Beloit College Magazine

Beloit College Magazine

Fall/Winter 2012 (November 16, 2012)

Investing in Tomorrow

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November 16, 2012
By Robert S. Benchley

Eaton Chapel Bell Tower“Sticker shock.” It’s a term with its origins in car dealer showrooms. You walk in off the street, captivated by the latest model—shiny, seductive, filled with the promise of good things to come—and wonder what it costs. You lean forward to look at the price, and then you experience it, a feeling somewhat akin to a punch in the gut: sticker shock.

It has been some time since the cost of a year at a private liberal arts college surpassed the price of a new car. Beloit’s current sticker price—$46,336, plus another $3,000 or so for health insurance, supplies and personal expenses—is about twice the MSRP of a Toyota Camry, America’s best-selling sedan.

It’s this fact, and this shock, that has spawned countless editorials and stories in the national press in recent years. Even before President Barack Obama called on colleges and universities in his 2010 State of the Union address to “get serious about cutting” their costs, the topic was a regular feature in the papers, not to mention the minds of college-bound students and their parents.

In the summer of 2010, the rising cost of college was quickly becoming a daily topic in the editorial pages and on news programs nationwide. In response the topic was explored in the pages of this magazine, with “[Paying for] An Education.” With the cost and value of college remaining a regular feature in the media, and because it became a factor in the presidential race, we return to the topic in this issue to see what, if anything, has changed in the past two years.

Earlier this fall, the cover of Newsweek magazine asked “Is College a Lousy Investment?” and then, some say, attempted to answer its own question in the affirmative. A week later, Bloomberg Businessweek ran a cover story on student loans titled “Debt for Life.” And these are but two prominent recent examples.

Given this onslaught of debate and demonstrative headlines, how is it that colleges like Beloit continue to enroll its class—and get mentioned, as it recently did, among the “Best Value” schools in publications from U.S. News to the Fiske Guide to Colleges?

“Distinctive but competitive”

For years, the annual tuition increase across all U.S. colleges and universities averaged 8 percent, which roughly doubled the cost of higher education every nine years. Small liberal arts schools like Beloit sold themselves as an investment with a return to come down the road. That’s still the premise, but it was an easier sell when there seemed to be no end to the rising value of your home and 401k.

The slide finally slowed, but college costs continued to rise at a steady pace, and a combination of high unemployment and lack of new jobs blocked many new graduates from the opportunities they had hoped for. With their careers on hold, newly minted degree-holders moved back home after graduation and took jobs at the mall—with college loan debt in tow.

That’s the picture a lot of worried families on the college tour bring with them to Beloit. They are shopping for an education and, as in the car dealer’s showroom, they like what they see. Then they read the sticker and ask, “Can you give us a little help here?”

“The cost of college and how to finance it is now the number one consideration of families looking at Beloit,” says Nancy Benedict, vice president for enrollment. “There are many great educational opportunities out there. We need to be distinctive, but we also need to be competitive.” That includes helping families with financial concerns about the cost. “We tell them that is the price of attending Beloit, and that we work very hard at making it affordable through a combination of need-based and merit aid.”

But the need for financial aid also is increasing across the board. “We have seen year-over-year changes in family income as the economy has soured, with the neediest families—even middle class families—becoming far more needy,” says Jon Urish, director of student financial services. “Even families who don’t have financial needs are becoming more price-sensitive, and there are fewer of them.”

New Beloit parent John Galloway of College Station, Texas, is no stranger to financial planning—it’s his profession. With that in mind, it might seem like he would have an edge on planning to pay for his kids’ higher education, but his son Patrick—now a first-year at Beloit—is his third child to go to college. When Galloway talks about somehow making it all work, he sounds like most other parents.

“When my older son graduated from Trinity in San Antonio, I owed the same amount as a small house. I put it on my back instead of his,” Galloway says. His son faced the same employment hardships as many other new graduates. “He couldn’t get a job after graduation and waited tables for a year. Now he wants to go to law school and is working as a law clerk, and he’s still making less than the tuition we paid.” By contrast, his daughter went to a Texas state school that was half the cost of Trinity, and was able to land a well-paying job at an oil and gas firm in Houston.

Then there’s Patrick, at Beloit—a football player who hopes to become a coach someday. Like most Beloit students, he has a mix of financial aid and loans. The fact that the school was a good fit was important. “We never thought a school like Beloit would be right for him,” says his father, “but after we toured the school and met his coach, we knew he would be put on the right path, in sports and in life.” When he talks about his family’s choice with regards to Beloit College, Galloway sounds like a man who knows he has made an investment.

Financial aid landscape

More than 90 percent of Beloit students receive some form of financial aid. Need accounts for approximately three-quarters of aid; the rest is merit-based. For first-years, members of the class of 2016 who arrived on campus this fall, the average award is $23,000. Throw in loans and work study, and the average total is $28,000. Scholarships can further bolster that number if the student qualifies. “If a family can get their kid here for somewhere in the upper teens, I would argue that’s a very good value,” says Urish.

