Tuition benefits at other Universities

I posted this on Duke’s tuition benefit for children of employees yesterday. As people send me info on similar benefits from other Universities, I will add them to this post. North Carolina public universities have no such tuition/college benefit of any type (that I know of).

  • University of Chicago covers tuition at any college or University up to 100% of the University of Chicago’s tuition ($43,581 for 2012-13 academic year).  Thus, the maximum benefit of U of Chicago’s tuition benefit (also tax free) is about $10,000 more per year than is Duke’s, (~$32,000 this year) and further, it is a first dollar benefit so could be used to pay in-state tuition at a place like University of Illinois where tuition ranges from ~$11,000-$16,000/ year depending upon campus and program. Cost of attendance at University of Illinois campus is ~$30,000 full freight, but with Univ of Chicago tuition benefits would be between $15,000-$20,000. Lower mark is less than full freight at UNC, with top one about the same.
  • Stanford’s tuition benefit covers up to 50% of Stanford’s tuition ($20,625 max benefit for 2012-13). Like U Chicago’s tuition only, but much more straightforward (no deductible, would reduce cost of in-state options), though as most already know, UNC’s tuition for 2012-13 of $5,824 for 2012-13 is very low compared to other public Universities (UCLA’s is $12,686 for this coming year). However, Stanford’s benefit would pay the entirety of UCLAs tuition for a faculty brat leaving ~cost of attendance at around $10,000, whereas Duke’s would pay zero for UNC, leaving cost of attendance at $20,000.

Duke’s tuition benefit

Benefits are an important reason that employees value jobs, and Duke University’s tuition benefit for the children of employees is an example of one that makes Duke an attractive place to work. Interestingly, my experience is that outsiders greatly over-estimate the value of the benefit, as do many employees with young children.

To whit, I was at a social gathering the other night and someone said “it must be so great working at Duke since your kids can go to college for free!?” That is, of course, not true, but I was armed with more facts than before because I have a daughter who is a rising senior in high school, and so I am paying great attention to such issues. The actual tuition benefit goes like this (for 2 children, with each getting 8 semesters of coverage; I have 3 kids).

  • I pay a deductible equal to $2,912/semester (this deductible is 50 cents more than UNC-Chapel Hill’s tuition per semester for this year, the most expensive state school in NC)
  • After the deductible I can receive up to 75% of Duke’s tuition to go toward tuition at Duke or another University, ($15,865.50/semester or $31,731/year).

My daughter is interested in Barnard so I work through that example here, and it is what I am trying to plan on because it is about as expensive as they come, so if she goes somewhere else (the list of possibles is long at this point) it will be less. Barnard’s tuition for 2012-13 is $20,925/semester, so I would pay $2,912 (deductible) + $2,147.50 ($20,925-$2,912-$15,865.50)= $5,059.50 x 2 =$10,119 for a full year in tuition. Mandatory fees are $1,652/year and a shared dorm room is $8,240/year. Freshmen at Barnard must purchase a full meal plan which comes to $5,570/year. I can cover her on my health insurance plan, so she wouldn’t have to pay the $1,280 student health insurance fee. So, we are up to Duke paying $31,731 toward tuition for a full year at 2012-13 prices and I/we would be responsible for:

  • $10,119 tuition
  • $15,462 in fees, room and board

Not sure exactly how much to estimate for other expenses, but I have heard uttered from my daughter’s lips the phrase “it would be so cool to be able to go see Wicked on broadway on the weekends!” so I will say $10,000/year which would give Barnard at cost of attendance of about $65,000/year.

So, if you are looking for a bottom line of what the Duke tuition benefit covers:

  • The cost of attendance at UNC* or NC State is about $20,000/year for N.C. residents (other state schools are less). If my child went there, I would have to pay the full cost because the per semester deductible for the Duke tuition benefit is set at just above the cost of tuition at these Universities.
  • Or my child could go to a school like Barnard (or other private university) with me/us paying $30,000-$35,000/year depending on cost of living, fees and room and board (and Duke paying ~$32,000/year).

