(Bloomberg) — This year, the price of tuition at Bethel University's quaint lakeside campus in St. Paul, Minnesota is $44,050.
Next year, it will be close to half that: $25,990.
The small school is one of dozens across the U.S. that has lowered prices in recent years in an effort to attract more students. Described as a tuition “reset,” struggling institutions are making the moves as families increasingly question the value of high-cost degrees from anywhere but the most elite universities.
The notes at Bethel and elsewhere highlight a fault line in higher education. As Ivy League universities and other elite schools approach $100,000 a year, a growing number of smaller, less selective private institutions are cutting costs in an effort to avoid joining dozens of peers. CLOSING their campus gates for good.
“It's a risky strategy,” said Phillip Levine, an economist at Wellesley College. Schools set high prices because it signals selectivity and quality, then flatter applicants by cutting costs with merit aid packages, he said. “If you drop the sticker price to $50,000 and give up the credit, you just lose those advantages.”
Bethel says early results are promising. It enrolled nearly 500 new students this year and has seen 40% more visits compared to the same time last year. Attendance doubled at the three most recent college recruiting events.
Wartburg College in Waverly, Iowa is also among the institutions that have also decided to reinstate tuition. Wartburg — where almost half of the school's student body is involved in sports — cut SCHOOLING up more than 45% to $25,000 starting this fall. Similarly, Concordia University Texas cut off tuition by almost 40% to $23,500 for this academic year.
Millikin University in Decatur, Illinois, has been testing a tuition cut since 2021, when it offered local students a 33% discount. After seeing an increase in enrollment, Millikin decided to extend the tuition cut to all of their undergraduate students.
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The college is satisfied with the results so far. Millikin saw a 12% increase in year-over-year enrollment and a 47% increase in transfer students. Students eligible for Pell Grants—those with exceptional financial need—increased by a quarter, and those from underrepresented races and ethnicities increased by 30%.
At $26,000, Millikin is still more expensive than public schools in Illinois, but is among the cheapest of the private institutions. Millikin is assuming it will continue to bring in the same tuition revenue per student for the next class, but will increase the volume of students by enrolling more and retaining them.
“The value proposition of higher education has been challenged, and we really need to listen to our stakeholders,” said Sarah Kottich, Millikin's executive vice president and chief strategy officer. “Schools that are not thinking about how they can best serve their local communities and be affordable and accessible are not positioning themselves well for the future.”
Changing trend
More than 100 schools across the US have reduced tuition over the past decade. The cost cuts come as dozens of small, often religious schools close each year, hurt by declining enrollment and growing concerns about the rising cost of college. For years, ever-higher prices have been an effective marketing tool for colleges – but these days there are growing calls for more transparent pricing.
In 2019, only 16% of students enrolled in private, non-profit institutions paid the sticker price, according to explorative by Levine. Even relatively wealthy students usually get some kind of discount: Less than a third of higher-income students paid full tuition at private schools during the same period, compared with 64% in 1995.
The story is different at ultra-selective institutions. The cost of attendance for most Ivy League schools has already exceeded $90,000, and despite generous financial aid packages, about half of the student body still pays full tuition.
The jury is still out on whether tuition resets are a winning tactic for less elite colleges in the long run. In many cases, discounts quickly increase the number of applications and registrations. But the impact diminishes in the long run. Mills College in Oakland, California, for example, cut tuition by 36% in 2018. It announced it would close just three years later and eventually merge with Northeastern University.
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Still, the strategy continues to gain popularity: Bridgewater College in Virginia last year said it would cut tuition by a staggering 62% to $15,000, hoping to attract students excluded by high sticker prices.
Thanks to the college's advertising, the tuition reduction has become a topic of conversation, said Michael Post, vice president for enrollment management. The president is regularly stopped by locals who know him, the Post said.
“It's a lot about building, building a new kind of perception with our families,” Post said. “We want to reach more students, but it wasn't just about reaching more seniors last year, it was about reaching high school freshmen, high school sophomores, high school juniors because it is a long process of families deciding on schools. on their interest list.”
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Price signal
Minerva University, a selective private college started in 2012 with venture capital backing, has been pushing the modern concept of college life since its inception. Students take classes online and commute between a handful of global cities—from San Francisco to Hyderabad. Minerva has no facilities such as dining halls or libraries and instead encourages students to use the towns as their campus.
The price tag? $50,000 all-in. That's relatively low among selective schools and has even planted doubts in the minds of prospective students, said Mike Magee, Minerva's president.
“For some parents, especially in the US, they associate our price with low quality,” Magee said. “We have to work hard to convince them that we are the high-quality university that we are. They don't understand our price – that says a lot about how we've allowed education to become a luxury product.”
To contact the author of this story:
Francesca Maglione in New York at (email protected)