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Business Officer Magazine

Putting College Costs in Context

The time has come for institutions of higher education to better explain the costs they incur in providing academic programs—and the prices students pay.

By Karla Hignite and Christine Larger

According to Steve Golding, vice president of budget and finance for the University of Colorado System, to successfully confront its cost critics the higher education community must convey the full range of expenditures incurred when delivering educational programs and related services to students. Furthermore, says Golding, individual colleges and universities must explain their institutional finances in ways that are transparent to the wider public and that demonstrate to stakeholders accountability for the monies received in providing quality, costeffective educational programs.

We shouldn't be immune from answering questions about cost structure and from having our feet held to the fire to make sure we're making good use of resources that have been given to us", says Golding. At the same time, he and many other business officers recognize that greater public understanding is needed as to the budgetary pressures faced by colleges and universities and the cost efficiencies that many have implemented to stretch resources as far as possible.

Perceptions of Price

"A primary issue that institutions need to struggle with and delicately balance is the perception that higher education tuition is too high and that gross inefficiencies exist within the current academic business model for establishing prices", says Golding.

"While colleges and universities do have a broad public purpose—to educate students and to provide an environment and infrastructure for research opportunities and the development of new knowledge—operationally they are businesses", says Golding. "Institutions of higher education are very complex, and in fact, they are some of the most complex businesses that exist in this country, governed by very specific rules and perceptions held by the general public and public policymakers across the country."

Consider where the resources come from to support these institutions: from parents of students and from students; from the public sector through general appropriations or financial aid from federal or state governments, or through agencies sponsoring university research; from private donors; and from medical patients and other users of university services. Colleges and universities have diverse revenue streams, and each requires its own infrastructure to manage, its own set of expectations for the use of those funds, and often its own set of rules and regulations for ensuring compliance, says Golding. "In this context, it is important to understand the pressures that those managing institutional budgets face in terms of balancing the various financial issues, programmatic issues, and internal political issues that ultimately come together to create budgets that in turn allocate resources for salaries, financial aid, facilities, technology infrastructure, and student services. Those budgets also determine how much research an institution can afford versus the need to ensure highquality academic programs to educate students", he says.

Joseph Mullinix agrees that there exists enormous misunderstanding overall about university budgets. Especially when it comes to providing student aid, many people believe that an institution can simply move the money from someplace else to lower its sticker price, says Mullinix, vice president of finance and administration for the University of California System. "What many don't understand is that most of the other money they know exists elsewhere is earmarked for other purposes. We don't really have the luxury of taking federal grant and contract money and moving it over to support our educational product, or of using revenues generated from patient care within our five medical centers to subsidize undergraduate education."

Price confusion. According to a 2002 report, "Attitudes Toward Public Higher Education," conducted by the American Council on Education (ACE) , the average respondent overestimated tuition prices by three times the actual national average ($11,637 versus $3,754) at a four-year public college or university. In fact, about one in 10 respondents—whose answers were excluded from the study's results—gave an estimate of more than $100,000. Furthermore, when asked to estimate the total price of attending college (tuition, fees, and room and board) , the average response was $20,361—70 percent higher than the national average of $11,976 for attending a public four-year institution. An earlier study conducted by ACE that included both public and independent colleges and universities showed similar results, with respondents believing that tuitions were significantly higher than the actual amounts charged, regardless of institutional type or control.

Many reasons may be cited for the confusion about college costs and prices. In its 1998 report to Congress, "Straight Talk About College Costs and Prices", the National Commission on the Cost of Higher Education (NCCHE) stated that "information on cost and price of higher education at individual institutions is in many cases unavailable or difficult to understand. Part of the confusion can be attributed to differences in financial reporting standards and how expenditures are measured."

Included among the commission's recommendations was an action plan that called for leaders in the academic community to develop better consumer information about costs and prices and to improve accountability to the general public. NCCHE members also encouraged higher education to better define commonly used terms of cost and price to help reduce the confusion when college costs and prices are reported and discussed. (See sidebar, "Cost and Price Terminology.") While many leaders in the higher education community understand the importance of responding to the commission's recommendations, colleges and universities have not done enough collectively to improve the public's understanding of institutional finances or the prices actually paid by students to receive a college education.