If a child obtains scholarships for tuition, that reduces Duke’s tuition benefit. If a kid gets an undeclared scholarship it can be applied to room and board without reducing Duke’s benefit. In the end, the benefit is a far cry from “your kid goes to college for free” it is more like “your kid can go to a private school for about half price or about 50% more than UNC” which is still a valuable benefit. And I understand the benefit to somehow be tax free, which means that it would take on the order of ~$45,000 in income to produce that purchasing power, of course depending on your tax bracket.

The Duke tuition benefit is a valuable one to employees. However, it is unclear to me why so many people think the benefit is much more lucrative than it actually is.

*I went to UNC. Three times.

The ‘net cost’ of college

Brad Plummer notes that the net cost of college is not as high as the sticker price. Duke’s cost of attendance is around $59,000 for next year, but how many students can expect to pay that? About half of the undergrads paid full freight during the 2010-11 school year:

About 45% of the undergrads received need based financial aid, and a small number of students attended Duke on a full ride merit, or an athletic scholarship.

The breakdown of how much need based aid was received by the median need based financial aid recipient in 2010-11 looked like this:

Note: I believe that the average total aid received by income includes the merit aid awards as well as need based financial aid.  I am also not sure if the figures above include the zeros of the half of students not receiving any aid. One of the issues that could arise is that you end up with a mean amount of aid that actually does not really describe many students if you have some paying the full price, while others receive a large amount of aid. The worry might be the crowding out of the “middle” which would likely represent a higher income than most uses of the term middle income.

Recent posts on related topics: here and here.

More on is college worth it

OK, so this stuff is everywhere. Maybe a tipping point, or maybe just the recession has just made people pay more attention to what they got for their student loans, or maybe a simple sweeps month link to graduations.

Past stuff I have written on this down the path here.

The confluence of two factors made me start thinking about this: first, serving on the executive committee of the Sanford School of Public Policy several years ago during a period of budget cutting, and looking more closely at the the cost side of our academic enterprise. Second, having an 11th grader and helping (watching?) her think about where she wants to go to college, and listening to college tours through the ears of a parent. In doing this, I found myself say (silently, I value my relationship with my daughter) Bullshit! quite a lot.

When I wrote that college tuition was a bubble, I was (and am) mostly thinking of the cost side of the college equation. There are many key issues, but I think the bottom line is that there are many things that are being done by research universities that are cross-subsidized in non transparent ways. I am less sure about small, teaching-focused liberal arts schools, meaning I just don’t know much about the cost side of their equation. My bottom line to my friends and colleagues in the academy is that we had better get out front of this and take seriously the notion that there may not always be an unlimited supply of people willing to pay the full freight private University tuition, especially at lower ranked ones with less expansive financial aid than the Ivies, etc.

Does where you go to college matter?

Derek Thompson in the Atlantic has the story, at least if earnings is the standard:

Past posts riffing on the general topic of is college worth it/tuition costs are a bubble: here, here, and here.

More on college tuition as a bubble

I blogged a couple weeks back about the similarity of college tuition and health care costs (up, up, up). I then linked to story about High Point University, and its highly leveraged play to recruit students.

There were several interesting comments about these stories, and many others are weighing in on related issues lately (Josh Barro, Ezra Klein, I am sure there are more).

My main thought about the escalation of college costs and worrying if it is “a bubble” is as a producer of college, a Professor; I worry that the cost structure of what we produce is too high, and that Universities will be too slow to adapt. I suspect that universities will have to look for non-traditional ways to generate revenue from non traditional students. The move toward providing free on line classes could be understood as a back door way of doing this by saying yes we are expensive, but we are providing benefit to those who cannot pay, get in, or who don’t want to do so, making the myriad subsidies “worth it”.

A series of important questions are relevant, many of which were raised by commenters to my post and to others.

