Tuition Reset

As colleges continue to scramble to attract students during the pandemic, the idea of a tuition reset is being discussed on many campuses.  

In many cases, this is occurring at institutions that are sensing they might have priced themselves out of reach for their target markets.  

As you might remember, a tuition reset is a one-time reduction in a college’s tuition rate. Usually this is accompanied by a cut in financial aid. Once the reset is in place, the college’s tuition typically follows a normal pattern of yearly increases.  

The goal of a tuition reset is typically more than financial. As part of the reset, many colleges hope to garner favorable attention in the press and thereby increase both exposure and student interest.  

In late 2019, Mark Kantrowitz noted that colleges that opted to reset tuition often shared a number of common characteristics: 

• Largely non-selective 
• Small, with a third having less than 1,000 students
• Very likely to be private 
• Highly to very highly tuition dependent 
• A reputation that is regional or even local¹  

Mixed results  

The results of a tuition reset are mixed. According to RNL, of 71 private not-for-profit institutions that reset their tuition between 1996 and 2018. Half the institutions saw no increase in enrollment. Half the institutions also saw net revenue from first-year students decline by four percent. Lost revenue from current full-pay or near-full-pay students can be significant.²  

Lucie Lapovsky noted that the data are “positive although not overwhelmingly so” for colleges that are using a reset in the hopes of building larger enrollments both from freshmen and transfer students.³ 

Some questions to ask when considering a tuition reset 

There are a number of questions to ask when considering a tuition reset: 

• What are your goals for the tuition reset? Are you considering a reset to expand market presence to simply to arrest declining enrollment? 
• Do you have solid data that indicate your students are truly price sensitive or have you let your cost creep beyond your brand value?  

• Have you undertaken a tuition pricing elasticity study to determine how a reset will impact both enrollment and revenue?  
• Have you evaluated how a reset will impact both total enrollment and the enrollment of full- and fuller-pay students and students of greater academic ability?⁴ 
• Is your brand or reputation strong enough to counter a tuition reset? Remember, no matter how carefully a reset is undertaken, there is a danger that your institution is scrambling to generate revenue. Many resets, particularly by less well-known schools, are perceived as fire sales.  
• Have you anticipated how your campus, including your alumni base, will respond to a reset? Will faculty view the reset as a positive move forward or the beginning of a rearguard action? Will recent alumni who incurred significant debt for their education vent their disapproval?  
• Have you invested, or are you willing to invest, in the comprehensive marketing and promotion plan ahead of the reset, during the reset, and on an ongoing basis?  

In conclusion

My intention here is not to scare you away from a tuition reset. Rather, my objective is to open your eyes to some of critical issues that must be addressed before and during a reset.  

Of particular importance is the need for solid pricing research a priori and the need to invest in a comprehensive marketing plan both before launching the reset and during the reset itself.  

Please let us know if you are considering a reset. Our pricing elasticity studies are the most sophisticated and accurate in the marketplace and we would be glad to help you clarify how a reset will impact enrollment, revenue, and your brand.  

Want to learn more? Schedule a free consultation with Becky Morehouse today.

Read next: Building Credibility

Sources:
¹ https://www.savingforcollege.com/article/surge-in-number-of-colleges-cutting-tuition#:~:text=A%20tuition%20reset%20is%20a,does%20not%20decrease%20by%20much
² https://www.ruffalonl.com/blog/enrollment/considering-a-tuition-reset/
³ https://www.insidehighered.com/news/2019/04/10/economist-colleges-should-take-time-care-tuition-resets
⁴ There is considerable data that suggest that students of higher ability will shy away from colleges that are less expensive because they often equate cost with quality. At one time this trend was called the Chivas Regal effect.