Net price. A pricing strategy used by many colleges and universities to improve their affordability—a practice that is often misunderstood by the wider public—is the tuition discount, otherwise known as institutional aid. Determining the proportion of financial assistance an institution may provide to students in addition to aid received from external resources involves a lively debate at most institutions and is something that should be done with the full input of institutional stakeholders, says Barry McCarty, dean of enrollment services at Lafayette College.

Colleges and universities typically provide different amounts of assistance based on criteria such as the types of students an institution wants to attract, the financial needs of students it wants to admit, and the institution's expectations about the success of its admitted students. The solution may vary dramatically from one institution to another based on the resources available for this purpose. "All the while, institutional decision makers must bear in mind that the resources used to provide institutional aid compete with library resources, faculty compensation, utilities, and facilities maintenance, as well as all the supporting services to which families and students increasing believe they are entitled", adds McCarty.

Craig Becker, Seton Hall University associate vice president for finance, says his institution strives to be competitive and affordable but must balance easing student burden with meeting all its other instructional and research needs to maintain quality programs and be true to its mission. According to Becker, determining the amount of financial resources to allocate to student aid at Seton Hall takes place within the context of a wideranging university planning and budget committee that has representation from students, faculty, and administrators. "One of our first tasks is to help the committee understand tuition discounting and its purposes", says Becker.

Perhaps one of the biggest challenges faced by colleges and universities is getting students and parents to look beyond the sticker price. This challenge is especially true for an expensive independent institution such as the University of Pennsylvania, where it can be a major hurdle getting prospective students and their families to understand that, as a result of additional assistance provided by the institution, what they actually pay may be much less than the published price.

As a selective institution, Penn has a need-blind admissions policy that seeks the best and the brightest students regardless of their ability to pay. But its financial commitment to creating a student community reflective of the diverse cultural, ethnic, and socioeconomic community into which students will graduate still requires a significant marketing effort to convince some to apply, says Frank Claus, Penn's associate vice president of finance. It remains a concern of ours that there are eligible applicants out there who perceive us as unaffordable.

"When you are committed to offering the best programs in the world, but you also have an institutional ethos as your driving force that says you want students to have an environment resembling the society in which they'll function in—including those who can afford to pay the bill and others who can't—it costs money", says Claus. Throughout recent lean economic years, Penn has not faltered on its financial commitment to students. But those buffers for weathering economic downturns may be easier for the larger independent institutions, which tend to have a much longer history of fundraising and heftier endowments than do their public counterparts—many of which have been hit hard in recent years by dramatic cuts in state appropriations.

"Ultimately, what drives the cost structure of a college or university is fundamentally different from institution to institution, based largely on role and mission", says Golding. For instance, according to Tom Green, associate vice president of enrollment services at Seton Hall, part of the university's approach to fulfilling its mission is to provide small classes taught by full-time faculty members. To maintain such a commitment, an institution must typically charge a higher price than institutions with different missions, such as public colleges and universities where the primary goals are often access and low tuition prices. Regardless of differences in individual institutional missions, however, the collective higher education community can do a better job of effectively communicating the range of costs an institution incurs when providing educational programs and related services.

"Most families are not anxious to listen to this discussion, but when you look at the overall costs within an institution's budget, no student is paying anywhere close to the true cost of attendance", says McCarty. "Families increasingly expect strong social programs and facilities that are first-class with state-ofthe-art computer systems. Some institutions have significant research and development costs, not to mention services available to students to help them succeed, such as tutoring and academic advising", says McCarty. There are, as well, high expectations for everything from residence halls to faculty rosters. All these cost money, says McCarty. "While the education itself may be the bottom line for those doing the academic shopping, much more goes into supporting the academic program than meets the eye."

