Literature is mixed on the value of a tuition reset. This practice is where an institution, in most cases a private institution, reduces tuition by some fixed amount. The outcomes of the effectiveness of the practice are also mixed. It’s an interesting topic, especially in light of ever-increasing tuition discount rates, so let’s explore it a bit (or as my friend Brian Zucker says – “let’s take a walkabout”).
Let's begin with a little bit of history. I believe one of the first institutions to explore and execute a tuition reset was Muskingum College (now University), a private liberal arts institution in Ohio (shout out to David Kalsbeek’s alma mater) in the mid 1990’s. Others that followed were The University of the South (Tennessee), Drew University (New Jersey), and Colby-Sawyer College (Vermont). Each of the institutions experienced degrees of success with the implementation of this practice.
So how do you define success? What was the outcome? Was it sustainable? In considering a tuition reset each of these questions needs to be researched and understood in advance.
First, what is the expected or desired outcome from a tuition reset? Some institutions explore a tuition reset to stimulate increased student demand via application numbers. This feels short sighted as the marketing splash associated with a tuition reset only lasts a year. Also, working to stimulate additional demand just by cutting the sticker price tuition does not leverage the authentic value proposition of an institution. In other words, an institution needs to stimulate student demand by means of more than a lower price; presumably there is some reason a student would apply to the institution outside of a reduced price.
Tied this, perhaps a tuition reset is being explored to increase tuition revenue via additional new student enrollment. To me, this makes more sense from a strategic decision-making perspective but still relies largely on a reduced sticker price as the primary tactic – again disregarding institutional value proposition to stimulate increased student demand and enrollment. Coupling a tuition reset with some type of value proposition enhancement – perhaps a new program associated with student outcomes – helps to further emphasize the institution’s value.
From a broader strategic perspective, a tuition reset feels like a good exploration for implementation when the market position of an institution is largely tuition revenue dependent, competes largely against less expensive institutions, and essentially every student is already receiving some type of institutional financial aid. In this case, resetting tuition by the amount equal to lowest level of institutional aid awarded will not result in a loss of tuition revenue. Also, the published tuition sticker price of an institution can then be more aligned with other lower priced competitive institution’s tuition sticker price. Last, continuing students are not adversely impacted as their institutional financial aid grant is simply reduced by the amount of the tuition reset. This keeps them whole from an out-of-pocket expense perspective and would not adversely impact persistence.
The longer-term question to consider next is – what to do in year two? Or three or four? In other words, is a tuition reset a sustainable long-term practice? I believe the answer is – no – however in the short term, institutions can achieve a competitive market advantage that results in increased student demand, enrollment, and thus additional net tuition revenue. Especially, if the institution has the capacity to grow enrollment and the tuition reset results in increased new student enrollment, the outcome, in the short-term, can be positive. That said, the institution needs to ensure they have the infrastructure to support increased new student enrollment via classroom space, faculty teaching load, and student advising support in addition to residence hall, dining, and perhaps parking capacity.
So what was the outcome of the tuition resets at the aforementioned institutions? Both Muskingum University and The University of the South experienced enrollment gains because of their respective tuition resets; however, The University of the South, after year two, began increasing tuition again at meaningful rates. Similarly, Drew experienced a 39% increase in enrollment that resulted in additional net tuition revenue and Colby-Sawyer reported realizing a 75% increase in applications.
To summarize, tuition resets, to me, are largely short term considerations based on an institution’s market position and competitive application set, the capacity for enrollment growth as well as the percent of current students who are already receiving institutional financial aid. Lots to think about that can impact the strategic sustainability of an institution.
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