The Question of Tuition Increases for Fall 2022

John W. Dysart
President
The Dysart Group

Many colleges and universities elected to freeze tuition over the last couple of years in response to declining enrollments, economic downturns and the pandemic.  Market conditions made it more difficult for many families to absorb increased costs, and colleges and universities responded by keeping tuition rates steady or limiting the size of any increases.

The pandemic seems to be waning and unemployment continues to drop.  Unfortunately, demographic obstacles have not changed, colleges continue to struggle to secure enrollments.

Increased federal expenditures in recent years have fueled inflation, and the war in Ukraine has already served to exacerbate the problem.   Inflation is hovering around 7% as institutions deal with increased costs.  Consider that between 2020 and 2021:

- Gasoline increased by 58%
- Food increased by 13%
- Electricity increased by 6.5%
- Natural gas for heat is up more than 30%

Many institutions have already announced tuition increases next year to mitigate the impact of inflation.

- Loyola University will increase by 3.65%
- University of Virginia will increase by 4.7%
- Columbia College plans a 10% increase
- DePaul University will increase by 2%
- Lafayette College will increase by 4%
- TCU will increase by 4.5%

It is a difficult decision for other colleges and universities, especially those serving low-income populations.

Understand Your Socio-Economic Market

Reach out to your Financial Aid Office to gather financial information about the students enrolled in your college or university.

• You may wish to be cautious if more than 50% of your newly enrolled students are eligible for Federal Pell Grants.
• If your local area has experienced economic downturns, you may want to delay any increases in tuition.
• How many first-generation college students do you enroll? These families are likely to be more price sensitive.
• On the other hand, if Federal Pell Grant recipients comprise less than a third of your enrollments, and most of your students and their families demonstrate a reasonably strong ability to pay, you can increase charges now to offset the real increases in expenses.

Note Recent Enrollment Trends

Taking into consideration the pandemic, have your recent recruitment outcomes been stable?

• A period of declining enrollments may not be the best time to increase tuition.
• Take a hard look at the students who have left your institution in recent years. Is your price [affordability] a significant barrier to retention?
• College and universities with stable or growing enrollments are in a safer position to raise prices.

Consider Competition from Your State Institutions

Private colleges and universities often compete more with public institutions than other privates.  Sticker price always makes public institutions seem attractive.

• Are your public competitors accepting more students?  Many publics are aggressively recruiting and increasing class sizes. This can make tuition increases more problematic for private colleges.
• Some public institutions have capped new student enrollments, placing a bit less price pressure on their private competitors.

Consider Financial Aid Offsets

The impact of a price increase can be mitigated, especially for students with financial need, by corresponding increases in state and federal financial aid.

• We expect the Federal Pell Grant to increase by approximately $400.
• Some schools may see increases in Federal Supplemental Opportunity Grants and/or Federal Work-Study.
• The prospects for increases in state scholarships and grants vary significantly. The individual situation in your state matters.

Your Place on the Competition Scale

Almost every college keeps a list of its top competitors comparing tuition and room and board charges.  Your position on your list should influence your decision regarding a tuition increase.

• If you are near the top of your “competition” scale, you may want to delay another increase in tuition.

The decision on whether to increase prices is more complicated than it has ever been.  There is no doubt that costs are increasing for every college and university, and the pandemic has created very real revenue shortfalls for many.  While the need for a price increase may be a given, colleges leaders must take more into consideration.