OUR THOUGHTS ON:

Challenging the Traditional Tuition Model

Higher Education

By Patrick Kerns

Traditional tuition models are being challenged by many who see the rising cost of tuition as a potential impediment to those wishing to pursue a college degree.  Institutions and state governments alike are experimenting with alternative models in attempts to remain competitive and improve accessibility to higher education.

Recently, Governor Andrew Cuomo of New York signed into law a new program that provides for free tuition at New York State’s public universities for families that make less than $125,000 per year. The Governor’s office estimates that 80% -  or more - of the state’s 940,000 families with college-aged children will qualify for this program. While this provides relief from tuition, it does not address fees, which could be up to $14,000 per year, depending on institution. The program also mandates that students must live and work in New York State for up to four years after graduating in order to avoid repayment of these grants.

As another example: A start-up, MissionU, is looking to make a splash by deferring tuition payments until a student graduates and finds a job. The school intends to launch its first program focused on data analytics and business intelligence, and it will be only a year in duration. The goal of this program is solely focused on helping students develop skills to help them find well-paying jobs. Upon gaining employment, the student will repay the cost of the program over a period of time based on their salary. This is an interesting alternative to the traditional tuition and student loans model.   

These  are just two examples of programs that could cause schools to re-think their pricing models, as students may be enticed by offers of free, or discounted, tuition prior to graduation. Higher education institutions must continue to evaluate how they price their programs to match the current market, which in many cases is easier said than done. A study by Hanover Research notes that, “Recent evidence indicates that the high cost/high aid model may be losing effectiveness, as the discount rate continues to increase while enrollment stagnates or declines at private institutions.” Students and parents alike are becoming more savvy when evaluating financial aid packages and the broader economics of obtaining a college degree.  Institutions must respond accordingly to protect and preserve their “brand” and “mission,” while battling potential erosion in both net tuition revenue and net tuition per student.

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