In response to the host of headwinds facing small liberal-arts colleges, Colby-Sawyer College in New London has decided to shake up one of the industry’s long-standing trends: Ever-growing tuition partly offset by ever-growing financial aid.

“Higher education has to get off this train of constantly increasing prices and increasing aid at the same time,” said Colby-Sawyer President Susan Stuebner. “It’s just confusing families. It doesn’t help.”

The school, which has academic roots in town going back 180 years and has been a college for almost a century, recently announced that it was slashing tuition next year by 62% to $17,500, the first such cut in memory. By comparison, a year’s tuition at New England College in Henniker is $40,178.

At the same time, the school is greatly reducing the amount and type of scholarships and other aid that it gives.

This move puts Colby-Sawyer in a small set of colleges trying what is called a tuition reset, in which tuition is cut drastically along with the amount of tuition aid. Stuebner admits the move is not without risks, both to enrollment and to the bottom line, but says it’s needed in the face of New England’s declining number of high-school graduates and national concern about graduate debt loads.

“The demographic cliff is here and going to be with us for years. The trustees have been studying the issue of how do we stay competitive in this environment,” she said. “About 50 schools have done this nationwide, and 91% saw an increase in applications. It’s up to us to work those applications through the funnel.”

All-important discount rate

One of the most important but little-known figures to describe the financial situation of a college or university is the discount rate. This is the average percentage of tuition that is actually paid by undergraduates after grants, fellowships and scholarships are factored in.

A high discount rate indicates that the school has to give a large financial break to get students to enroll.  Many colleges do not release their discount rate, fearing it reflects badly on their reputation.

The average discount rate for U.S. higher education has been climbing for years along with tuition. The National Association of College and University Business Officers says that a survey of 359 private, nonprofit colleges and universities found that in 2021-22 the discount rate hit 49%  for all undergraduates, a record high.

In other words, the cost of going to college is, on average, only half of what it appears to be.

Colleges take this route because it lets them get maximum payment from students who don’t need or can’t meet requirements for student aid. That’s particularly true for foreign students, who had become a vital source of income for U.S. higher education until COVID-19 and geopolitical tension reduced their number.

In recent years Colby-Sawyer has seen its discount rate soar into the 70s, Stuebner said – every one of the roughly 750 undergraduates gets some form of aid – but giving all those breaks isn’t enough to overcome the drawback of having an eye-popping tuition on the website.

“In a 2022 Sallie Mae study, 81% of students dismiss colleges based on the sticker price alone without even asking questions about what financial aid is available,” she said.

This was particularly a problem for Colby-Sawyer because it has one of the highest tuition prices of any similar school in New England. That’s a reflection of moves made after a financial crisis, including a $2.6 million operating loss led to the layoff of 18 employees in 2016.

Possible drawbacks

There are a few reasons more colleges aren’t doing a tuition reset, mostly involving public perception.

For one, the move might set off alarm bells in potential students or their families.

“Sometimes, what they didn’t realize is by cutting your tuition, you might be sending a message of ‘something could potentially be wrong with our financial picture,’ ”Angel Pérez, CEO of the National Association for College Admission Counseling, told Inside Higher Education, an industry publication, in an article about resets.

Then there’s the idea that good schools should be expensive.

“The biggest worry expressed by a few people when we were studying this is the perception that high price equals high quality,” Stuebner said.

Finally, there’s the fact that under the new system Colby-Sawyer will have few financial treats to dangle in front of prospective students as they decide where to go. “There’s something psychologically powerful about receiving a $30,000 merit scholarship,” Stuebner admitted. “People feel good about it.”

Stuebner said the admissions team expects to hear from students – or, more likely, their parents – wanting Colby-Sawyer to match financial aid packages from schools with a higher tuition.

“Our job is to have people focus on the out-of-pocket cost: ‘That aid package is all well and good but how much do you have to pay to actually go there?’ ” Stuebner said.

Stuebner said she doubted that Colby-Sawyer would see much enrollment boost in the first year of the program since many high school seniors are already locked into their college, but that the school was anticipating a big effect starting with the class entering 2024.

Colby-Sawyer’s undergraduate school is entirely residential, with no online courses. Stuebner said there is room to increase that number by around 100 students. “Given this climate you really can’t expect to grow dramatically. We’re trying to grow incrementally.”

The school also has about 250 graduate students, a figure that has grown sharply from just 30 in recent years. They are not being offered a similar tuition cut, and some are online-only students.

Stuebner said the college’s financial problems six years ago may be helping it now because they forced it to go through painful changes that the pandemic is forcing on other schools.

“We’re coming out of COVID stronger than going in,” she said. She pointed to record donations that have roughly doubled the endowment to almost $60 million, although like most small colleges, Colby-Sawyer remains heavily dependent on tuition income to keep going.

Colby-Sawyer has raised $9.6 million to support a new nursing and health sciences building that should open in two years. It has also launched new programs, in part through its partnership with Dartmouth Health, including an online Master of Business Administration geared primarily toward DH employees.

Colby-Sawyer appears to be the first college in New Hampshire and perhaps in New England to try such a radical tuition reset. Stuebner said she doesn’t think they’ll be the last.

“I’m hopeful that more schools will consider this. Higher education needs it," she said.

At the same time, there’s no harm in going first: “We’re excited to be a leader in this right now.”

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