Plans, programs & promises: think there's no way to help your students out of their college finance crunch? Think again. (A University Business Special Section: Student Finance).

As the United States struggles out of an economic downturn, one thing is clear: Financing a college education is becoming more challenging than ever. The College Board estimates that tuition and fees at four-year private institutions jumped 5.8 percent to $18,273 between the 2001-2002 and 2002-2003 academic years, with four-year public tuition fees increasing 9.6 percent to $4,081 over the same period. According to data from the DOE, the average amount borrowed in federal student loans at private, four-year colleges jumped from $14,290 in 1995-96 to $18,000 in 1999-2000--this, before the recession officially began. Borrowing at public, four-year institutions increased from $11,950 to $16,100 over the same period. This translates to an increased load on both students and universities.

"We need to get money into the hands of students who need it," says Marty Guthrie, director of Governmental Affairs for the National Association of Student Financial Aid Administrators (www.nasfaa.org). Financing an education is not only putting greater pressure on students and families seeking better ways to manage their budgets, she says; increased demand for student aid is also creating more work for universities, who are searching for ways to streamline processes, adopt innovative pricing strategies, and use technology to provide faster services. "There's a tension between wanting to simplify things and needing to be accountable," Guthrie adds. Still, colleges are finding their own unique ways of meeting the challenge.

University of Wisconsin-Stout: Streamlining with Technology

Students receiving a refund of the overage from their financial aid award used to be participants in a cumbersome system at the University of Wisconsin-Stout--a system that may sound familiar to many campuses across the nation. Once a student's aid confirmation was received by the financial aid office, the student's account file was sent to the business office. The business office would apply the aid toward any outstanding tuition and fees; then, if the amount of the aid exceeded the amount owed the university, the office would calculate the net to be returned to the student. This would typically occur when the student's aid included money for room and board, and the student chose to live off campus, or when the aid included funds to be used for living. The refund (in the form of a paper check) was then available to the student for pick-up. Routinely, processing time was inconvenient for students who needed the money to pay rent or purchase text books, and the business office became accustomed to long lines of students at the beginning of terms, as it processed and distributed refunds for many of the 7,400 undergraduates on campus.

But much of this changed when the university instituted new services to accompany the student debit/check card, says Joe Krier, director of Budget, Technology, and Campus Card for Student Life Services. Through a partnership with Higher One (www.higherone.com), a "One Card" banking and online funds disbursement provider, most students now see their financial aid refund appear on their Stout One Card automatically, with a minimum of processing time--a matter of hours from confirmation of aid by the university, to deposit of funds to the student's card. There's simply no more standing in line for checks.

The new system of automatic deposit of refunds to the Stout One Card debuted at the university in early 2003. "We basically outsourced check writing for student funds," says Krier. Through the Web-based One Card system, students can request that refunds be posted to the Stout One Card, be transferred to any other bank account, or be sent via paper check to their address. On the back end, the Higher One system integrates with the university's existing Datatel (www.datatel.com) student information system, to provide for automatic updates (to both school and student) of the location of student funds.

As aid dollars are received by the university, they are automatically transferred to Higher One, where each student has an FDIC-insured account to hold the funds for the brief time before distribution. Higher One electronically transfers the money to the student nearly immediately, either making the deposit to the Stout One Card, the bank account, or arranging for a paper check. Students can track the location of their funds over the Web through a site created and maintained by Higher One and branded for the university. Krier receives regular management reports electronically, to allow him to monitor fund movement, as well. And Higher One has also installed ATM machines on campus that are flee for students to use, which means that a credit to the card can be converted quickly into cash if needed to pay rent or other living expenses.

As with all innovations, there has been a period of adjustment. Krier notes that for the first onslaught, "the kids wanted paper checks," as they were accustomed to receiving. But now, almost four months later, nearly two-thirds prefer a direct credit to the Stout One Card. Since the plan's debut at the beginning of the spring term, it has already become a welcome option for the students. Krier expects four out of five students to choose this option within a year or two. And he finds student reaction to the system to be largely positive. "There's always a percentage that doesn't like change," he says, adding that "you only hear when feedback is negative." The office is pretty quiet these days, he hastens to add.

The quiet office may also be an indication of cost savings to come. Krier expects that there will be quantifiable savings over the next year. Much of this may come in the form of reduced need for limited-term or part-time staff, who will no longer be required to handle fund processing and assist the 3,000 students who used to visit the business office at the beginning of each term. Currently, as a beta site for Higher One, the university is receiving free re-carding services, marketing, and Web development through a five-year contract that is a revenue producer for the university.