Price in Context

Many of the discussions regarding college costs that take place within the wider public realm also are about the prices students pay to attend college and not about the expenses institutions incur when providing instructional and other educational services. In response to NCCHE's recommendation that colleges and universities increase their accountability and develop better consumer information about costs and prices, NACUBO initiated its Cost of College Project in 1999. The results of this multi-year effort are presented in the 2002 report, "Explaining College Costs—NACUBO's Methodology for Identifying the Costs of Delivering Undergraduate Education" ((available at

The methodology offers a tool that any institution—public or independent, large or small—can use to provide important information to its students, parents, and other important stakeholders about average undergraduate education costs in the context of an institution's mission. According to NACUBO President Jay Morley, "College cost data should be as accessible and ubiquitous as published tuition data are today. Without greater visibility on the cost side of the equation, it will be difficult to increase public awareness about what it takes to deliver quality educational programs."

In part, understanding the costs associated with delivering quality programming entails discussing tuition pricing within the context of overall budgetary pressures and an institution's commitment to remaining affordable for students. At Seton Hall, the 4-percent and 8-percent tuition rate increases implemented during the past two years reflect the additional costs of providing services. Yet, according to Becker, what is often missed is that for many institutions like Seton Hall, the university's institutional aid budget has grown at the same rate or higher as tuition increases.

In the case of Denison University, a healthy endowment has allowed institutional aid to outpace tuition increases by a ratio of 2 to 1. In 1989, income from the institution's $63 million endowment provided about 9 percent of the revenue required to operate the university. According to Seth Patton, Denison's vice president for finance and management, earnings from the university's current $422 million endowment now provide close to 29 percent of operating revenues. With regard to institutional aid in particular, gross tuition and fees have risen on average 5.8 percent per year during the past 15 years, while institutional aid has grown on average 13 percent per year during that same time period, says Patton. He points to the success of Denison's endowment as the primary factor that has allowed the university to remain affordable to students and families at the same time that operational costs have grown significantly with substantial new commitments to technology and academic program enhancements.

But for many public institutions that lack substantial endowment resources, more must and has been stretched from less. "At the same time that state budgets haven't been able to keep pace with funding, there has been a significant upswing in enrollments", says Golding. During the past two years, the University of Colorado System sustained a $75 million reduction in its state general fund appropriation while student enrollment increased by approximately 4,450 resident FTEs.

The University of California System likewise has experienced significant growth—to the tune of 13,000 additional enrollments that were to be funded in the current fiscal year. Some of the gap in state funding shortfalls from the amount specified in the state/ university compact—about $1 billion—has been made up with increased educational fee increases within the UC system, but the majority is missing and presumed gone, says Mullinix. "The question for us is, given the level of that gap and the realization that the state has indicated that it doesn't intend to pay for any additional students for the coming year, do we admit more students? We generally have concluded that it would be difficult for us to grow our enrollment", says Mullinix.

That realization is based also on the fact that the UC system faces substantial increases in the cost of housing students while in the midst of increasing and updating its student housing stock. Add to that financial pressure UC's plans to push ahead and open a 10th campus in the fall of 2005 in Merced—UC's first campus in California's central valley where a very large and growing Latino population is currently underserved, says Mullinix.

At the State University of West Georgia (UWG) , direct support from the state has decreased by $4 million during the past two budget years, reducing the overall percentage of funding derived from the state from 75 percent to 67 percent of the institution's operating budget. Likewise, at the Community College of Philadelphia, state and local funding has dropped from providing 60 percent of the institution's operating budget to 52 percent during the past two years.

To offset those kinds of losses while maintaining quality programs and services, increases must come from somewhere, says Bill Gauthier, UWG vice president for business and finance. "What we're really seeing is a cost shift in public higher education", says Gauthier. While that shift often requires implementing budget cuts to institutional administrative areas and programs, it also typically includes charging higher tuitions and fees.

And yet, while the Community College of Philadelphia has raised its tuition by 8 percent this year to help recoup the lost funding, the actual dollar increase that spells for students is quite small. "When your institution charges $100 per credit hour, raising fees by $8 per credit hour translates into students paying roughly $192 more total for the year than for the previous academic year", says Thomas Hawk, vice president for finance and planning.

