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Having One’s Cake, and Eating It, Too

December 10th, 2012 by dfarish

In my last post, I posed the dilemma of how a campus could freeze tuition (as Roger Williams University has chosen to do), thereby eliminating a logical source of new revenue, without somehow causing damage to the quality of the students’ educational outcomes. Isn’t it the case that “you get what you pay for” – and if you pay less, doesn’t that ensure that you will receive less?

Of course, most people recognize that the quoted statement is overly simplistic. A person can spend anywhere from about $15,000 to more than $200,000 for a new car, but most people don’t think that it is worth it to spend extravagantly on a car, if their primary goal is just to have reliable transportation. Similarly, one can purchase a perfectly respectable bottle of wine for $10 to $20, although it is also possible to spend more than $200 for a grand cru from Burgundy. Is that bottle worth 10 or 20 times the first bottle? As a practical matter, not to most people.

Nevertheless, when a college freezes tuition – or, more dramatically, actually reduces tuition (as a handful of campuses are now doing) – it is not unreasonable for a student or parent to wonder how and where the campus is reducing its expenses, since the campus’s total revenue will presumably not keep pace with inflation.

We debated the idea of a tuition freeze at RWU for some months before proceeding, because of our concerns about perception: would this move be interpreted as an act of desperation? Would it be seen as inevitably leading to a reduction in educational services and quality? It wasn’t until we were satisfied that we had sound answers to these concerns that we elected to move ahead.

We knew (and anyone can easily verify) that our enrollments have been strong in recent years, and presumably would have continued strong, even if we had not frozen tuition (although New England will be seeing a significant decrease in high school graduates in recent years, a fact that will undoubtedly cause stress at many colleges and universities in our area). Nevertheless, our actions were not that of a desperate institution.

But we also wanted not just to maintain our level of educational quality, but actually to enhance it. We wanted demonstrably stronger educational outcomes, especially in job and graduate school readiness. How were we to achieve these objectives without the revenue that would result from raising our tuition price?

The answer is central to our story. Just as many countries in Europe are finding it very difficult to cut their way to prosperity through extreme austerity measures, we knew that reducing our expenses was not the route to improving quality. That’s not to say that we shouldn’t be appropriately frugal, and regularly check to ensure that we are using every dollar to best effect – and we are doing just that. But it would take more than being tight with a dollar to get to where we needed to be.

What we have elected to do is to diversify our revenue stream. Rather than rely almost entirely on tuition, we are expanding some of our alternative revenue streams, even as we create new ones:

  • We are increasing the use of our campus in the summer – a spectacular time of year in Rhode Island, especially for a campus on the water – by expanding our academic offerings for students, and by introducing new programs for high school students and for working professionals.
     
  • We are dramatically expanding our School of Continuing Studies, located in Providence, partly to meet the skills gap of adult workers, and partly because, even with lower tuition for students in non-residential programs, we derive a modest amount of net revenue that can be used to subsidize the costs of our high-cost residential campus.
     
  • We have developed a series of contracts with communities and the state to provide, for a fee, the services of our Community Partnerships Center – services that benefit the communities while they enhance the skills and expertise of our students.
     
  • We are redoubling our philanthropic efforts, a task made easier because our donors applaud our efforts to increase both affordability and quality.

In short, we are doing what any business would do when it plateaus: we are developing new product lines, and with them, new revenue streams.

“You only get what you pay for?” Our objective at Roger Williams University is to ensure that every student gets more than what he or she pays for, by developing revenue streams that augment what we charge the student in tuition.

“You can’t have your cake, and eat it, too?” You can, at Roger Williams University – and you can bet that, as we prove successful, other institutions will follow our lead. We’re fine with that. As our mothers told us when we were children, “Imitation is the sincerest form of flattery.” And it’s past time that American higher education changed direction. Success at Roger Williams University will blaze the trail.

In my next blog post: Colleges that are heading in the opposite direction.