By Jilian Mincer and Stephanie Simon
(Reuters) - Even before President Barack Obama announced plans last month to push colleges to improve affordability, a number of schools beat him to the punch by lowering tuition and helping students graduate in fewer semesters.
These schools -- typically small private colleges like University of Charleston, Cabrini College and Midland University that lack the cachet of top-tier colleges and compete with less expensive state schools -- are bucking the widespread trend of increasing costs. In the last year, a few have cut tuition by as much as 20 percent. Others promise that students will earn their degree in four years or the college will pick up the cost of additional coursework.
While there's no hard data, dozens of schools already have cut costs or implemented graduation guarantees. More such initiatives are expected to be announced this spring.
Such programs have clearly intrigued students and parents, but skeptics fear they may have a negative impact on the quality of education.
Promising a cheaper, quicker education will "invite institutions to take shortcuts," says Richard Arum, a sociology and education professor at New York University. The temptation, he said, would be to make courses less rigorous, hire fewer top-notch faculty and pack more students into each class. "If you don't also focus on quality, you risk contributing to this downward spiral in the quality of undergraduate education," Arum says.
Arum adds that the most elite private schools are not rolling back tuition, for fear of cheapening their brands. Even in this rough economy, plenty of students are willing to pay for the cachet of prestigious degrees. "The Harvard, the Yale, the New York University brands ... they don't need to do that, and they're not doing that," Arum says.
But colleges that have taken these measures say they're not cutting corners -- just costs, especially for middle-class, middle-of-the-pack students who may not be eligible for either need-based or merit-based financial aid.
Before the financial crisis, many families tapped home equity and borrowed heavily to pay escalating tuition costs, but that became far more difficult in 2008 when credit markets tightened. With the job market miserable, students also became much more concerned about carrying student-loan debt.
"We knew we were pricing ourselves out of the market," says Lee Ann Afton-Backlund, dean of admission and financial aid at The University of the South, a small liberal arts school in Sewanee, Tennessee.
The university, widely known as Sewanee, cut tuition by 10 percent last year, from $46,112 to $41,518, and has pledged to freeze the rate next year for current students.
The University of Charleston in West Virginia recently announced an even bigger cut: It will lower tuition by 22 percent next year, to $19,500 from $25,000.
"We decided, let's have an advertised price that's closer to the real price," says Edward H. Welch, president of university, which serves nearly 1,400 undergraduates.
Welch says his board decided to lower costs after 42 students left their deposits on the table for the 2011-2012 school year and instead decided in August to attend less expensive schools.
Nationwide, 13 percent of college freshmen say they ended up at their current school in large measure because they couldn't afford their first choice, according to a new study by University of California, Los Angeles (UCLA). More than 40 percent say tuition costs were a "very important" factor as they weighed their college options.
Obama highlighted the issue in his State of the Union speech on January 24, and a few days later detailed his plans to use federal aid as a lever to prod colleges to become more affordable.
A COMPETITIVE MARKET SWAYING STUDENTS
At Sewanee, which lowered its tuition last fall, the reaction was immediate. Campus visits shot up 60 percent, applications climbed 20 percent this year to 3,200 (as of February 1). Many alumni and families were pleased with the lower tuition, and contributions to the annual fund hit $3.487 million -- the second-highest in Sewanee history.
The price drop made a difference to Jimmy Szewczyk, 19, a freshman from Pittsburgh, Pennsylvania, who attends Sewanee. It also impressed his parents, he says. "It made them feel much more comfortable with the school," he says. "I was going to a school that cares about how much we had to pay."
High-school senior Abby Forren, 17, of Oak Hill, West Virginia, says the price cut at the University of Charleston prompted her to apply, though she had originally planned to target only public schools with lower prices. "I was so excited to be able to afford such a good college," she says. "It made a big difference. I didn't have to opt for plan B."
There is, to be sure, a price to be paid for lower tuition: some schools are increasing class size and eliminating academic departments with low enrollments. William Peace University in Raleigh, North Carolina, cut tuition by 7.7 percent for 2012-13 and is freezing room and board, but dropped less popular programs like classical music performance.
Some schools that lower tuition are also decreasing the amount of merit aid they offer, though such aid is a key to attracting top-flight students and bolstering a college's ranking on lists like the one published by U.S. News & World Report.
THE NEW FOUR-YEAR PUSH
Colleges also are aiming to help families cut costs by getting students in and out more quickly. Only about half the students at private non-profit colleges graduate within four years.
Administrators at Medaille College in Buffalo, New York, rolled out a four-year graduation guarantee -- which will take effect next fall -- as a way to distinguish the small private college from more than a dozen rivals in the area.
"Competition is fierce," said Greg Florczak, a vice president at Medaille, which serves 1,700 undergraduates.
Prospective students typically ask two questions when visiting campus, Florczak said: Will I actually graduate in four years? And can you promise I'll land a job?
"It's very difficult to answer the second question," Florczak says. "But we wanted to ensure an answer to the first. To be able to say to students and parents, 'We guarantee it' gives them peace of mind."
As with most graduation guarantees, Medaille's plan requires students to declare a major before sophomore year, enroll in all required classes, take a full course load and maintain passing grades. If they do all that and still can't finish their degree in four years, Medaille will cover tuition - about $10,800 per semester - until they do graduate.
About half of Medaille's 1,700 undergraduates typically earn their degree in four years. Even among those who successfully complete their freshman and sophomore years, just 70 percent graduate on time. To boost that number, administrators plan a whole lot of hand-holding.
The college just opened a $3.5 million "Student Success Center" connected to faculty offices so that a professor concerned about a student's progress can literally walk him down the hall to consult with a guidance counselor, academic tutor, or career mentor. Counting on students to make such appointments on their own doesn't work, Florczak says.
While they praise the goal, skeptics argue that guaranteeing a degree in four years "creates an incentive to pass everybody, and that damages academic quality," says Jane Shaw, president of the John W. Pope Center for Higher Education Policy in Raleigh, North Carolina. "It's a little scary."
College administrators say that is not a risk because the guarantees are structured so that they only apply to students who pass all their classes. If a student fails a course, the college is not on the hook to cover additional tuition.
At Midland University in Fremont, Nebraska, President Ben Sasse believes he can boost graduation rates with some common-sense tinkering.
Sasse says Midland's 930 undergraduates often had a tough time fitting in required courses because so many professors scheduled their lectures in the same mid-morning time slots. So he worked with faculty to spread out their classes. "There's no reason that problem had to exist," Sasse says.
(Editing by Lauren Young, Linda Stern and Andrea Evans)