Golding likewise puts price increases in context. "At our Boulder campus, on a per-student basis, we are back to 1995 funding levels when we combine student tuition and general fund dollars", says Golding. He also notes that tuition as a percentage of median income has dropped from 9 percent in 1995 to 7.2 percent in 2004, while the tax burden and the general fund per resident student was also declining. "When you adjust for inflation, tuition at Boulder increased only $39 per year during the past 10 years."

Another point often overlooked in the price-cost discussion in public higher education is the return on investment to states, argues Golding. "For every dollar in state support that CU received in 2002, we generated $16.64 in economic activity for the state of Colorado. Additionally, for every dollar of state unrestricted support, CU spent $2.14 in research and development activity, and the state recaptured $0.76 in taxes", says Golding. He predicts those numbers will likely rise when adjustments are made for budget cuts the university sustained during the past several years and its growth in sponsored research activity.

No matter the fluctuations in state funding allocations or endowment investments returns, college and university business officers throughout the higher education community can vouch for the very tangible increases in the costs of doing business that will undoubtedly continue to place pressure on institutional budgets.

Institutional Cost Drivers

Colleges and universities face the same operational and personnel costs as do all business enterprises and are subject to the same market increases in expenditures for providing services. Among those cost factors: health insurance, utilities, technology upgrades, construction and infrastructure maintenance, security enhancements, and regulatory compliance—not to mention the pressures placed on institutional budgets by efforts to remain competitive in attracting and retaining topnotch faculty, students, and staff.

Health care. At UWG, health care spending—which represents about 7 percent of the institution's total budget—has tripled from $4 million 10 years ago to $12 million today. In recent years, it has not been uncommon for institutions to swallow 15-to 30-percent increases associated with providing health care insurance and benefits.

Energy and utilities. Utilities have also risen exponentially for many. "During the past five years, our square footage has increased by 6 percent and our utility rate per square foot has increased by 30 percent", says Gauthier. That has translated into an overall increase in institutional utility spending of about $700,000.

Technology. At Denison, the infusion of new technology into the university's instructional process to enhance how courses are taught has been wonderful in terms of what has been accomplished, says Patton. Yet, that same technology has required hiring technology staff to assist students and faculty in the use of new systems and programs. As a result, operating expenses per student have risen within Denison's computer services area—from $536 per student in FY 95-96 to $1,363 per student in FY 03-04, says Patton. And that doesn't include investment in equipment. "We're investing more than $1 million per year in equipment and infrastructure to keep current. We have a cycling system in place to replace lab equipment every four years on average, with high-end computer science labs often receiving more frequent replacements", says Patton.

The obvious costs associated with maintaining cutting-edge hardware and software in campus technology are exacerbated by hidden costs such as personnel deployed for fighting viruses and worms, says McCarty. At Lafayette, that included allocating 15 staff for the first three weeks of the fall 2003 semester. Data security efforts also demand more college resources than ever before, says McCarty.

Facilities infrastructure and maintenance. While the cost of new construction carries its own hefty impact on institutional budgets, the ongoing expense of maintaining and upgrading a facility may be extremely burdensome over the long term. "Any new facility begins to put pressure on an institution's maintenance budget from the day it is built", says Danny Flanigan, vice president for business and treasurer at Spelman College. Currently, Spelman is halfway through adding air conditioning to its residence halls. UWG—which has a multi-year program for facility improvements that are funded by campus auxiliary enterprises—is currently remodeling its 10 residence halls at the rate of about one hall per year.

Most institutions have at least some deferred maintenance, and along with it, a plan to prioritize maintenance projects. At the Community College of Philadelphia, function and practicality rule. "For us, that means first making sure that all labs and teaching spaces are fully functional and never allowing our deferred maintenance to impede the quality of instruction", says Hawk. Simply put, that means making sure the roofs don't leak and that major mechanical systems are always in good condition. "What we've tended to skimp on in recent years are those things that won't damage long-term capital investment or instructional programs, such as non-critical plumbing fixture replacement, exterior window cleaning, and floor resurfacing", says Hawk.

