to Flat-Rate Tuition.” Washington, DC: The Education Advisory Board, 2012.

http://www.eab.com/Research-and-Insights/Academic-Affairs-Forum/Custom/2012/06/Transitioning-to-Flat-Rate-Tuition.

 Ellis, Blake. “Private college tuition rises 3.9%.” CNN, October 4, 2012. http://money.cnn.com/2012/10/04/pf/college/tuition-increase/index.html.

 “Guaranteed Tuition Option.” Baylor University Student Financial Services. Accessed December 6, 2012. http://www.baylor.edu/sfs/index.php?id=69447.

 Hebel, Sara. "Push for Tuition Predictability." The Chronicle of Higher Education, May 20, 2005. http://chronicle.com/article/Push-for-Tuition/15074/.

 Metropolitan College of New York, "Student Financial Services: Tuition Rate Guarantee." Accessed December 6, 2012. http://www.mcny.edu/financialaid/tuition2.php.

 Morphew, Christopher C. “Fixed Tuition Pricing: A Solution That May Be Worse Than the Problem.” The Magazine of Higher Learning 39: 1 (2007).

www.eric.ed.gov/ERICWebPortal/recordDetail?accno=EJ767216.

 National Center for Education Statistics (NCES). Accessed December 6, 2012. http://nces.ed.gov/.

 Northern Illinois University. "Truth-In-Tuition: Public Act 93-0228 Undergraduate Tuition Policy." Accessed December 6, 2012.

http://www.niu.edu/bursar/forms/truth_in_tuition_policy.pdf.

 Supiano, Beckie. “Locked-In Tuition Is a Win for Families but a Tough Sell for Colleges.”

The Chronicle of Higher Education, April 14, 2009.

http://chronicle.com/article/Locked-In-Tuition-Is-a-Win-for/47180.

 Turner, Dorie. “’Fixed for Four’ tuition dumped.” Athens Banner-Herald, April 15, 2009. http://onlineathens.com/stories/041509/uga_429352978.shtml.

 University of Colorado-Boulder. “Percent of bachelor’s degree recipients who graduated in 4 years or less.” Accessed December 6, 2012.

http://www.colorado.edu/pba/degrees/ttd/ug_4yr.htm.

 University of Oklahoma, "Office of the Bursar: Information for Students and Parents about the Guaranteed Tuition Program." Accessed December 6, 2012.

https://www.ou.edu/content/bursar/tuition_fees/tuition_plan.html.

Project Challenge

(5)

I.

Executive Overview

Guaranteed tuition plans help families accurately budget for the cost of higher education, as students pay a fixed rate determined by administrators for four years. Guaranteed plans also incentivize timely degree completion because the fixed rate typically expires after the specified four-year degree completion period. However, the effect of guaranteed tuition plans on graduation rates is inconclusive.

Administrators must accurately predict future institutional budgets and expenses to establish guaranteed tuition rates. Administrators that underestimate projected tuition increases for coming years must pass the financial burden on to incoming classes through higher tuition rates. The financial risk of guaranteed tuition plans is lower at private institutions because they do not rely on fluctuating state support. Public institutions are also more likely than private institutions to abandon guaranteed tuition plans.

Underclass students pay a higher tuition rate under a guaranteed tuition plan than they would pay under a regular tuition plan because the guaranteed rate is set high enough to account for projected cost increases in future years. This accelerated cost for first- and second-year students deters program participation although families may pay less tuition over a four-year period. Guaranteed tuition plans also penalize students that transfer or drop out. Students enrolled in a guaranteed tuition plan who do not persist will have paid a higher annual tuition rate than peers enrolled in a regular tuition plan.

(6)

II.

Overview of Guaranteed Tuition Plans

Guaranteed Tuition Plans Fix Tuition Rates Over Four Years

Institutions with guaranteed tuition plans allow students to pay a single tuition rate, which administrators determine for a fixed period of time, typically four years. Guaranteed tuition plans are also known as tuition locks, tuition guarantees, stable tuition fees, fixed tuition plans, and flat rate tuition plans.

Administrators set rates based on the projected tuition rate average for the next four years. Underclassmen enrolled in guaranteed tuition plans therefore pay accelerated costs that are higher than the regular tuition rates their peers pay.

