Private Colleges Slash Costs to Compete

With parents strapped for cash, private institutions have begun matching local public-university tuition to attract top students

When Carlos Cortez of Austwell, Tex., sat down with his parents to discuss his options for college this fall, he quickly realized his options were limited. Even though Cortez was the No. 1 student in his class and a star basketball player at Austwell Tivoli High School, his parents told him could afford to send him only to one of the large public universities in Texas. It was a blow for Cortez, 18, who had his sights set on Texas Lutheran University in Seguin, Tex., a tight-knit private university with 1,360 students and a hefty price tag of nearly $33,000 in tuition and fees

"I knew that if I didn't get any kind of help, it was just going to be too expensive for my family," says Cortez. "Texas Lutheran was just out of the question."

At least that's what Cortez thought. To his surprise, Texas Lutheran announced a new program—the TLU Choice Scholarship—this February promising to match the tuition and fees of two of the large state public universities, University of Texas at Austin and Texas A&M University. The only caveat? Students admitted to TLU had to show the school acceptance letters from one of the schools to get the deal. For Cortez, who was accepted at both Texas Lutheran and those two public universities, the news was an incredible stroke of luck. His parents soon agreed to let him attend his dream school.

Closely Watched Model

"When we saw you could go to a private school for the same cost as a public, we were like, 'Wow, we can't believe it,'" says Patsy Cortez, Carlos' mother. "That really made the difference."

For years, private colleges have competed with public universities by offering students generous scholarships, financial aid, and merit grants. But with the economy in turmoil, some private schools are starting to take a more aggressive approach to recruiting students like Cortez, promising them a top-rate private school education at a public school price. At least five private colleges in states from Texas to West Virginia have announced programs—including several in recent months—where they promise to keep tuition and fees equal to those of state flagships, and more may follow suit in the coming months, says Tony Pals, a spokesman for the National Association of Independent Colleges & Universities (NAICU), a group of 952 private schools.

"It is a model that will be closely watched," Pals says. "In typical years, private colleges have always competed well in value. But this year, because of the recession, we are seeing a lot more pressure to compete on price."

While the price competition is having little impact on public institutions, some worry this could change, especially if the trend accelerates. Top students without the financial means to attend elite private colleges would have that option. At the University of Minnesota, which now competes on price with neighboring St. Mary's University, these developments are being closely watched. "I think it's too early to tell," says Dan Wolter, a spokesman for the University of Minnesota. "Affordability is a big aspect for students, so any effort to make tuition more affordable will make a program more competitive."

Upping Financial Aid

The move comes as private colleges tread warily around nervous parents and families, who are fretting about how they will afford college tuition in the face of rising unemployment, salary cuts, and massive investment losses. Nearly 92% of private colleges said they plan to increase financial aid next academic year for families, according to a December survey done by NAICU.

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."