  • What is the goal of college? (better educated citizenry, get a job, mixture) This story of Duke Classics professor Peter Burian retiring after 44 years is interesting and relevant to this discussion. I sense a shift at Duke anyway toward the purpose of college being a credential for a job.
  • How should the research mission of major Research universities be paid for? It it generally a given in a place like Duke that researchers bring something extra to the classroom because of their research work? Is this true? Does it make sense for researchers to teach undergraduates?
  • What is the value of colleges to the taxpayers who subsidize us in many ways, but whose children will not go to college? This question is especially important for public Universities.
  • Just as Harvard and MIT moving to provide free online courses, with Stanford having done similar will lead to copy cats (there has been discussion at Duke). Any move made by the so-called SHYMPs (Stanford, Harvard, Yale, MIT, Princeton) will have great impact, especially on places like Duke that are below these in prestige. I suspect one of these 5 will someday soon drastically cut tuition for everyone. The actual average amount of tuition received per pupil might not change much given financial aid, but this will have cascading effects for other private Universities, who don’t have as large an endowment as those 5.

In addition to the fact that both tuition and health care have risen consistently faster than other parts of the economy for many years, I think there is a similar avoidance of the hard questions this fact raises by those producing/providing these services. In short, neither Professors in the case of college, nor doctors and other leaders in health care want to focus on the notion that there is likely a cost side problem in our enterprise. I think we in universities better get out in front and not simply defend the status quo. That is what I meant by college tuition as a bubble.

Bubble U: High Point University?

Carol Matlack has a story in BusinessWeek in which she refers to High Point University as “BubbleU” due to the aggressive capital expenditures and highly leveraged finances of the private school in High Point, N.C. This caught my attention since I wrote about college tuition as “the next bubble.

As an aside, there are several Duke connections in this story. Dr. Daniel Erb has gone to High Point University to start the School of Health Sciences. And Plato S. Wilson for whom the School of Commerce at High Point University is named, is a graduate of Duke and is the benefactor of a Trinity Scholarship at Duke (which covers tuition, room and board and mandatory fees) that is reserved for a student from High Point, N.C.

Is this story a matter of a small town, down on its luck being revitalized by the local university and townspeople who are willing to invest their money in their town, or the creation of BubbleU? Time will tell.


The next bubble, college tuition edition

David Brooks makes several good points while asking the basic question of whether the cost of college is worth it. Money quote:

This is an unstable situation. At some point, parents are going to decide that $160,000 is too high a price if all you get is an empty credential and a fancy car-window sticker.

Of course, if you are pricing Duke for little Johnny, you recognize $160,000 as a bargain (the cost of attendance for Duke is $59,343 for 2012-13; our expansive financial aid policies are contained in the link).

I think the practical definition of a bubble is people are rushing to desperately spend their money on something up until the moment where almost no one is willing (or able) to do so. You don’t really know it was a bubble until it pops, but you can likely get some hints. This chart from mymoneyblog may be a hint of sorts.

I have an 11th grader and now view college tuition from a slightly less theoretical perspective, and a month ago we went to New York City visiting colleges, and have since visited more, with more to come.  At the first visit, a parent said her kids’ first choice was Duke, so I wasn’t about to identify myself as a professor at Duke, and I have discovered that answering the question, “what do you do?” by saying “I am a teacher” is a good neutral way to engage the other parents on college tours without being asked to write a letter of recommendation for a kid you have never met. Under this guise, it has been fascinating listening to the parents talk about what they expect in terms of student/faculty interaction. (The list of possible schools constructed by my daughter is nearly schizophrenic in terms of how different they are as institutions, but I have mostly been shutting up and trying to listen to her with lots of encouragement along these lines from my wife).

We have visited small liberal arts schools and major research Universities. The oddest thing has been my general take that parents seem to expect the same type of interaction between students at professors at both types of institutions. I can see upsides of both types of schools, but both the amount and type of interaction between students and professors differs; they aren’t offering the same thing. When figuring out if something is “worth it” you need to understand what it is that you are about to purchase.

update: this is cross posted at the Reality Based Community and this comment is a fair and important point.