Sticker shock vs. ‘net tuition’ at private colleges

The Minnesota Private College Research Foundation’s latest tuition trends report [pdf] points out that average annual tuition and fee increases are growing “at the smallest level in more than 30 years.”

Tuition and fees will go up an average of 4.5 percent in 2010-11 at the 17 private, nonprofit institutions in the Minnesota Private College Council.

But if you look at the cost of average tuition and fees for the institutions at the dawn of the 21st century, it’s a different story. Tuition and fees have jumped 76.6 percent since 2000 — from $17,448 to $30,816 in 2010-11.

9 years of financial aid to undergraduates at Minnesota private college member institutions


Source: Minnesota Private College Research Foundation Analysis of Minnesota Office of Higher Education Report: Financial Aid Awarded to Minnesota Undergraduates (1999-2007)
Click on chart to enlarge

92 percent receive aid
The report emphasizes, however, that 92 percent of private-college students receive some form of aid and “on average, our students end up paying about half of the full tuition price.”

Welcome to the world of the “published price” vs. “net tuition.”

“It’s more accurate to look at the net tuition increases over time rather than the published price increases,” said Paul Cerkvenik, president of the Minnesota Private College Council. Previous research by the foundation found that net tuition increased 54 percent between 1999 and 2007, he said.

Paul Cerkvenik
Paul Cerkvenik

If it’s more accurate to look at net tuition, then why keep advertising published prices?

“That’s a good question,” he said. “You’d need to ask individual institutions. There’s a wide range of approaches. … All over the country, the model is driven in part to make sure opportunities for higher education are open to people of all income levels and limited means receiving substantial institutional aid to complete a degree.”

Institutional aid to students [chart 2 in current report, see above] also increased 105 percent in that 1999-2007 period, he said.

Trying to hold down ‘actual costs’
“What I think that reveals is the colleges, in their aid and price discounting policies, are doing a really strong job of trying to hold actual costs down for students,” Cerkvenik said.

Chart 2 also shows that student loans soared 94.6 percent from 1999 to 2007.

The published price vs. net tuition reminds me of the sticker price for an automobile and the negotiated price after discounts, sales and haggling with the dealer. But Cerkvenik isn’t keen on comparing car pricing and private-college tuition.

“Sellers are not trying to ensure that a low-income family gets a Cadillac,” he said, explaining such a family is likely to end up with an inexpensive car.

It’s different in the world of private-college pricing: The lower the family’s income, the higher the financial aid from a private college, he says.

“I’d like to think all students are getting a Cadillac education … whether they’re from a low-income family or a high-income family,” Cerkvenik said.

And the returns from a higher education are supposed to last a lifetime, he says. A car reportedly loses half its value once it leaves the lot.  

“The returns on higher education are beyond dispute,” he said.

Staggering increases at public institutions
While tuition and fees are lower at publicly supported institutions in Minnesota, the percentage increase is staggering between 2000-01 and 2009-10. At the University of Minnesota-Twin Cities, average annual tuition and fees soared 107 percent from $4,877 to $11,466, according to data from the Minnesota Office of Higher Education (OHE).

Students in the Minnesota State Colleges and Universities (MnSCU) system saw high double-digit increases over the decade: Tuition and fees increased 79 percent at two-year colleges (from $2,480 to $4,708) and 90 percent at four-year universities ($3,258-$6,639). And Wednesday, MnSCU announced a 4.4 percent increase at its 25 two-year institutions and 4.8 percent at its seven universities for 2010-11.

“The Board of Trustees remains committed to keeping tuition as affordable as possible, but this increase is necessary,” Chancellor James H. McCormick said in a news release. “State appropriations have dropped substantially in recent years from covering about 66 percent of the cost in 2002 to an expected 43 percent this year. That means tuition will pay the other 57 percent.”

Per-capita income fails to keep pace
If you’re wondering why tuition and fee increases left a deep hole in your budget in the 21st century, consider that Minnesota’s per-capita income grew 28 percent from $32,970 in 2000-01 to $42,238 in 2008-09, according to the OHE data.

