How Private Universities are Operated – Part 2

Assessing Student Expectations

In the previous blog post, we noted that the institutional culture of a private university often reflects the principles and fundamental beliefs of its founder and/or most influential leader, and that virtually every other notable characteristic of a university flows from, and is a manifestation of, its institutional culture.

One subtle yet key culture-driven characteristic of every university, whether private or public, is its unique set of institutional expectations—including those which the university has for its students, and those which the students have for the institution.

In private universities, institutional expectations for students get spelled out in the mission statement, strategic plan, course catalog, student handbook, website and many other university publications.  On the other hand, the expectations which students have for the institution are rarely catalogued in that way, but are nevertheless readily knowable—assuming that the institution cares to know what they are.

National publications for university professionals frequently conduct and report on surveys of student expectations over a wide range of issues.  In addition to publications, one of the best known, longest running and nationally normed surveys directly available to colleges and universities is the ACT Student Satisfaction Survey.  Because its survey results are nationally normed, it is possible for any university that administers the survey to learn, not only how its students rate various academic and student-life services and amenities, but also how its students’ level of satisfaction, item by item as well as overall, compares to the national average of hundreds of other universities that administered the same survey.

Private universities, by their very nature, must be carefully attuned to the expectations of their students because of the highly contentious nature of the market in which they must compete in order to recruit and retain students.  One recent measure of that competition is the increasing “tuition discount” which private colleges and universities are now offering to students, just to maintain their current enrollments.

Tuition Discounts

NACUBO, the National Association of College and University Business Officers, issued a report on May 6, 2013 which stated that, between 2000 and 2012, the average tuition discount for freshman at private colleges and universities in America increased from 37% to 45%, where the tuition discount is defined as the total institutional grant dollars awarded as a percentage of gross tuition and fee revenue.

Very simply, it means that, in 2012, for every dollar of tuition and fee revenue it collected, the institution gave back 45 cents in “institutional grants,” also referred to loosely as “scholarships.”

That private universities would offer such large average discounts may be mystifying until one realizes that, despite the high discounts, the average net tuition and fee revenue from first-time, full-time freshmen—that is, the amount of money available for the universities to spend after providing such large discounts to incoming students—still increased slightly year over year: by 1.8% between 2008 and 2009, and by 2.8% between 2009 and 2010.

There is no mystery as to how tuition discounting works, once one understands that it only works when there would otherwise be empty seats—and lost revenue—if those discounted seats hadn’t been filled.  Just as with airlines and hotels, it is better to collect half the sticker price at the last moment, than to let classroom seats, airplane seats or hotel rooms remain empty.

It also means that, despite the official tuition sticker price, or airline fare, or hotel rate, not all students, flyers or hotel guests pay the same bottom line.       

It is also clear from the history of tuition discounting in this difficult economy that one of the clear expectations that students have for private universities is a willingness to provide adequate financial aid.

A Lifelong Relationship

Another key expectation of private university students is that their alma mater will not only provide them with an excellent education at a price they can afford, but that it will also help them with lifelong career assistance and networking opportunities—in exchange for the student’s lifelong commitment to support their alma mater by giving of their time, talent and treasure. 

The fact that private universities, on the average, tend to have the highest Alumni Participation Rates (APR) where APR = # of alumni donors as a % of all alumni, suggests that the quality of the relationship between private universities and their students is the key to that success.  The willingness of private university students to become and remain loyal and generous alumni in such high numbers points to their undergraduate experience as the source of that obvious affection.  Private universities have historically earned that loyalty, generosity and affection through what are described today as “Student Philanthropy” programs.  And privatized ‘public’ universities would be wise to follow their example.

Clearly, private universities know what key expectations their students have for them and, more than that, the evidence shows that these universities are also meeting or exceeding those expectations.