Sample Four-Year Tuition Rates Assuming Six Percent Annual Regular Tuition

Increase

Guaranteed tuition plans are mandatory or voluntary. For example, every student that attends the Metropolitan College of New York participates in a guaranteed tuition plan.1In contrast,

state legislation permits first time, in-state, and full-time undergraduate students enrolled in public universities in Oklahoma to participate in a guaranteed tuition rate program or pay the annual rate charged each year.2

1 Metropolitan College of New York, “Student Financial Services: Tuition Rate Guarantee,” http://www.mcny.edu/financialaid/tuition2.php. 2 University of Oklahoma, “Office of the Bursar: Information for Students and Parents about the Guaranteed Tuition Program,”

https://www.ou.edu/content/bursar/tuition_fees/tuition_plan.html. 10,000 10,600 11,236 11,910.16 10,936.54 10,936.54 10,936.54 10,936.54 9,000 9,500 10,000 10,500 11,000 11,500 12,000 12,500

Year 1 Year 2 Year 3 Year 4

Traditional Tuition Rate ($) Guaranteed Tuition Rate ($)

Structure of

Guaranteed

Tuition Plans

(7)

Master’s Colleges Abandon Guaranteed Tuition Programs at a High Rate

Eighty-six private institutions and 93 public institutions offered guaranteed tuition programs between 2008 and 2011. Some public institutions adopted plans to comply with state

legislation. For example, 12 public institutions in Illinois offer undergraduates a four-year tuition guarantee in accordance with the state’s “Truth-in-Tuition” bill. 1

Forty-six Master’s colleges and universities with larger programs offered guaranteed tuition programs between 2008 and 2011. Of these, only 13 have maintained programs, including Oklahoma City University, which will end its guaranteed tuition program for students that enroll after the fall 2012 semester.

III.

Benefits and Drawbacks of Guaranteed Tuition Plans

Guaranteed Tuition Plans Create Cost-Transparency for Students and Families

Between 1999 and 2009, tuition rates increased by an average of 5.7 percent per year at private institutions.2 Tuition increases since the 2009 academic year have been more modest. For

example, tuition and fees at private colleges and universities will increase by 3.9 percent for the 2012 – 2013 academic year.3 Guaranteed tuition plans allow families to accurately budget

for the cost of higher education through consistent annual costs.

Guaranteed Tuition Plans May Increase Graduation Rates

Administrators adopt guaranteed tuition plans to motivate students to complete degrees within the four-year completion period.4 Guaranteed tuition plans require students who

continue their study after four years to pay the annual regular tuition rate for the remaining enrollment period.

The University of Colorado-Boulder implemented a guaranteed tuition plan for

undergraduate students paying non-resident tuition in 2005. The first cohort of non-resident undergraduate students enrolled in the plan graduated in spring 2009. The average four-year graduation rate for non-resident students between 2005 and 2008 was 58.75 percent. This rate increased slightly to 59.25 percent between 2009 and 2012, when the first four cohorts under the plan graduated.

1 Northern Illinois University, “Truth-In-Tuition: Public Act 93-0228 Undergraduate Tuition Policy,” http://www.niu.edu/bursar/forms/truth_in_tuition_policy.pdf. 2 Blake Ellis, “Private college tuition rises 3.9%,” CNN, October 4, 2012, http://money.cnn.com/2012/10/04/pf/college/tuition-increase/index.html.

3 Ellis.

4 Jed Diamond and Sarah Moore, Transitioning to Flat-Rate Tuition (Washington, DC: Education Advisory Board, 2012), 6, . http://www.eab.com/Research-and-Insights/Academic-Affairs-Forum/Custom/2012/06/Transitioning-to-Flat-Rate-Tuition.

Benefits of

Guaranteed

Tuition Plans

(8)

Four-Year Graduation Rates for Non-Resident Undergraduate Students at

University of Colorado-Boulder

2005 to 2012

Source: University of Colorado Office of Planning, Budget, and Analysis.

Four-year graduation rates also increased at the majority of institutions that introduced guaranteed tuition plans profiled in a previous Education Advisory Board report.1 However,

contacts described that other institutional initiatives may have contributed to higher graduation rates, and that higher rates should not be attributed to guaranteed tuition plans alone.

