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This school is slashing tuition by 20 percent

  • Drew University is the latest school to cut tuition costs, hoping for a competitive edge.
  • Middle class students will benefit the most.
Drew University
Source: Drew University
Drew University

When it comes to college, rising costs are a seemingly unstoppable force.

However, some schools are bucking the trend, slashing tuition in hopes of attracting more students and families struggling with the weight of a college tab.

Most recently, Drew University, a New Jersey-based private college, announced it is lowering the price of its tuition by 20 percent, to $38,668 for 2018-2019 from $48,336 for 2017-2018.

"We have to have our finger on the pulse of how students are making choices," Drew President MaryAnn Baenninger said. "A lot of families will search based on published price, and if they are looking for private liberal arts colleges under $40,000, we don't show up."

In addition, even though college enrollment is on the rise, competition among schools for the top students is fierce. Schools like Drew are making a bet that the reduced costs will attract more student applicants, raising the overall bar for the school.

"Our goal now is to increase applications and accept students at the same rate," Baenninger said.

"Our goal now is to increase applications and accept students at the same rate." -MaryAnn Baenninger, President of Drew University

"I suspect that other schools are going to sit up and take notice and likely follow what's going to happen at Drew," said Robert Franek, The Princeton Review's editor-in-chief and graduate of the Drew University Class of 1993, as well as a member of the university's Board of Trustees.

With the tuition decrease — which comes out to about $10,000 less — Drew is narrowing the gap between the sticker price and what many families actually pay. (That's the difference between the full tuition price and any need-based and merit aid that a student receives.)

Most students pay less than a college's sticker price thanks to financial aid. Your net price is a college's tuition and fees minus grants, scholarships and education tax benefits, according to the College Board.

At Drew, nearly three-quarters of the student population already get an average of $30,000 in need-based aid.

Even as college costs soar, families in general are paying less out of pocket than in the past and relying on loans, scholarships and grants more than ever.

During the 2016-17 academic year, the typical family reported receiving $8,390 in scholarships and grants — enough to cover 35 percent of their college costs, an increase from the previous school year, according to a recent Sallie Mae report "How America Pays for College 2017."

The second-highest proportion comes from income and savings followed by borrowed money, which covered 27 percent of college expenses in 2016-17.

However, for those already subsidized, a tuition decrease doesn't mean much. It will largely benefit those middle class families that wouldn't have qualified for considerable aid, if any at all, and were struggling with the sticker price of college.

All in, families with students in four-year private colleges spent about $45,370 in 2016-17; at four-year public colleges, it was about $20,090, according to the College Board.

For many, that's just too much for private school. "Even prior to the free college movement, families were migrating to public colleges because it was a better value," said Drew's Baenninger. "You can't be the institution that's left."

More than five years ago, The University of the South, known as Sewanee, adopted a similar strategy, cutting tuition 10 percent, coupled with a guarantee that there would be no tuition increases over the course of four years. (Utica, Stillman and Rosemont colleges, among a few others, have since done tuition resets as well.)

"This was not an act of desperation, it was a strategic decision to grow the student body without diminishing the applicant pool," said John McCardell, Sewanee's vice chancellor and president.

In the year that followed, the number of applicants nearly doubled and the school's selectivity went to 40 percent from 60 percent, according to McCardell. Since then, "the credentials presented by the entering class have strengthened year to year," he said.

More from College Game Plan:
Student loan balances hit record $1.4 trillion
Last-minute tips for paying for college
Free college keeps growing as Arkansas, Indiana, Montana and Rhode Island join in

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