Tuition Crunch Takes Big Toll

December 6, 2013

Colleges and universities are struggling to generate enough revenue to keep up with inflation, says the Wall Street Journal.

A survey of almost 300 schools by Moody's Investors Service indicates that almost half are not keeping up with inflation. After two decades of rising enrollment numbers and increases in tuition, demand for four-year degrees is softening, and schools are seeing drops in enrollment.

  • Forty-four percent of public and 42 percent of private universities are seeing tuition growth that is less than the 2 percent inflation rate.
  • Net tuition revenue will fall for 28 percent of public schools and 19 percent of private schools.
  • Karen Kedem, author of the Moody's report, said "It's concerning because colleges and universities are mostly dependent on tuition to raise revenue. If they're not able to invest in programs, personnel and facilities over time, their ability to attract students, faculty and donors will deteriorate."

Schools are looking to the out-of-state student and international student markets to generate revenue.

  • Public schools depend on out-of-state students for revenue, as out-of-state tuition is two to three times higher than for in-state students.
  • International students also pay high tuition rates, and that market is becoming more competitive. Established state schools have an advantage with international students, as they can benefit from alumni networks overseas.
  • Nick Bruno, president of the University of Louisiana at Monroe, says, "We have to look at a different business model; we can't just depend on our region anymore.

These schools are also unsure of how a new federal ratings system, intended to measure the value of an education, will impact them. The system is expected to be implemented next year.

Source: Douglas Belkin, "Tuition Crunch Takes Big Toll," Wall Street Journal, November 22, 2013.

 

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