The best news is that substantial financial aid is available, and the key to helping nervous families put things in perspective, Urish says, is communication. “If all you see is the sticker price and don’t have a meaningful conversation with someone, you’ll come away with some mistaken judgments,” he explains. He tries to preempt the sticker shock by showing families how Beloit, even as a small institution, has the people and the resources to be affordable. He also can show them the financial aid packages that have been received by students in various income segments.

“It gets emotional. We’re talking about large dollar amounts, and we’re also talking about the future of their children,” Urish says. “The real challenge is with people for whom cost is the number one factor; they tend not to differentiate between the value-added aspect of various schools.”

For example, he notes, Beloit doesn’t do a lot of nickel-and-diming; there are no parking fees, technology fees, or other add-on charges. “If you’re interested in a double major or study abroad, that’s very common here, but it’s not always so easy at public institutions,” he adds. “There are other institutions that are in very tenuous financial condition and do anything they can to enroll their class. If their cost is going up because of loss of state support, and the lecture halls are huge, that enhances the value of a place like Beloit dramatically. This kind of analysis gives a family a way to reconsider the experience their kid is going to have. Will he or she come out prepared, with good connections, and ready to take the next step?”

In some ways, the downturn forced families to do some helpful financial self-reflection. “It caused everyone to rethink big-ticket items and how certain or uncertain their employment is,” Urish says. “The savings rate went up, as did the number of people trying to pay down debt. As it relates to college, more and more people are asking the right questions about debt and about employment prospects. In short, colleges are dealing with more financially savvy consumers. Still, he says, “every year we have to counsel a certain number of families that this might not be the right place for them in terms of loan burden.”

There are some new tools, created by 2011 federal legislation, to help families make this evaluation more easily. Beloit’s Net Price Calculator, found on the college website, provides an approximation of what a new first-year student can expect to pay. The results are only an estimate and not a guarantee of what financial aid an incoming student might receive (all of the usual applications must still be completed), but it provides a snapshot for early decision-making. Another is the new federal Shopping Sheet from the U.S. Department of Education, a uniform financial aid letter that enables applicants to compare, apples to apples, the aid available from different schools.

The Beloit balance sheet

Student and Red BikesBeloit’s commitment to financial aid amounts to 38 percent of the college’s operating budget, the largest line item after salaries and benefits. When the economic downturn began, the college was one of the first educational institutions to take steps to protect its own financial health. “In 2008-09, we cut 10 percent of administrative staff,” says Benedict. “In 2009, we got a new president who wanted to assure the physical health of the institution.” For two years, salaries were frozen and staff size remained static. “It worked, and now for two years we have had salary increases again. We have also had tremendous success in fundraising,” Benedict says.

Donor money is important to financial aid, especially scholarships, says Jeff Puckett, vice president for development and alumni relations. Last year, Beloit received $1.2 million in scholarship donations. “Given the effects of the economy, we’re not going out with a conventional comprehensive campaign,” he says. “Instead, we’re taking a projects-oriented, modular approach and looking no more than two or three years out. We’re finding that donors are more willing to make short-term commitments for outright annual gifts that will go directly to the support of students than longer-term commitments. Of the six modules we are developing, one is for scholarships.”

Puckett collaborates regularly with Urish on both overall need and special packages that may interest specific donors. There is also a greater effort being placed on stewardship and donor relations—developing strong connections between donors and recipients that help generate repeat gifts.

Overall, donations have held steady. “There has been some drop-off due to the economy, but it is not so much total dollars as it is the number of donors,” says Puckett. “We have had great luck growing the size of the gifts to maintain our total giving.”

Although financial aid helps students meet the cost of a college education, it also becomes a marketing tool in the highly competitive battle among schools in a dwindling market. “We had 2,205 applications this year, up about 100 over 2011, but our yield has not been up for the past two years,” says Benedict. “There are two reasons for that. First, students are casting a wider net and searching for both the best program and the best financial aid package. Second, and this is pure demographics, the number of high school graduates has declined for the past four years, and this will continue over the next two years.”

It’s a competitive battle for a share in a shrinking market, even if Beloit continues to be listed among the “Best Value” colleges in places like the The Princeton Review. “Our distinctive message is the strength of our curriculum,” says Benedict. “We’re thematically putting the liberal arts into practice. That means having our students take their classroom experience out into the world through internships and other programs to practice what they are learning. Surviving as a nation comes through having a well-educated population, and the superior education we offer at Beloit is ultimately what the financial aid is all about.”

The Real Cost

In his summer 2010 letter in Beloit College Magazine, President Scott Bierman showed how the cost of a Beloit education—the actual cost, inflation adjusted for the average student—had risen since 2001 by only $335. “The next time you read or hear about the unsustainable cost increases of a liberal arts education, just remember $335. It is a number for which we can be proud,” he wrote.

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