Safety and security. Along with capital improvements, colleges also must absorb dramatically rising property and casualty premiums from companies that require the installation of full fire detection and suppression systems in residence halls and other facilities. According to Fred Quivey, Lafayette's vice president of business affairs, those costs alone have required undertaking a $6 million capital plan. At Spelman, catastrophic insurance costs related to its facilities have doubled from $250,000 to $500,000 during the past three years. Largely the result of September 11, most institutions can attest to significant expenditures during the past three years to beef up cam pus security with improved systems and additional personnel as well as to implement safety-related training programs for staff.

Regulatory compliance. Increased financial aid reporting requirements and foreign student monitoring are among state and federal regulations that are impacting institutional budgets in big ways. Lafayette recently constructed new science and engineering complexes for which the college realized a significant growth in construction costs because of required air handling and chemical management systems. In turn, those systems have necessitated exponentially higher operations and maintenance contract costs. At a cost of almost $200,000, Seton Hall recently constructed and implemented spill prevention countermeasure and control sites on its campus that are designed to contain any leak of a hazardous material and to prevent that material from leaving the campus property.

As at many institutions, additional regulatory requirements and reporting programs have made it necessary for UWG to hire a full-time risk management position. As Gauthier points out, not only is there an associated personnel cost, but the very nature of the job also uncovers issues that must be addressed from a compliance standpoint. For instance, the university recently spent $500,000 correcting a mold issue in one of its buildings. While the problem most certainly would have been addressed anyway, a tougher regulatory environment required putting the project on the fast track rather than allowing the facility to fall under the university's deferred maintenance program, says Gauthier.

At the all-woman, 425-student, 350-acre campus of Wells College located on the Finger Lakes of New York, recent EPA scrutiny directed at institutions located on bodies of water resulted in compliance costs of $30,000 associated with hazardous waste removal from college chemistry labs. Another $100,000 was required to cover legal costs, implementation of prevention and control measures, and personnel training and certification. According to vice president and treasurer Diane Hutchinson, those compliance costs had to take priority over other planned capital expenditures.

Prior to the recent sizeable increases in expenditures related to these and other cost drivers, the higher education community had already begun adopting many of the same belt-tightening business practices found within the for-profit sector in response to a sluggish U. S. economy. But perhaps more than ever before, institutions now also need to make evident their accountability for the wise use of institutional resources.

Accountability Measures

"While we are not a for-profit business, we are an enterprise that must generate a surplus to reinvest in our programs and facilities", says Becker. "We do have a budget. It is very real. And we attempt to manage very carefully to that budget." In fact, many of the operational areas in which colleges and universities have experienced dramatic cost increases in recent years are also areas in which many institutions are implementing impressive cost savings.

Health care. Like many colleges and universities, Spelman is migrating away from paying the full cost of health care premiums and requiring premium cost-sharing and co-pays from faculty and staff. According to Flanigan, at the highest point when Spelman was paying full insurance costs (vision, life, health) , the price tag hovered around $400 per person per month. In truth, employees still pay only a small portion of insurance costs, says Flanigan. But he believes the new costsharing model is sending the message that while the college is committed to providing extraordinary benefits, it requires some help to do so. On the front end, Spelman is also working more closely with actuarial consultants to determine appropriate costs and how to reconfigure benefits to save resources without decreasing the quality of benefits provided.

Energy and utilities. The Community College of Philadelphia became a Green Lights school in 1999, implementing a complete conversion of its lighting systems, and in the process, saving 600,000 kilowatts of energy use. While its major energy cost drivers are lighting and computers, heating and cooling costs are another significant expenditure. In response, the college has implemented a load-shedding program aimed at shifting energy use to non-peak demand to reduce utility bills. The college also migrated to dual fuel systems. While natural gas is the institution's primary energy source, its use can be interrupted at any time and switched to fuel oil when the city's supply is low or when, as a result of market demand, fuel oil becomes less expensive. According to Hawk, the load-shedding program is saving several hundred thousand dollars a year, while the dual fuel systems capability adds about another $70,000 in annual savings.

