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July 12, 2004
Tuition Getting Still More Expensive
Attention employers with tuition-reimbursement programs: If a new study is any indicator, you'll be shelling out significantly more for the benefit next year.

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The National Association of Independent Colleges and Universities, which represents nearly 1,000 private, nonprofit institutions, projects a 6 percent rise in the average published tuition for private colleges and universities for the 2004-05 academic year.

The NAICU blamed the increase on an assortment of factors:

  • The average college endowment earned just 3 percent for 2003, following losses of 3.6 percent and 6 percent in the two previous years. Despite the small increase last year, an inflation rate of 2.2 percent and an average withdrawal rate of 5.4 percent meant that most institutions still experienced a decline in the overall value of their endowments.

  • Philanthropic support of education has faltered in recent years. Gifts to higher education dropped 1.2 percent from 2001 to 2003, according to the Council for Aid to Education. The drop from 2001 to 2003 was the first decline in 14 years. When inflation is taken into account, the buying power of gifts to education declined by 3.3 percent.

  • Employee health insurance premiums rose 13.9 percent between 2002 and 2003, marking the third consecutive year of double-digit increases. Liability insurance has increased between 20 and 30 percent over the same period.

  • Periodicals and other library materials routinely increase at double-digit rates annually, and the cost to institutions of keeping up with information technology has doubled in the last decade.

Private institutions account for about half of all American colleges and educate about 20 percent of four-year college students. NAICU says its members include traditional liberal arts colleges, major research universities, church- and faith-related institutions, historically black colleges and universities, women's colleges, performing and visual arts institutions, two-year colleges, and schools of law, medicine, engineering, business, and other professions.

Apparently, the news is even worse at public colleges and universities. The Associated Press reports that Travis Reindle, director of state policy analysis at the American Association of State Colleges and Universities, estimates public institutions--feeling the effects of state budget cuts in recent years --will raise tuition 10 percent.

The silver lining

NAICU reports that more private colleges and universities are trying new approaches to enhance affordability, including these:

  • Some private colleges and universities have cut tuition, while others have locked in the tuition rate for a student's four- or five-year enrollment. A handful allow the bartering of products and services for tuition.

  • Others offer three-year bachelor's degree programs, or four-year graduation and employment guarantees.

  • More than 200 private institutions participate in a national prepaid tuition plan (the Independent 529 Plan).

There's also good news for parents and students who aren't receiving tuition assistance from employers. Over the last decade, student aid from private colleges increased by more than twice as much as tuition--197 percent vs. 86 percent, according to NAICU. The result was that "net tuition" at private colleges (published tuition minus grant aid) declined by $100 over the past 10 years, when adjusted for inflation.

Last year, institutional aid at private colleges and universities increased 15 percent (compared to 6 percent growth in tuition). It grew 11 percent in the previous year.

"In nearly 9 of 10 cases, published tuition overestimates the out-of-pocket costs that students and their families end up investing in a college education," said NAICU President David L. Warren. "No student should rule out a college or university simply because of its published price. Student aid is the other key factor in the college affordability equation."

Eighty-six percent of undergraduate students at private colleges pay less than list price. In 1999-2000, these students received an average of $13,700 in aid from all sources, according to NAICU.


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