(Bloomberg) -- This year, the price of tuition at Bethel University’s quaint lakeside campus in St. Paul, Minnesota is $44,050.
Next year, it will be close to half of that: $25,990.
The tiny school is one of dozens across the US to slash prices in recent years in an effort to draw more students. Described as tuition “resets,” struggling institutions are making the moves as families increasingly question the value of high-cost degrees from anywhere except the most elite universities.
The markdowns at Bethel and elsewhere highlight a fault line across higher education. While Ivy League universities and other elite schools approach $100,000 per year, a growing share of smaller, less selective private institutions are cutting costs in a bid to avoid joining the dozens of peers shutting their campus gates for good.
“It’s a risky strategy,” said Phillip Levine, an economist at Wellesley College. Schools set prices high because it signals selectivity and quality, then flatter applicants by reducing costs with merit aid packages, he said. “If you cut the sticker price to $50,000 and give up the merit, you just lost those advantages.”
Bethel says the early results are promising. It enrolled nearly 500 new students this year and has seen 40% more visits compared to the same time last year. Attendance doubled at the college's three most recent recruiting events.
Wartburg College in Waverly, Iowa is also among the institutions that have also rolled out tuition resets. Wartburg — where almost half of the school’s student body is involved in sports — cut tuition by more than 45% to $25,000 starting this fall. Similarly, Concordia University Texas slashed tuition by almost 40% to $23,500 for this academic year.
Millikin University in Decatur, Illinois, has been testing a tuition cut since 2021, when it offered local students a 33% discount. After seeing a boost in enrollment, Millikin decided to expand the tuition cut for all of their undergraduate students.
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The college is pleased with the results so far. Millikin saw a 12% increase in enrollment year-over-year and a 47% increase in transfer students. Students eligible for Pell Grants — those of exceptional financial need — increased by a quarter and those from underrepresented races and ethnicities went up by 30%.
At $26,000, Millikin is still more expensive than public schools in Illinois, but it’s among the cheapest of the private institutions. Millikin is assuming it will keep bringing in the same tuition revenue per student for the incoming class, but increase the volume of students by enrolling more and retaining them.
“The value proposition of higher education has been challenged and we really need to be listening to our stakeholders,” said Sarah Kottich, Millikin’s executive vice president & chief strategy officer. “Schools that are not thinking about how they can better serve their local communities and be affordable and accessible are not positioning themselves well for the future.”
Changing Trend
More than 100 schools across the US have slashed tuition prices over the last decade. The cost reductions come as dozens of small, often religious, schools close each year, battered by declining enrollment and growing concerns about the surging cost of college. For years, higher and higher prices have been an effective marketing tool for colleges — but these days there are growing calls for more transparent pricing.
In 2019, only 16% of students enrolled in private, nonprofit institutions paid the sticker price, according to research by Levine. Even relatively wealthy students usually receive some kind of discount: Less than a third of higher-income students paid full freight at private schools during the same period, compared to 64% in 1995.
The story is different at ultra-selective institutions. The cost of attendance for most Ivy League schools has already surpassed $90,000 and despite generous financial aid packages, about a half of the student body still pays full freight.
The jury is still out on whether tuition resets are winning tactics for less elite colleges in the longer term. In many cases, discounts quickly boost application and enrollment numbers. But the impact tapers off in the long run. Mills College in Oakland, California, for example, lowered its tuition by 36% in 2018. It announced it would close only three years later and ultimately merged with Northeastern University.
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Still, the strategy continues to gain popularity: Bridgewater College in Virginia last year said it would lower tuition by a striking 62% to $15,000, hoping to attract students turned off by high sticker prices.
Thanks to advertisements the college has rolled out, the tuition cut has become a topic of conversation, said Michael Post, vice president for enrollment management. The president is regularly stopped by locals who recognize him, Post said.
“It’s a lot about building, building a new kind of perception with our families,” said Post. “We're wanting to reach more students, but it wasn't just reaching more seniors last year, it was about reaching freshmen in high school, sophomores in high school, juniors in high school because it's a lengthy process of families putting the schools on their list of interest.”
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Price Signal
Minerva University, a selective private college started in 2012 with venture capital backing, has pushed back on the contemporary concept of college life since its founding. Students take classes online and move between a handful of global cities — from San Francisco to Hyderabad. Minerva has no facilities like dining halls or libraries and instead encourages students to use the cities as their campus.
The price tag? $50,000 all-in. That’s relatively low among selective schools and has even sown doubts in the minds of prospective students, said Mike Magee, Minerva’s president.
“For some parents, in particular in the US, they associate our price with low quality,” said Magee. “We have to work hard to convince them we are the high quality university that we are. They don't know how to make sense of our price — it says a lot about the way we have allowed for education to become a luxury product.”
To contact the author of this story:
Francesca Maglione in New York at [email protected]