Because of its rural location, Wells College relies heavily on fuel oil since it doesn't have ready access to natural gas. "We keep a close watch on fuel oil prices and fill our tanks when we believe it's at a good seasonal rate", says Hutchinson. That same attention to market fluctuations dictates the purchases of other petroleum-based products—including the very smallest items such as trash-can liners that are often bought in bulk. Ironically, the very lake adjacent to the campus that has invited close scrutiny from the EPA is also the source of a cost savings for the college. Under strict monitoring for water quality control by the state of New York, the college not only uses water from the lake for its own consumption but also sells water to the local village in exchange for fixed sewer rates. "It's a benefit to both us and the local community", says Hutchinson.

Operational efficiencies. When Hutchinson first came to Wells College eight years ago, she introduced zero-based budgeting in an attempt to bring costs under control by identifying costly redundancies in purchasing, implementing seasonal and bulk-purchasing practices, and assigning the responsibility for certain purchases to specific departments. In one example, thousands of dollars are saved annually as a result of putting the communications department in charge of stationery purchases for the entire campus, says Hutchinson.

For the Community College of Philadelphia, operational efficiencies are often enrollment dependent. Economies of scale made possible through enrollment growth have decreased the institution's per-student operating cost. In addition, financial viability for the college has been maintained by increasing enrollments in lower-cost programs to help offset the cost increases associated with growing enrollments in higher-cost programs, says Hawk. In another example of operating efficiency, all new facilities added during the past 10 years have been designed to maximize classroom and other teaching spaces and minimize as much as possible administrative spaces. By doing so, each building essentially generates enough revenue to cover its costs of operation. "None of these efficiencies would work well if our enrollments were dramatically shrinking", says Hawk.

Human resources. The Community College of Philadelphia has likewise implemented a number of efficiencies from a staffing perspective. While the college encompasses three smaller regional campuses in addition to its central downtown campus, one administrative structure is shared among all. Likewise, fewer secretaries and clerical staff are now supporting larger pools of staff as more employees become increasingly independent in areas of document preparation. The college has also incorporated more multi-functional staffing—hiring those who can work within several areas such as bursar and accounts payable and who can rotate based on peak workload. The college also encourages flexible scheduling of staff to extend hours of coverage to service areas without adding personnel.

As far as teaching load, institutions are exploring a variety of ways to improve and expand instructional offerings without adding to their faculty head count. Denison is testing distance learning and faculty sharing with several consortia members as a way to expand foreign language offerings without adding personnel. In an attempt to delay hiring of new faculty, UWG has increased class rosters and added an extra course to the plate of non-tenured faculty. In another approach, Spelman is offering additional compensation to some of its tenured faculty in certain fields to teach an overload as an interim step to hiring new instructors.

Consortia. Many more institutions are cutting costs collaboratively through combined purchasing power in conjunction with other institutions. Both UWG and Spelman are members of the Atlanta Regional Consortium for Higher Education, a group of more than 20 colleges and universities—both public and independent—realizing substantial savings on office supplies and equipment, air travel, and express mail services.

Some institutions are exploring consortia relationships not only to save money but also to enhance institutional offerings without spending additional resources. Denison is part of The Five Colleges of Ohio, a consortium composed of Kenyon College, Oberlin College, Ohio Wesleyan University, the College of Wooster, and Denison—all independent residential four-year liberal arts colleges with enrollments between 1,700 and 3,000 students. The group received a grant to bring their institutions—card catalogs online under one consolidated server. The consortia also shares an offsite storage site for holdings with very low circulation rates so as to conserve valuable shelf space at each of the participating institutions.

This same consortia provides an information-sharing forum for a variety of concerns, including regulatory compliance with campus environmental health and safety issues, says Patton. "How each of us is responding to emergency circumstances, what we're each doing in terms of compliance, and what those initiatives translate to in terms of cost—most schools of our size struggle with how to stay current on these issues without expanding staff", says Patton. "In many ways, this partnership allows us to do just that."

Efficiencies from these and other practices aside, because institutions of higher education cannot afford to simply break even, more leaders within higher education agree that colleges and universities must begin their own exploration of innovative, entrepreneurial responses to the pressing issues of affordability and accountability.

Entrepreneurial Mind-Set

"Whether through fundraising, life-long learning, sponsored research activity, technology transfer, partnerships with businesses, or using our facilities in off cycles for other activities, we need to look to the variety of ways institutions can diversify and be more innovative and creative in terms of how we think about generating resources to cover our costs", says Golding.

