There are many ways in which the process of buying a college degree is unlike that of other consumer goods. One of the major differences: students (and their parents) typically don’t know what the full cost of their education will be when they enroll because prices often go up every year.
But starting next year, students at one small liberal arts college won’t have to wonder any more. Washington College in Chestertown, Md., plans to fix the price of a student’s college education for four years, the school announced Monday. Starting next fall, tuition will go up by 2% to $ 43,707, but freshmen who graduate in four years will be guaranteed to pay that price every year they’re in school. That price will also be fixed for students already enrolled at the college.
‘I hope other colleges will do this. It’s not without risk, but I think with careful budget management schools can do this.’
Every year, Washington College will re-evaluate its price and may raise it for each incoming class, but that class will be locked into whatever price they pay the year they enter, it said. The school won’t freeze the price of room and board, which currently runs nearly $ 11,000 annually, according to the school’s website, because those expenses are more sensitive to economic swings like energy and food costs.
“We understand that families are worried about inflation, we want to provide some protection around that,” said Sheila Bair, the president of Washington College and the former chairwoman of the Federal Deposit Insurance Corp. “I hope other colleges will do this. It’s not without risk, but I think with careful budget management schools can do this.”
The school’s plan certainly runs the risk of going awry if inflation or other costs, such as labor, rise faster than predicted. But it’s possible that locking in tuition may be less risky than some of the pricing strategies private colleges are employing right now.
The announcement comes as many private colleges look for ways to attract students amid increased price sensitivity among families. Often at the same time that private colleges are increasing tuition, they’re increasingly offering discounts to students. The average tuition discount for freshmen at private schools hovers around 50%. That high level of discounting can put some colleges in a financially risky position.
Yearly tuition increases can be “a hardship for families, but also what schools find themselves doing is just discounting behind that,” Bair said. “When they increase tuition, they only capture a fraction of that tuition revenue.”
Washington College’s plan locks in both the tuition, the so-called sticker price, and the amount of aid students receive (as long as they maintain eligibility for any merit-based scholarships), Bair said.
Typically when students receive a financial-aid award, it’s for one year, and students and families often don’t take into account that a college’s sticker price will likely go up in the subsequent years and that their aid might decrease, said Mark Kantrowitz, the publisher of Cappex.com, a financial-aid and scholarship search site. About half of colleges also front load grants, so incoming freshman may get aid that doesn’t continue with them through the course of their schooling, he said.
“I have yet to sit in on a financial night at a college, where they say, ‘Yes your costs are going to go up, but it’s not going to go up by more than x,’ ” Kantrowitz said, noting that only a handful of schools offer tuition locks and even fewer offer net-price locks — or a guarantee that students will actually pay the same amount every year. Instead, the cost of college is likely to go up each and every year for families.
Bair acknowledged that Washington College, with its enrollment of about 1,400, wasn’t the first to come up with a plan to lock in tuition. Still, she said she believes offering families some certainty about what they’ll pay at Washington will give the school a competitive advantage.
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Since taking the reins at the college last year, Bair has made a point of launching splashy affordability initiatives. In May, the school announced that it would put more than $ 300,000 toward the federal student-loan debt of graduating seniors, reducing their individual debt by an average of $ 2,630. Bair also launched George’s Brigade, a program that admits a cohort of low-income, high-achieving students from the District of Columbia and environs and meets their full financial need, including room and board.
Bair said that in addition to giving families some peace of mind, she’s hopeful that the tuition lock will serve as an incentive for students to graduate in four years, since it doesn’t apply beyond the first four years of school. Freezing the price of a Washington College education may also help retain students all the way through graduation because often when students leave the school it’s because of financial reasons, Bair said.
“There’s nothing worse than a student going to college for a couple of years and borrowing and not getting that degree,” she said.