So, why is the cost of a higher education outpacing income, inflation and assorted indexes?

“Higher education is staff-intensive,” Cerkvenik said. “I think it’s probably in the ballpark to say that 70 percent or more of the costs are in staff. One thing everybody is facing is rising health-insurance costs. I know they increased 14 percent here (in his office) last year.  … So, the cost drivers … are just related to the nature of the enterprise, which is people-intensive.”

Check out the council’s report. It includes a list of the colleges and their published tuition and fees, room and board, and comprehensive charges. Carleton College’s comprehensive rate is the priciest: $52,110. Bethany Lutheran is the lowest: $27,450. Remember: These are the rates before the financial aid, the discounts, scholarships and loans.

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Comments (5)

  1. Submitted by Bill Gleason on 05/20/2010 - 11:55 am.

    What really matters to students – and their parents – is the debt at graduation. Data is available on this topic from the Project on Student Debt.

    The best school from the standpoint of low debt is Macaleste, weighing in at $17,304 for students who graduated in 2008. Perhaps surprisingly, Carleton is also quite competitive at $20,083. For public colleges, UM-Crookston weighs in at $26,565 while UM-Twin Cities and UM-Duluth are $23,811 and $20,993. From the financial standpoint, a bright Minnesota high school student would be well advised to apply to Mac or Carleton and not be sticker-shocked into only applying to public universities.

    Of course another way to think about this is that public schools are overpriced. But that is a topic for another day…

  2. Submitted by Ed Stych on 05/20/2010 - 03:56 pm.

    My two older kids are both attending private universities, and I’ve been very pleased at how competitive the net price is with the public schools. I’m even more pleased because I think the private schools are providing a more unique experience than the public schools.

    What’s also been interesting is the attitude of the schools. We have found the public schools to be more arrogant. They have a “take-it-or-leave-it” approach. Maybe they can afford to be arrogant, I don’t know. The private schools took considerable time to get to know my kids better, and they listened better to our concerns and requests.

    The published prices are high, but I really encourage people to drill down a lot farther to find the real value … and the net price … of each school.

  3. Submitted by Christie Burke on 05/21/2010 - 05:11 pm.

    I graduated from Macalester in 1998, with around $17,000 in loan debt. I know the published price has just about doubled since then, so it’s impressive to see that this number is holding steady. Having recently finished a graduate degree that cost me twice as much *really* makes me appreciate the value of my Mac diploma.

  4. Submitted by John Reinan on 05/21/2010 - 05:42 pm.

    The argument that higher college costs are due to personnel and healthcare increases is unconvincing.

    When I started at St. Olaf in 1976, the comprehensive fee was $4,000. According to the U.S. Bureau of Labor Statistics, that would translate into about $15,300 in current dollars.

    But a year at St. Olaf now costs about $45,000 — up by a factor of 11, and triple what inflation alone would account for.

    Are professors making 11 times what they made in 1976? I don’t think so. Do fuel and electricity cost 11 times what they did in 1976? Does a pound of hamburger or a gallon of milk cost 11 times as much?

    This question has bedeviled me, and I’ve asked a lot of smart people if they could answer it. Nobody has been able to.

    For my entire life, college costs have been rising at least twice as fast as inflation overall. How can that be? Why are private college costs going up 4.5 percent in the coming year at a time when inflation is virtually nil?

    Meanwhile, as you point out, wages and income are nowhere near keeping up. And the financial aid that Cerkvenik mentions is more likely to be loans than grants — saddling students with debt.

    I’ve heard people say that you have to be either very rich or very poor to afford college. It’s a glib statement, but I fear it’s becoming more true than ever.

  5. Submitted by Dave Michel on 08/26/2010 - 10:23 pm.

    Don’t forget that student debt at graduation doesn’t take into consideration the parents’ costs. We’re definitely feeling it this year as our first child goes off to Gustavus. Macalester’s student debt at graduation is low because a lot of parents are ponying up significant sums to send their kids there. Same for St. Olaf, my alma mater. The U has many more students paying for it on their own.

    Actual out of pocket cost after grants and scholarships is the real barometer of the expensive of a college education.

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