Guaranteed Tuition Plans Increase Financial Risk for Institutions

Calculation of tuition rates is the most difficult component of the planning process for guaranteed tuition plans. Administrators that offer guaranteed tuition plans must accurately anticipate inflationary expenses including utilities costs, health care costs, and the costs of various institutional initiatives.2 Provosts and deans should collaborate with the chief financial

officer, who possesses a better understanding of revenue streams and future institutional expenses, to select appropriate price points for guaranteed tuition plans.3

1 Diamond and Moore, 12.

2 Christopher C. Morphew, “Fixed Tuition Pricing: A Solution That May Be Worse Than the Problem,” Change: The Magazine of Higher Learning 39:1 (2007): 37, www.eric.ed.gov/ERICWebPortal/recordDetail?accno=EJ767216.

3 Diamond and Moore, 9.

59% 60% 59% 57% 53% 59% 60% 65% 0% 10% 20% 30% 40% 50% 60% 70% 2005 2006 2007 2008 2009 2010 2011 2012

Drawbacks of

Guaranteed

Tuition Plans

Guaranteed tuition program implemented in Fall 2005

First cohort of students enrolled in guaranteed tuition program graduates

(9)

Rates must also be high enough to prepare for all budget scenarios.1 Financial risk is higher for

public institutions with guaranteed tuition plans because state appropriations are volatile. Central Michigan University eliminated its guaranteed tuition plan in the summer of 2008 when state appropriation levels became less predictable.2

Hypthetical Process to Assess Financial Risk of Guaranteed Tuition Plan

3

Front-Loaded Tuition Plans are Difficult to Market and May Disadvantage

Underrepresented Groups

Underclass students enrolled in guaranteed tuition plans pay accelerated costs that are higher than the regular tuition rates their peers pay.4 For example, an incoming student at Baylor

University in 2006 that enrolls in the guaranteed tuition plan would pay $289 less in overall tuition over four years than a student under the regular tuition plan. However, the advertised tuition rate for a student’s first year is higher under the guaranteed tuition plan.

1 Sarah Hebel, “Push for Tuition Predictability,” The Chronicle of Higher Education, May 20, 2005, http://chronicle.com/article/Push-for-Tuition/15074/. 2 Beckie Supiano, “Locked-In Tuition is a Win for Families but a Tough Sell for Colleges,” The Chronicle of Higher Education, April 14, 2009.

http://chronicle.com/article/Locked-In-Tuition-Is-a-Win-for/47180.

3 Supiano.

4 Morphew, 36.

Is your institution private?

Is enrollment at your institution increasing?

Can administrators confidently predict increases in institutional costs in the next four years (e.g., health care costs and costs of institutional initiatives)?

Are economic conditions relatively stable?

If you answered YES to most of the above questions, the financial risk of a guaranteed tuition plan is low.

Budgets at private institutions are more predictable because they do not depend on state allocations. Economic certainty and a clear sense of future institutional costs allow administrators to accurately set price points for guaranteed rates. In addition, increasing enrollment rates provide a financial cushion to institutions with guaranteed tuition models.3

If you answered NO to most of the above questions, the financial risk of a guaranteed tuition plan is high.

Volatile levels of state support and unpredictable institutional costs increase the risk of miscalculating future costs to determine guaranteed tuition price points. A negative economic outlook and low enrollment rates eliminate financial safety nets for an institution with a guaranteed tuition plan.

(10)

Tuition Rates for Past Academic Years at Baylor University

Academic Year Regular Guaranteed

2006 – 2007 $10,287.00 $11,400.00 2007 – 2008 $11,110.00 $12,225.00 2008 – 2009 $11,832.00 $13,050.00 2009 – 2010 $12,660.00 $13,950.00 2010 – 2011 $13,483.00 $14,860.00 2011 – 2012 $14,360.00 $15,825.00 2012 – 2013 $15,293.00 $15,855.00

Source: “Guaranteed Tuition Option,” Baylor University Student Financial Services, accessed December 6, 2012, http://www.baylor.edu/sfs/index.php?id=69447.

