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Continued: Concordia to cut tuition, fees by $10K

  • Article by: JENNA ROSS , Star Tribune
  • Last update: September 12, 2012 - 12:37 AM

Concordia University is pairing two words that don't often come in contact -- "tuition" and "cut."

The St. Paul school will announce Wednesday that it is lowering its undergraduate tuition and fees by $10,000, or 33.7 percent, to $19,700 for the next school year. It will become the first college in Minnesota to slash its sticker price. But it joins a few others across the country who have responded to growing concern about the rising price of college with a similar dramatic move.

Just a handful of Concordia undergrads now pay the full $29,700 in tuition and fees. But Concordia hopes to attract families who are being scared off by the published price.

"It's been a bigger and bigger challenge for us to get those individuals to even consider us," said Prof. Eric LaMott, Concordia's senior vice president and chief operating officer. "The high discount isn't fixing the problem, because they don't even look."

Concordia believes it's making a bold move toward greater affordability and transparency in a marketplace that's demanding both. But some experts believe such markdowns are gimmicks that lead to little lasting change.

"It's partly a publicity stunt," said Mark Kantrowitz, a college finance expert who tracks tuition cuts and freezes. "Everybody loves a bargain."

Most of the more than two dozen colleges that have at one point slashed their sticker prices also pulled back on their grants, he said, so that the cut made less of a difference in many families' bills. The key will be tracking Concordia's "net price," or the price students actually pay after grants and scholarships are subtracted, Kantrowitz said.

The nonprofit, private university will reduce, but not eliminate, grants and scholarships. The lower sticker price also will apply to returning students, and officials promise that next year, all students will end up paying less. Room and board of $7,750 will not increase.

Concordia's current total charges for tuition, fees, room and board are third lowest among the 17 members of the Minnesota Private College Council, which have an average sticker price of $42,295. But because of "generous institutional financial aid packages," the average amount students actually pay is much lower, and has grown at a slower rate, the council said.

What students actually pay

Concordia's new price will better reflect what students actually pay, LaMott said. "We're getting off the wagon and going to something more transparent."

The university's "discount rate," or the amount it gave in institutional grants, compared with gross tuition revenue, was 48 percent last year, said Kristin Vogel, director of undergraduate admission. Federal data show that 99 percent of Concordia students who started in 2010-11 got grants or scholarships from the college. The average amount: $12,654.

"Tuition is going up, discounts are going up and net revenues are going down," LaMott said. "That is not a sustainable business model."

A recent report by the National Association of College and University Business Officers carried a similar message. To attract students and meet families' growing financial need, colleges have deepened their discounts, especially since the recession. The average "discount rate" for first-time students rose from 37.7 percent in 2001 to 42.8 percent in 2011, according to the April report.

Combined with sagging enrollment, the data "suggest that this strategy is no longer working effectively at a large number of colleges and universities," the report says.

Concordia officials say that enrollment for this fall, which will be finalized Friday, is "strong" and that the college is expecting "modest" growth next fall.

Without any enrollment growth next year, the university would have to absorb $400,000 to $700,000 in lost revenue from the tuition change, LaMott said. But he believes the university has a strong enough balance sheet, partly from growing graduate programs, to do so. The Christian liberal arts university enrolls about 1,100 graduate students.

Similar move, years ago

Concordia has spent three years planning for a tuition reduction. "Nothing will be cut or eliminated from the Concordia educational experience, in or out of the classroom, to accommodate the tuition reset," a university statement says.

The risk is always that the public will believe "that the tuition cut is accompanied by a reduction in ... quality," Kantrowitz argued on his website.

For decades, high price was associated with high quality, he said by phone. But now, "colleges can no longer distinguish themselves by charging more, because they all charge a lot. There's not a lot of advantage in charging more if you can afford to charge less."

In 1995, Muskingum University in Ohio announced that it was going to slash tuition by 29 percent. The college was hoping the resulting publicity would bring the undergraduate population from 1,000 to 1,200 over five years, said Jeff Zellers, vice president of enrollment. It took just one. Eventually, enrollment reached 1,550.

"We ran out of residence halls and classrooms," Zellers said.

Muskingum was one of the first to make such a move, so it attracted national attention. Since then, the college has increased its tuition by 4 or 5 percent a year, Zellers said. It did and still does give students big discounts.

"It wasn't an attempt to buy people away from other institutions," Zellers said. "For most students, we weren't that much cheaper than we were before. It's just that more took a look at us."

Jenna Ross • 612-673-7168

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