In addition to implementing cost-cutting measures, Wells College is now also exploring revenue-generating opportunities. Two years ago, the college engaged with a donor to establish a foundation to manage the commercial properties located on the college campus, including an inn, a local market, and several small shops. The foundation is now responsible for investing in capital improvements and maintaining facilities. Any profits from the management of those properties become a revenue stream flowing back to the college, says Hutchinson. But perhaps the boldest market-savvy initiative that has taken place at Wells College in recent history is the reduction of its tuition price by 30 percent—from more than $20,000 to $13,592 in 1999 when the college first implemented its new pricing strategy.

While the college had not been at its high point of nearly 600 enrollments since the early 1970s, by 1997 it had reached an enrollment low of less than 350. Market analysis revealed that middle-income families in particular were no longer considering Wells College because of its sticker price. In response, the college finance committee worked with the administration and a consultant to develop scenarios of what pricing points might increase enrollment of middle-income and full-pay students and how those pricing strategies would ultimately affect perception about the quality of the college's programming. The consultant also helped the college establish a good financial aid packaging policy, and through strategic marketing emphasizing the affordability of a Wells College education, the next year's incoming freshman class grew from a size of 90 to 135, says Hutchinson.

The University of California System—whose students benefit from a state entitlement—still must entertain alternatives for continuing to grow efficiently. "We've attempted to expand current campuses as much as we can, but we need to look to other operational solutions and partnerships", says Mullinix. One option is moving to a 12-month schedule so as to add an effective fourth quarter. Doing so allows a substantial increase in the number of students on UC campuses during the summer, which helps spread out the numbers from September through May. That also translates into savings on capital costs if new facilities are not required to accommodate increased enrollments, says Mullinix. This has been implemented at some campuses, but ironically, operating budget funding constraints have limited extension to all UC campuses, says Mullinix.

As for partnerships, UC continues to explore a collaboration with community colleges that would expand the number of students UC accepts from those community colleges while also encouraging more students to attend community college for their first two years. That would help alleviate the current over-enrollment crunch within the UC System and ultimately allow access to more students, says Mullinix.

As Golding sees it, public education institutions in particular will have to rethink their business models if they're going to survive. "During the next 15 to 20 years, I don't think states will be able to cover many of the costs they once did", says Golding. "We can't afford to lose focus of our core missions, but we do have to find ways to diversify our base in order to help underwrite the costs of education so that no one part of an institution's revenue stream—or student—is overburdened." And as more institutions move in these new directions, they must continue to engage parents, students, and the wider public in meaningful discussions about college costs and institutional affordability and accountability.

Cost and Price Terminology

The following cost and price definitions are based on concepts provided in "Straight Talk About College Costs and Prices" (NCCHE, 1998) and in "Congressionally Mandated Studies of College Costs and Prices" (NCES-2003-17).

Cost Terms

Cost refers to the amount institutions spend to provide higher education and related educational services to students, as measured through expenditures. The following are key terms used to describe college costs.

Revenues: Current fund revenue institutions receive from tuition and fees, endowment earnings, government appropriations, grants and contracts, private gifts, sales of educational services such as books or housing, and educational and general revenue.

Expenditures: Current funds expended by institutions in functional areas of the budget, including direct expenses such as instruction and student services, allocated expenses such as operations and maintenance, and depreciation of facilities.

Cost per student: The average amount of expenditures spent annually to provide higher education and related services to each full-time-equivalent student.

Price Terms

Price refers to the amount students are charged and what they pay for educational services. The following are key terms used to describe college prices.

Sticker price: The tuition and fees that institutions charge, or the published price.

Price of attendance: Tuition and fees that institutions charge students, as well as other expenses related to obtaining a higher education, such as housing, books, and transportation (also referred to as "cost of attendance").

Net price: The amount that students pay after financial aid is subtracted from the price of attendance.

Author Bio Karla Hignite is a writer and editor based in Colorado Springs, Colorado. Christine Larger is NACUBO's vice president of higher education research.