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Price, Enrollment and Revenues in the COVID Era: Charting a Sustainable Course

Bob Massa and Bill Conley

July 24, 2020

“Cost is not always related to price.  If it were, we’d have to charge a lot more in tuition.”  So is a traditional stance taken by colleges whose costs are underwritten by endowments or public funding in defense of their “sticker price.” No two colleges arrive at their “sticker price” by the same accounting and now the “pricing” of higher education is approaching full chaos mode.

Today, with COVID bearing down on our nation and its colleges, parents and their college-aged children are hearing ever-changing messages about price and signaling that they are less willing to pay “in-person” prices for remote learning.  Meanwhile, colleges and universities, struggling with the immediate decision to open or teach remotely this fall, are sometimes setting price without weighing how that informs post-COVID pricing and aid strategies.

Decisions made today will have long-term implications, but  most institutions are looking only at what they need to survive in 2020-21. However, deciding how their price calculus will operate beyond this academic year should be in the strategic wheelhouse NOW.  This includes an understanding and appreciation for the value of the institution’s degree, the costs to educate a student, the expected revenue from other sources and the market’s willingness to pay. The COVID Era will cast a darker and longer shadow on higher education than did the Great Recession. College leaders need to “price” their institutions for the difficult years ahead.

Several months ago (May 19, 2020), one of us wrote a piece for Inside Higher Ed that gave five reasons why lowering tuition for on-line instruction was not a good idea. While the article was generally well received, and although we took great pains to acknowledge student and parent concerns, we were still criticized for “being on a campus for too long,” and for having a “myopic institutional perspective.”  Our main point was that colleges should help families who have been hit economically by COVID with additional financial aid rather than by reducing tuition for everyone. We need to acknowledge that nation-wide, 85 percent of students at four-year public and non-profit private institutions are not paying full tuition, having received need-based aid or merit scholarships.  Any pricing strategy now and for the future needs to take this important fact into account.

But other facts are indeed clear and need to be part of the equation:  costs of instruction have increased with the need for technology platforms, training and support; faculty are still teaching and are available to students for extra help and consultation; although not occupied, buildings still need to be maintained; and tuition does not generally cover out-of-class experiences such as student activities and residence hall functions.  When going remote, colleges will not be charging residence hall, food and activities fees, and will lose revenue there.  They will lay off some staff who work with student groups, contributing to the nation’s unemployment woes.  So while charges for room and board and student fees will be eliminated for on-line only instruction, tuition pricing will likely be all over the map.

Some of the wealthier schools have already reduced tuition at the edges.  Williams College, with its $3 billion endowment, cut theirs by 15%. In so doing, a spokesperson admitted they were concerned about the pressure this would put on less well-endowed competitors to do the same, but they thought it was the right thing to do for their students.  When you have the resources, it is certainly easier to “do the right thing.”

Some schools rolled back their normal annual increase but held fast on no discounts for remote learning.  Dickinson College recently announced that it would be totally online this fall and eliminated room, board and student activities fees. In her letter to families, President Margee Ensign justified that move:  

The fall academic experience, while different, will feature the same expert faculty and the same small class sizes, and it will contribute credit to the same Dickinson degree. While many online programs are less rigorous, our approach will maintain rigor and the close student-faculty relationship that characterizes a Dickinson education.

Other schools are bringing back some students but not all (e.g. Bowdoin) and still others are starting late and are not bringing students back after the holidays (e.g. Ithaca College).  The challenges here with pricing are clear – it will be difficult to justify differential pricing for students taking the same class when some are in-person and some are remote.  How families of entering students will respond to these various models is unfolding in real time.  That is why it is critical to be transparent, to stay in touch, to respond to family concerns quickly, and to remain several steps ahead of those concerns while being proactive. 

Given that many families are struggling with diminished financial resources and great uncertainty about their financial futures, colleges are wise not to lament their own economic stresses.  All colleges, wealthy or not, are operating in a deficit mode for the coming academic year as COVID-related costs are adding to the stress of decreased comprehensive fees (tuition, room, board) due to lower enrollments and/or lower pricing. What current and prospective students will want to know, sooner rather than later, is how your college’s educational experience and associated price will look over the next several years.

Enrollment Intelligence Now suggest these steps to address this imperative:

  • Demonstrate frequently and articulate strongly the value of your institution’s programs and degrees. Persuasive and targeted marketing messages matter.
  • Engage in rigorous, five-year financial modeling under multiple assumptions of enrollment, discount and expenses
  • Build a strategic, five-year enrollment management plan that is realistic and tactically aspirational. A comprehensive marketing plan must be a part of this work.
  • Engage trustees, faculty and key staff members in the conversation and the planning.
  • Within the board and faculty governance structures, encourage creative, strategic and ambitious thinking.

 

Between them, Bob Massa and Bill Conley have 85 years of experience in college admissions, financial aid and enrollment management.  They are principals and co-founders of the consulting firm, Enrollment Intelligence Now  specializing in coaching and mentoring new deans and vice presidents of admission and enrollment, and providing strategic enrollment guidance to college presidents and senior staff.

 

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