April 2012 Lawlor Focus

The Role of Financial Fit in College Selection

This “College Spring”—as prospective students make their college decisions—is giving root to new thinking about college pricing on the part of higher education administrators. As our guest blogger Dan Lundquist pointed out last month, affordability is the new college amenity in a higher education marketplace where even if ability to pay the net price exists, willingness to pay may not. And our guest blogger Jon McGee followed up on Lundquist’s thoughts by pointing out that the language colleges speak to prospective students about tuition cost should center around “customized pricing” in order to convey the vast variation in net price due to discounting.

The newly released 2011 Tuition Discounting Study Report from NACUBO revealed the average amount that private institutions discounted tuition for first-time, full-time undergraduates in 2011 was estimated at 42.8 percent, up from 42 percent in 2010 and 41.6 percent in 2009. The upward slant can be interpreted as evidence that college is becoming unaffordable for more and more families. Inside Higher Ed headlined a recent article “Wait, Isn’t This the Old Normal?” when observing tuition increase trends: “Despite the national political conversation that President Obama has spurred about keeping the price of college down, it would be understandable to think that a few institutions missed the memo this year.”

The problem with tuition increases is that it focuses the conversation on sticker price when customized price should be the frame—because everything is coming down to “financial fit” for prospective students this spring and most likely, for years ahead. We wrote last June in our blog about The Role of Cost in College Fit, but the formula for college fit is now being heavily influenced by “financial fit.” Students are now assessing the value and worth of an institution primarily based on financial factors, which are overriding academic reputation or personal fit variables, even though these continue to be key to the selection of a specific college or university.

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Most colleges and universities by now have a sense of their net revenues for the coming academic year, so the time is now to take a serious look at what the cost of education is—both to deliver it and what to charge for it. This may mean taking a hard look at: 

  • increasing collaboration with other institutions to avoid redundancies and gain efficiencies
  • determining what’s essential to the core academic experience for your institution’s primary target market
  • considering differential pricing for selected majors and programs
  • assessing the feasibility of guaranteed pricing 
  • exploring new and additional sources of revenues to help offset the pressure to increase tuition prices

Above all, college and university administrators must conduct an honest assessment that answers the question “What really is affordable?”

In the news

The New York Times' college admissions blog reports that The Consumer Financial Protection Bureau has released a new tool that incoming freshmen can use to compare their aid packages from three institutions.

Did you know?

A majority of mobile users will have a smartphone by 2013.

Source: eMarketer