Administrators struggle to market guaranteed tuition plans because they appear more expensive at face value. For example, only 14 percent of students at Oklahoma City University chose to enroll in the University’s guaranteed tuition plan in 2009.1

Families may also choose regular tuition plans over guaranteed tuition plans because they are concerned about students who transfer or withdraw. A student with a guaranteed tuition plan that withdraws or transfers as first- or second-year student will have paid a higher cost for those years than a peer under the regular tuition plan. According to Christopher Morphew, a scholar in higher education policy, guaranteed tuition plans are more likely to

negatively impact low-income, minority, or first-generation college students, who represent the majority of withdrawals.2

Guaranteed Tuition Plans Have Mixed Effects on Revenues

Guaranteed tuition plans at institutions profiled in previous Education Advisory Board research provided a short-term increase in tuition revenue of one to several million dollars.3

However, other institutions have lost revenue through guaranteed tuition plans. The College of St. Joseph in Vermont launched a guaranteed tuition program in 2009 but later abandoned the program because it lost approximately $5,000 in tuition over each enrolled student’s College career.4 The University System Board of Regents in Georgia also suspended its ‘Fixed

for Four’ guaranteed tuition program after three academic years. The Board predicted that the elimination of the program and other changes in tuition policies would save the state

approximately $60 million in revenue over the 2009 – 2010 fiscal year.5

1 Supiano. 2 Morphew,38.

3 Diamond and Moore, 10.

4 Kim Clark, “How to Cut College Costs by $5,000,” U.S. News and World Report, May 24, 2010. http://www.usnews.com/education/articles/2010/05/24/how-to-cut-college-costs-by-5000.

5 Clark.

Morphew advises that administrators front-load financial aid to offset the potential negative effect of guaranteed tuition plans on

(11)

Appendix: Master’s Colleges (Larger Programs) with Guaranteed

Tuition Plans Between 2008 to 2011

Institution Location Type Program Abandoned

1. California Polytechnic State University San Luis Obispo, CA Public 

2. California State University Polytechnic

University Pomona, CA Public 

3. California State University - Bakersfield Bakersfield, CA Public 

4. California State University – Chico Chico, CA Public 

5. California State University – Dominguez Hills Carson, CA Public 

6. California State Univerity- East Bay Hayward, CA Public 

7. California State University – Fresno Fresno, CA Public 

8. California State University – Fullerton Fullerton, CA Public 

9. California State University – Long Beach Long Beach, CA Public 

10. California State Univeristy – Los Angeles Los Angeles, CA Public 

11. California State University – Northridge Northridge, CA Public 

12. California State Univeristy – Sacramento Sacramento, CA Public 

13. California State University – San Bernardino San Bernardino, CA Public 

14. Concordia University Irvine, CA Private 

15. San Francisco State University San Francisco, CA Public 

16. San Jose State University San Jose, CA Public 

17. Sonoma State University Rohnert Park, CA Public 

18. Armstrong Atlantic State University Savannah, GA Public 

19. Brenau University Gainesville, GA Private 

20. Columbus State University Columbus, GA Public 

21. Georgia College & State University Milledgeville, GA Public 

(12)

23. University of West Georgia Carrollton, GA Public 

24. Valdosta State University Valdosta, GA Public 

25. Chicago State University Chicago, IL Public 

26. Eastern Illinois University Charleston, IL Public 

27. Governors State Unviersity University Park, IL Public 

28. Northeastern Illinois University Chicago, IL Public 

29. Southern Illinois University – Edwardsville Edwardsville, IL Public 

30. University of Illinois at Springfield Springfield, IL Public 

31. Western Illinois University Macomb, IL Public 

32. Notre Dame of Maryland University Baltimore, MD Private 

33. Fontbonne University Saint Louis, MO Private 

34. Southeast Missouri State University Cape Girardeau, MO Public 

35. Missouri State University Springfield, MO Public 

36. D’Youville College Buffalo, NY Private 

37. Metropolitan College of New York New York, NY Private 

38. East Central Unviersity Ada, OK Public 

39. Northeastern State University Tahlequah, OK Public 

40. Oklahoma City University Oklahoma City, OK Private

Last Guaranteed Tuition Plan for Students Entering Fall 2012

41. Unviersity of Central Oklahoma Edmond, OK Public

42. Western Oregon University Monmouth, OR Public 

43. The University of Texas – Pan American Edinburg, TX Public 

44. Tarleton State University Stephenville, TX Public 

45. Norfolk State University Norfolk, VA Public 

46. Lakeland College Plymouth, WI Private 

Figure

Updating...

Related subjects :