All this notwithstanding, the immediate benefit of the program, says Krier, is flexibility. "Students have the flexibility to do whatever they want with their money," he says, explaining that the Stout One Card also allows for direct payroll deposit for on-campus and some off-campus jobs, and that it is accepted for payment for all campus functions, such as food services and bookstore charges. Although streamlining the processing of financial aid and other university refunds was a major reason for the adoption of the Stout One card, these additional services give the students even more control over their funds. And Krier says that there is even a program for parents, so that they can transfer money to students at no cost.

For Wisconsin-Stout--the 2002 (and first ever) university winner of the Malcolm Baldrige National Quality Award for performance excellence in organizations--flexibility is the key to making funding easier for students. "It's the wave of the future," Krier says.

Miami University: Better Targeting of State Funds

On its face, it is counter-intuitive to raise the sticker price of a college education as a way to make that education more affordable. But that is just what Miami University in Oxford, Ohio, is planning. Effective for the 2003-2004 academic year, the sticker price for an in-state resident will more than double from the 2002-2003 rate of $8,700 to meet the out-of-state rate of $18,103. "Its not an obvious choice for us," says Miami president James Garland, who adds that the One Tuition plan "represents the fair market value of a Miami education" for the approximately 14,400 undergraduates in attendance.

Like many public, state-assisted institutions, Miami has tong charged out-of-state students a much higher tuition sticker price than it does in-state students, with in-state students reaping the benefit of state subsidies. Out-of-state students have been willing to accept the steeper price tag to attend the university dubbed a "Public Ivy."

Now, Miami plans to return the Ohio subsidies to Ohio students not in the form of tuition differential, but as scholarships. The first--the Ohio Resident Scholarship--will always be equal to or greater than the amount of money that the university receives from the state for each student. The state subsidy is currently close to $4,400 per student, and the scholarship is expected be around $5,000 per.

The second award--the Ohio Leader Scholarship--is designed to fluctuate, to give the university more flexibility in targeting middle- and lower-income students who may not otherwise attend Miami. For example, the Ohio Leader Scholarship for a student from an upper-income family (as defined by financial need) may result in that family paying $1,000 more per year than it would have under the old tuition plan. That $1,000 then becomes available to target students at lower family-contribution levels. "Initially, we're keeping the spread pretty small," Garland says. In the first years, he says, the spread will be around $1,000, eventually growing to as much as $3,000.

The new plan makes mathematical sense. "We have an unusually affluent student body for a public institution," Garland points out, adding that "the yield curve is very flat for upper-income families." Thus, he maintains, changes in tuition of a couple of thousand dollars per year will not deter families with higher income and asset levels from choosing Miami. For affluent families, sensitivity to price increases is low, so an upper-income family typically will not turn down an offer of admission to Miami because of a relatively small increase in price.

But on the other end of the economic spectrum, price sensitivity is great, Garland says; Miami may be losing talented moderate- and lower-income students whose families fall a thousand dollars or so short of paying the annual tuition bill. Students from such families are especially inclined to be swayed by price when choosing a college, he says. By diverting a projected $1,000 dollars per student from the economic top third of Miami's approximately 2,400 in-state students per class year, the university would be able to offer $3.2 million dollars in scholarships to target those middle- and tower-income students.

That $3.2 million impact is typically one that universities only see from dramatic increases in their endowment. Miami's current endowment of $95 million generates an approximate 5 percent return, yielding $4.75 million in scholarships each year. To generate an additional $3.2 million, the university would need to add a whopping $64 million to its endowment. What's more, says Miami's president, better targeting of the $3.2 million in state funds will have a more immediate impact than a long-term capital campaign to raise endowment levels.

Then there's the regional impact: Not only will the Ohio Leader Scholarship have a need component, it will also offer a modest reward for students whose career plans include fields that Ohio particularly needs. For example, says Garland, a student with high math aptitude who wishes to be a math teacher could find that the university "may sweeten the pot a little" to reward the student for his plans, given the need for qualified teachers nationwide and in Ohio specifically. But this decision will be made at the time of acceptance and generation of financial aid offers. "We want to avoid having a list of 'approved' majors," says Garland.

For the 2003-2004 academic year, the new tuition plan will be a paper change only. Ohio students will see the new, higher tuition rate, but their scholarship awards will automatically take that figure back to the traditional in-state amount. For example, an Ohio student will see the $18,103 tuition figure reflected on her 2003-2004 bill, but will also see a $5,000 Ohio Resident Scholarship and an Ohio Leader Scholarship of around $3,600 to bring the total tuition back to the approximately $9,500 level that in-state tuition would have been had tuition plans remained the same and typical annual increases taken place. "Financially, it will have no impact," Garland says, but the paper change will "reinforce in [students'] minds what the fair market value of [a Miami University] education is." Beginning in the fall of 2004, the first variances in the Ohio Leader Scholarship will appear.

