Concordia University tuition gamble paying off

Two years after Concordia University announced a massive tuition cut, the school has enjoyed its second consecutive enrollment jump — suggesting that its bold experiment in college finance is paying off.

Officials at the St. Paul school say it is coming out ahead financially and better positioning itself as a viable alternative to public universities, which are traditionally seen as less expensive.

Concordia administrators say the move makes the pricing system more transparent at a time when families are struggling to understand the cost of college.

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"We are very happy with the response," President Tom Ries said. "It has fit our strategy and position in the marketplace just perfectly."

The university made national headlines in December 2012 when it announced it would slash tuition by a third — from $29,700 a year to $19,700.

That made its published tuition the lowest among 17 of the state's leading nonprofit private colleges.

Until then, Concordia, like many colleges and universities around the country, had engaged to a high degree in "discounting," a process in which it listed high tuition prices but offered students lots of financial aid to compensate.

Although Concordia's list price was $29,700, almost no students paid the full amount. Instead, Ries said, the school ended up giving away about half its tuition revenue in the form of financial aid.

But Ries said he worried that high sticker prices were driving away potential students who took them at face value.

"Sometimes," he said, "families would say, 'Well, gee, it's so much more expensive — on the surface — to attend Concordia. We'd love to consider a private education, but we'll just choose the public option."

For the cut to pay for itself, Concordia officials determined that the university needed to increase its next fall enrollment by 24 students.

It ended up admitting far more — 165 — a number Ries called "out of this world" for a college of about 1,200 undergraduate students.

A year later, after a 2.8 percent tuition increase, Concordia's fall enrollment is up again — about 140 more than its traditional average. That bump is lower than last year's, but still far above normal.

The larger student body has brought in another $2 million a year for Concordia, Ries said.

And the average student, he said, is still paying less than he did under the old system.

A student who received financial aid used to pay about $15,000 a year net on average. Under the new system — which still offers financial aid, albeit a lower amount — the average student is paying about $13,800 net this year.

"It has been a big win all the way around," Ries said.

The cut helped lure Concordia sophomore Hector Leon of Columbia Heights, who is earning a dual degree in applied math and computer hardware engineering.

Leon, who heard about the tuition cut through a friend, said it played a big role in his decision to attend Concordia over some state-run universities he'd looked at.

Concordia did become being a little more expensive than the public schools, Leon said, "but I've really come to like it. ... I've really gotten that one-on-one experience [with faculty]."

Despite its success, Concordia is still an outlier — both nationally and in Minnesota. Only two dozen or so have made such cuts in the past five years.

"I don't think it's a general strategy for most colleges," said James H. Day, managing director at Hardwick Day, a higher-education consulting firm in Minneapolis.

A lot of schools enroll many more full-pay students than Concordia did, he said, so slashing tuition across the board would cut into their revenue too much.

When it comes to keeping college affordable, Day said, "there's going to be more cost-cutting than there is price-cutting."

In Minnesota, only the for-profit Rasmussen College joined Concordia. In January 2013 it rolled out an average tuition cut of 12 percent across its network — and 18 percent in Minnesota.

Rasmussen CEO Tom Slagle said enrollment spiked after the announcement, but only for about a quarter. After the college added a new scholarship, Rasmussen ended the year with enrollment up about 3 percent — an accomplishment, Slagle said, in a sector that posted an average decline of about 9 percent.

As for Concordia, Ries sees no more tuition cuts for his school — just moderate tuition increases to keep it as affordable as possible.

"Our goal," he said, "is to remain the most affordable private college option in the state."