(MENAFN- ValueWalk) The majority of colleges and universities increase their tuition like clockwork, a report shows. In state University tuition have been the most, significantly . But the trend is starting to slow. In fact, a Moody's report out September 25 highlighted colleges who are part of a trend towards significantly lowering their tuition costs – a trend that can be perilous if not properly handled.
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Harvard University tuition times over since the 1971-72 school year to just over $45,000 in 2015. Meanwhile, consumer prices increased near five times since then, according to the Bureau of Labor Statistics.
But it's not just elite schools seeing witnessing their tuition prices soar. During the 2007-2008 school year, the average state school tuition cost $6,468. That price tag has jumped to $10,691 for the 2017 – 2018 school year, a 65% increase – outpacing the 55% increase in private schools and once again higher than consumer inflation.
Some state schools were required to raise prices as government funding was cut, but for other schools, as they outsource teaching to non-professorial individuals at a lower cost, the reasons for cost continued cost increases are less clear. Some say the proliferation of has dramatically increased demand, allowing universities to charge higher rates.
Nonetheless, the trend isn't going away anytime soon, says Kim Dancy, a senior policy analyst in higher education at Washington, D.C.-based New America. "Overall, the change in sticker price happened primarily during the recession, but there's sort of an inflationary increase that will happen every year of up to 1% to 4%,' she told U.S. News. 'But during the recession, the average increases were much higher than that, particularly among four-year public institutions."
But is that trend of University tuition increases, in certain situations, may be coming to an end as supply meets .
Facing steep competition from area schools, small Drew University in New Jersey cut the sticker price for colleges by 20%, bringing the annual cost to $38,668, a Moody's report noted.
In addition to dropping prices, Drew invested in the college experience. It renovated the dining hall, admission buildings and international student center. The resulting improvements were notable. The freshman to sophomore retention rate was up 12% to 87% for fall 2017 and a 27% increase in freshmen and transfer students was the result.
'We expect that there will be more small private colleges following this strategy over the next several years as competition for students becomes even more fierce and colleges seek to improve transparency around college costs,' Moody's analyst Edith Behr, Susan Fitzgerald and Kendra Smith wrote.
But simply cutting University tuition might not be the answer for schools witnessing enrollment declines, as the perceived value declines as well.
'While headline grabbing, a tuition reset usually will not fundamentally improve the competitive profile of a college unless accompanied by programmatic and capital investments that increase the appeal of the college and the perceived value proposition for students,' the report noted.
While Drew University combined tuition drops with campus improvements, some schools are dramatically cutting University tuition without improving their product.
Small liberal arts college Birmingham-Southern College announced earlier this month it was lowering advertised tuition by 50% starting fall of 2018. While this might result in an increase in students, it typically brings in those that normally couldn't afford to pay full price.
'Radical pricing shifts can also substantially alter the economic profile of students who apply and enroll,' the report noted. In fact Moody's notes that while the recent market trends are positive for the school's sheet in the short term, 'they may not be sustainable and the university continues to face considerable challenges.'
So while there appear to be cracks in the trend of never-ending University tuition price increases, those colleges that engage in such a strategy need to balance perceived product quality and walk a tightrope in doing so.
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