Will in-state students begin to avoid Miami because of "sticker shock"? "We are worried about that. It's a business risk," Garland readily admits. Until the plan establishes a track record, he says, the university will depend upon good relationships with its Ohio feeder schools to spread the word of the benefits of the new plan. Garland expects that a short-term decrease in application volume could be followed by an increase in applications in later years.

Though the plan was approved by Miami's board of trustees in late April, there is still political work to be done, says Garland. Some Ohio state legislators remain unconvinced that the plan is the best move for the university and the state, and Garland acknowledges that "the burden is on us to explain." But he is convinced that this more complex plan will bring added flexibility to the university and an increased ability to attract quality students regardless of family economic level "We're raising tuition by more than 100 percent to make the university more affordable," he quips.

Pace University: Stable Prices, Available Classes

For many students and families, the challenge of affording cortege does not end when the student is admitted. Rising tuition prices, changes in financial aid packages, and competition for seats in required classes that means additional semesters to graduate can make funding an education difficult--or impossible. "As each year has gone on ... a tot of students have been leaving because of tuition increases," says David Caputo, president of Pace University in New York City. Even with annual university tuition increases of 5 to 6 percent, which Caputo terms "modest," some of the middle- and lower-income families of the 8,900 undergraduate students at the university were finding it difficult to fit a college education into their budgets.

So, beginning with the Fall 2003 term, Pace has instituted a tuition guarantee program that states that students will pay a tuition price that stays steady throughout up to five years of study, as long as the student remains enrolled. "Whatever the undergraduate tuition is the day you enter, that's what you will pay," says Caputo. The university believes that this plan, which will apply immediately to all enrolled students, is unique among the small number of tuition guarantee programs in the nation. Other guarantee plans require either an opt-in from the students or payment of a fee.

Not only will students pay a constant tuition figure, they will also receive a constant needs-based financial aid package, so long as financial need (as calculated by the federal formula) does not change. This means that, barring any major family changes like the addition or loss of a family member's job, the entry of a sibling into college, or any major event that would change the family's expected contribution as determined by the FAFSA, each Pace student will know in advance the total amount of financial aid available to her each year. With constant dollar amounts available, figuring out the price of an education is now much easier, says Caputo.

But what about the specter of closed courses that haunts students and keeps some from graduating in a timely manner? "A major concern for students is that they can't get into required courses," concedes Caputo. But that's why Pace is also instituting the Pace Promise, he adds. Basically, the Promise states that a student who takes responsibility for planning his education will be able to finish in a timely manner. "If you get appropriate academic counseling and maintain good academic standing and declare a major by the beginning of sophomore year, you will graduate in four years," Caputo declares. (One proviso: For some majors, such as many of the hard sciences, completion of certain core courses during the freshman year is essential for graduation in four years, Students who declare or change majors after the beginning of the sophomore year are not guaranteed graduation with four years of study).

But, what happens to a student facing a closed required class? Pace will assist a student in registering for that class by adding extra seats in an existing class or opening another section to accommodate the overload, says the president. Further, a day student will not be forced to enroll in a night section, or vice versa, in order to take that needed course. What about a student who wants to change majors from literature to pre-med? As long as even this drastic change is made before sophomore year, the Promise is still in force, says Caputo.

Certainty, all of these promises place an increased burden on Pace to manage its resources effectively. Yet, departments are not receiving additional funding to hire more faculty or to pay overload stipends to fulfill the Pace Promise. "The charge to the academic dean is, 'This is something you must manage,'" says Caputo, adding that he hopes the plan will "teach a level of accountability" to the departments; he hopes that they will learn they cannot accept more majors than they can educate in a timely manner. And departments may need to make some tough decisions about faculty scheduling, such as not offering seldom-requested, smart-attendance courses. In that way, they can free up faculty for more high-demand classes.

Caputo insists that the university as a whole can no longer count on yearly across-the-board tuition increases to meet rising costs. "[This] forces us to plan very carefully," he explains. The university must learn to "meet future expenses strategically" through better long-range planning and budgeting, he maintains.

So far, students and families have greeted these plans with enthusiasm. "Everyone has been very appreciative that tuition will not change," Caputo says. After all, he adds, "We're taking the financial uncertainty out of education."