Private Colleges Slash Costs to Compete

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Meanwhile, tuition for private schools will, on average, rise only 4.2% for the 2009-10 academic year, according to a current NAICU survey, which has so far received 250 responses from private colleges and universities. It is the lowest tuition increase ever recorded by the organization, which has been tracking the data since 1972-73, Pals said.

Even with the nominal tuition increases, private schools remain concerned that their enrollments may dip, as cash-strapped families choose low-cost public schools over high-cost private institutions. While nearly two-thirds of the 250 schools surveyed by NAICU said applications are up over last year, nearly all said they expect their admissions yield to be lower than usual this year, Pals said.

One of the private schools hoping to buck this trend is St. Mary's University in Minnesota, which has campuses in Winona and the Twin Cities. Administrators there grew concerned after a study by the Minnesota Private College Council three years ago showed that students were bypassing schools like theirs in favor of the University of Minnesota. At that point, there was a $12,000 tuition difference between the two.

Sticky Sticker Price

"We found a good number of students and families were dismissing the idea of attending a private college because of the sticker price," says Tony Piscitiello, St. Mary's vice-president for admission and financial aid. "The feeling was people were turning a blind eye to us."

The school designed a program that would allow students whose families made $75,000 a year or less to attend the private university for the same price as the University of Minnesota, later expanding it to include families with incomes up to $100,000. Since launching the program, applications have increased about 5% a year, with this year being the third-highest ever in terms of application volume, Piscitiello said. "We really feel we're getting the message across." he said.

Other schools are following suit with similar programs, including Davis & Elkins College in Elkins, W.Va., California Lutheran University in Thousand Oaks, Calif., and the University of Evansville in Evansville, Ind.

For some schools, the initiative is an attempt to repackage the financial aid grants and scholarships that they have always offered needier students. California Lutheran's Guarantee Scholarship program, which started this year, lets parents know up front that students who are also admitted to the University of California at Los Angeles or University of California at Santa Barbara can attend California Lutheran University for the cost of attending the public university.

Simple Message

There were 20 students who participated in the program this year, many of them first-generation college students, and the school had to add only $30,000 to its financial aid budget to accommodate the program, with the rest of the cash coming from existing financial aid programs, said Matthew Ward, the school's dean of admission and vice-president for enrollment.

"This gives us a very simple, explicit message about what we're offering," says Ward. "We say: 'Just show us your admit letter, and we'll match the cost of attendance.' It has changed the conversation we're having about price."

Indeed, this approach is proving to be an effective tool for private colleges, said Barmak Nassirian, spokesman for the American Association of Collegiate Registrars & Admissions Officers. Only a small percentage of families end up paying the full tuition and fees, but that is often the item that parents use to decide whether or not their child should apply to a certain school.

"Some privates have opted for the simplicity of simply reducing tuition so families can get a good sense from the outset of what they are dealing with," Nassirian said. "They've decided that a reasonable first impression is the best ticket to clear communication."

Surge in Applications

At Davis & Elkins, President G.T. "Buck" Smith said interest has soared after the school announced this March it would give students who meet certain geographic and academic criteria a 75% discount, worth about $15,000, if they chose the school over West Virginia University.

The school has received 1,153 applications from students so far, more than triple the 353 applications they received last year. The quality of the applicants has also improved: last year, only 19% of applicants had GPAs of 3.5% or higher, while this year nearly 34% do.

The program has allowed the school to attract students like Alexander Taylor, 18, a senior at Tygart Valley High School in Mill Creek, W.Va. He was applying to several out-of-state schools, as well as West Virginia, when he learned of the scholarship program a few weeks ago. For him, the deal was a no-brainer; he informed Davis & Elkins recently he'd be attending next fall. The tuition cost? $5,100 a year.

"I mean, it is the same price as West Virginia, and the ratio of students to teachers is 10 times better, so I was pretty excited," Taylor says. "You really can't get a better deal."

Damast is a reporter for BusinessWeek.com.