You've probably heard of the oldest college in the United States, Harvard University. But you may not have heard of the third-oldest, St. John's College.
Founded in 1696, St. John's is a private liberal arts college with a emphasis on classical philosophy and literature. The school has two campuses, one in Annapolis, Maryland and one in Santa Fe, New Mexico, which enroll a total of 896 graduate and undergraduate students. All classes are taught seminar-style, and students do not have majors.
Last week, St. John's announced it would be slashing its tuition for the 2019 - 2020 school year by roughly 33 percent, from $52,000 to $35,000.
"'Prestige pricing' is the belief that families equate a high price with high quality," Mark Roosevelt, president of St. John's College (SJC) tells CNBC Make It. "But the reality is most students can't begin to afford these ridiculously high prices and colleges are already offering vast discounts to make the tuition even close to accessible, often before ever knowing a student's financial circumstances.
"This creates a cycle of increasing tuition prices and subsequent increasing discounts given behind closed doors, where colleges find themselves in a pricing trap from which there seems to be no escape, and neither the college nor the student benefits."
He notes that over the past two decades, the "sticker price" of attending St. John's rose 163 percent.
In order to afford this dramatic cut, St. John's is launching a $300-million capital campaign and changing its funding model from tuition-centered to philanthropy-centered. School officials report that the cost of educating a student at St. John's is actually $60,000 a year, and the concept is to use the funds raising through a philanthropic campaign to counter-balance those costs.
The difficulty with this new model is that it requires significant fundraising and generous donors. If St. John's meets this ambitious $300 million fundraising goal by 2023, it will have doubled its endowment. Though St. John's has already received a $50 million matching donation, it's an ambitious campaign for an institution of its size.
Roosevelt says that switching to this new model is both the right thing to do for students and for the fiscal health of the college. He says that 10 years ago, 70 percent of college costs could be covered by "student-derived revenue" but by 2017, that figure was closer to 40 percent, a trend that has forced other schools to increase tuition.
"Our new philanthropy-centered financial model recognizes the reality of the diminishing role of student-derived revenue and the negative effects of an ever-increasing sticker price," says Roosevelt. "This is the right model for us. Perhaps it is not right for every college, but if we can strike even a small blow against escalating tuitions, that will be an added benefit of our action."
As impressive as a 33 percent cut may be, there's still room for improvement when it comes to increasing accessibility. According to most recent figures from The College Board the average cost of tuition, fees, room and board at a four-year private college is just $34,740. But when you consider fees plus room and board, the total cost of attending St. John's is closer to $49,270.
"We recognize $35,000 is still high for many families," says Roosevelt, who believes this new model will also allow the school to increase financial aid.
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