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Private Colleges Can Conquer 'Perfect Storm,' Starting by Keeping Tuition Costs Manageable

Is this the perfect storm for some institutions in higher education?

In September, U.S. Reps. John Boehner, R-Ohio, and Howard McKeon, R-California, introduced a bill that would financially punish colleges and universities that raise tuition faster than the rate of inflation. If institutions fail to comply within two years, they could be ineligible for many federal grants.

Meanwhile, state financial support for public institutions is declining along with state revenues. Already at record enrollments and receiving more applications than ever, many of these institutions are unable financially to accommodate additional students without significant reductions in quality. Record tuition increases are inevitable in order to balance budgets, while parents who are already financially strapped are wondering how much higher tuition can get.

Simply put, Juniata students usually pay for only four years of undergraduate education and are in the workforce (or graduate school) much sooner than those attending the typical state institution.

Regardless of whether the congressional bill gains enough support to become law, colleges and universities should proactively seek innovative ways to reduce the tuition burden for parents and students. Private colleges with smaller endowments, innovative programs and solid capital campaigns are in an advantageous position to prosper while they find ways to ease the burden. These institutions have never relied on large endowments or state income to support their budgets, and they are often in a position to implement innovations to keep college costs affordable.

These are a few measures that can be modeled by private colleges and universities to make them more attractive to cost-conscious parents and students during lean budgetary times:

Reducing the cost below today's tuition. In 1996, I founded a consortium to develop a national prepaid tuition program for private colleges and universities to lower our tuitions below today's price. Nearly 300 colleges and universities joined the effort to create the plan, from Ivies (Princeton) to research institutions (Syracuse, Vanderbilt, Washington University in St. Louis) to smaller liberal arts colleges (Sewanee, Rhodes, Furman, Pomona). Thanks to Congress's action to allow private consortiums to offer a prepaid program, the Independent 529 prepaid tuition program began in September.

The colleges take on all the investment risk and guarantee the cost up front. Each institution sets its own discount based on the risk and the tuition increases it expects over time. For example, parents or grandparents of a newborn will be able to lock in a freshman year at Juniata College at two-thirds of today's price. Member schools can market this as the only program in higher education that both lowers and guarantees the future cost of tuition. We should let our prospective customers know that it's hard to find any other program in any industry that's comparable. State programs - run by state agencies that are not in charge of setting tuition - are struggling to keep up with increased state tuition rates.

Graduating in four years. Aside from tuition increases, much of the recent increased college cost comes from extending the traditional four years of undergraduate education to five and beyond. Students, of course, must do their part. But at Juniata we ensure that classes and advising are in place to make graduation attainable in four years. Seventy percent of our entering students graduate from Juniata in four years. This compares to a 28 percent graduation rate at public institutions nationally. The initial reaction to this extraordinary difference is that, when compared to state institutions, students attending private colleges are wealthier and fewer are minority students. The fact is that the percentages for wealth and diversity are virtually identical at state and private colleges in Pennsylvania and in most states across the country.

Simply put, Juniata students usually pay for only four years of undergraduate education and are in the workforce (or graduate school) much sooner than those attending the typical state institution.

Loans to parents. In order to assist parents spread the cost of higher education over a longer period of time, Juniata initiated the JC PLUS plan. Loans of up to $20,000 are provided to parents at no interest during the time their son or daughter is at Juniata. Once the student graduates, the parents have up to 10 years to repay the loan, at an interest rate of 1 percentage point less than the federal rate. Other colleges have used similar deferrable loan structures, including Dickinson College, University of the South, and Lafayette College.

In recent studies of the millennial generation, it's clear that they are much more willing to look beyond the brand-name institutions. They will certainly be disillusioned when visiting a campus in the middle of budget-cutting turf battles, deteriorating facilities, program reductions, a higher likelihood of being rejected, and uncertain future tuition rates. Colleges with a slightly growing enrollment, new programs, new faculties and a better admissions acceptance possibility will look a lot better in comparison.

That's where marketing is key, and in these cash-strapped days we need to be aggressive in boasting of these creative efforts to keep tuition down. Now is the time for those colleges in this class to fare much better than their larger, state-affiliated counterparts could have predicted just a few years ago, and to outmaneuver this "perfect storm."

Tom Kepple has been president of Juniata College since 1998. He is a native of Murrysville, Pa.