Markets & Finance

Pssst! Wanna Go to College for Free?


Most parents would love to send their kids to college for free but probably don't believe it's possible. It is—if you know where to look

Tim Stroud's alarm goes off at 3:40 a.m. every weekday morning, a time when most of his classmates at the College of the Ozarks in Point Lookout, Mo., are fast asleep. By 4:30 a.m., he is out in the pasture in his work boots gathering the college's herd of 50 Holstein cows into the barn for their morning milking session. His unusual campus job—working in the dairy 15 hours a week—is a small price to pay for what he sees as one of the best deals today in higher education: a free degree.

At the College of the Ozarks, all students' tuition costs are offset by a mandatory work-study program. "If I was going to go to school, I was going to try to do it with the least amount of debt possible," said Stroud, a sophomore from Hume, N.Y., who wants to pursue a career in agriculture.

The cost of college is a red hot issue today, with students and parents fretting about how they will be able to foot the skyrocketing tuition bills at many private and public colleges. The College Board reported on Oct. 22 that tuition at public and private colleges for the 2007-08 academic year continued to outpace inflation (BusinessWeek.com, 10/22/07). Tuition prices at private colleges and universities average almost $24,000 this year, and that's not including room and board.

Focusing on Specialized Education

Stroud is one of several thousand students in the U.S. taking advantage of colleges that come with no sticker shock. Tuition-free colleges—also known as full-scholarship colleges—remain one of higher education's best-kept secrets. True to their name, they are institutions that guarantee to cover the entire student-body's tuition. There are only a handful of such schools in the U.S., which is one reason they are often overlooked by students, parents, and high school guidance counselors during the college search, says Sandy Baum, a senior policy analyst at the College Board. "It's not a trend of the future. It's just a certain niche market. These schools have unique situations that allow them to go tuition-free," she said.

They range from an urban college like the Cooper Union in New York's East Village to Deep Springs College, a remote, all-male school deep in the California desert. Many are specialized institutions, often focusing on engineering, such as the F.W. Olin College of Engineering in Needham, Mass.; or on music, like the Curtis Institute in Pennsylvania. A handful—the College of the Ozarks or Berea College in Kentucky—have mandatory work-study programs. Perhaps the most well-known of them is the U.S. Military Academy in West Point, N.Y., which offers free college tuition in exchange for five years of service after graduation.

Students who attend these schools walk away from college with little to no loans, debt, and financial worries after they graduate. In most cases, the only fee students need to pay is room and board, a cost separate from college tuition. It's a financial situation with almost irresistible appeal for college students with limited means, said Rick Darvis, co-founder of the National Institute of Certified College Planners, an organization founded in 2002 to help families navigate the college loan and financial aid market. "For kids coming out of college today, debt-free is pretty rare," Darvis said. "As far as a kid having a summer job to help pay off college, that's not going to happen anymore."

Salvation for Parents Who Didn't Plan

Though finding tuition-free schools can take some legwork, parents and students say the payoff is worth it in the long run.

Pamela Clemens, the mother of Erin Clemens, a college senior, said she still remembers how relieved she was when her daughter received an acceptance letter from the College of the Ozarks. Clemens and her husband, a self-employed handyman in Lebanon, Miss., had failed to save properly for their daughter's college education and were frantic about how they were going to foot her tuition bills, she said. "We were free from the burden of figuring out where we were going to get the money or take out loans for my daughter's college education," Clemens said. "Just knowing we won't have to deal with that for all these years is just such a feeling of freedom."

Aside from saving parents and students from financial burden, attending a tuition-free school has other benefits. These schools create an environment where all students can feel comfortable with each other regardless of their personal finances, said Andrew McCreary, a second-year student from Salt Lake City at Deep Springs College. "Everyone came here as an equal, and everyone has the same free opportunity, so money never has to come up," said McCreary. "We are all on the same footing."

Endowments Help

Covering the tuition cost of an entire student body is not an easy task in today's higher-education market where the cost of faculty salaries, fringe benefits, and supplies and materials continues to rise. The inflation gauge used by higher education officials to track the costs of running a university, the Higher Education Price Index, increased by 3.4% in the 2007 fiscal year.

Fortunately, most tuition-free colleges are cushioned from the shock of these spiraling costs by large endowments given to the schools by benefactors. For example, the Cooper Union, a four-year college specializing in engineering, art, and architecture, has an endowment worth more than $600 million, the bulk of which is New York City real estate and securitized investments, said George Campbell, the school's president. The school spends $35 million annually to fund the tuition costs of its 950 students, in addition to $15 million for other operating expenses.

The endowment allows the school to maintain the mission of industrialist and inventor Peter Cooper, who founded the school in 1859 with the vision that "education should be as free as water or air," Campbell said, adding "It's a mandate that we hold close to us even today. We think we make a very unique and important contribution in the constellation of higher-education institutions that virtually no one else makes."

Olin a Recent Arrival

At the College of the Ozarks, the $375 million endowment is the "backbone" of the school's financial operation, along with donations from alumni, said Jerry Davis, the college's president. The school supplements its operating budget through mandatory work-study program, where students can work a job at one of 80 work stations, ranging from overseeing the school's hog farm to cooking in the fruitcake and jelly kitchen.

Students are appreciative of their free education, not complaining about their work loads or the college's strict chapel requirements and dress code, Davis said. "We think it's a bad idea to settle young people with modest means with heavy debt, so the students who come here are very fortunate and I think most people know that," he added.

While most of the country's tuition-free schools have been around for 100 years, some newer ones have been established in the past decade, such as the Olin College of Engineering. The engineering school officially launched in academic year 2002-2003 with the help off a $460 million endowment gift from the F.W. Olin Foundation.

Running a tuition-free school in today's financial market proved to be harder than the founders initially thought, said Stephen Hannabury, Olin's vice-president for administration and finance. There were some initial challenges as the school struggled to get off the ground. For example, the endowment did not grow as quickly as the school had anticipated and it had to scale back on the number of students it planned to admit. Since then, the endowment has climbed to $491 million and the school has graduated two classes of students.

"It is a little bit more complicated to set up this type of school today, but I think it is certainly worth other institutions' considering it if they have the financial resources to do it," Hannabury said. "The cost of higher education is getting to the point where different solutions, if you will, need to be looked at."

Click here to see a roundup of tuition-free colleges.

Join a debate about whether kids are worth the cost

Business Exchange related topics:

Saving for College

Higher Education

College Marketing

Socially Responsible Investing

Work-Life Balance


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