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University Offers Explanation for Annual Tuition Increases

As students enter the spring semester at Monmouth University, many are aware of and concerned about what often seems like an inevitable tuition increase. 

According to William Craig, CPA, Vice President for Finance, for the past four or five years, University tuition has increased by just approximately four percent each year. Prior years saw tuition increases closer to four and a half to five percent.

“In the case of Monmouth University specifically, we are extremely tuition and student revenue dependent,” explained Craig. “Tuition alone accounts for 80 percent of our revenues… If you add in room, board, and books the school is 93 percent student revenue driven.”

According to Craig, other private schools similar to the University in size are more likely to be 60 percent student tuition driven, and are more assisted by endowment funds that have grown throughout the history of the institution.

“A lot of schools have these endowment funds that have built up over long periods of time, and the revenue from that can be used to partially support their budgets. Our endowment today is somewhere around $94 million,” Craig explained. “For a school of our size, that isn’t that large, and that puts us in a position that, as costs go up, a lot of it falls on tuition revenue.”

“From the standpoint of the endowment, the endowment assets that we have per student – our average would have been around $13,000 per student. The national average is closer to $22,000 per student,” he continued. While Craig explained that the figures may be slightly out of date since annual data is not immediately available, he added that growing the endowment is a long process because of its complexity.

While raising tuition helps grow the endowment, Craig also explained that the increases are used to benefit students and faculty, as well as other members of the University community.

Some of the increased tuition rates are due to competitive markets and increased financial aid packages.

The average is closer to 22,000 per student,” he continued. While Craig explained that the figures may be slightly out of date since annual data is not immediately available, he added that growing the endowment is a long process because of its complexity.

While raising tuition helps grow the endowment, Craig also explained that the increases are used to benefit students and faculty, as well as other members of the University community. Some of the increased tuition rates are due to competitive markets and increased financial aid packages.

According to Claire Alasio, Director of Financial Aid and Associate Vice President for Enrollment Management, the total amount of scholarship and grants in 2016 was $58.6 million, increasing more than $19 million from 2012, when it was $39.5 million. The average scholarship/grant package also rose from $8,982 to $12,279 in the same period. The average financial aid package per student, including all scholarships, grants, loans, and employment awarded, is $29,408.

“In order to be competitive as the market for students is narrowing, schools are becoming more competitive and making larger financial aid awards,” Craig said. “What that does is it narrows the money that you get to keep out of tuition to use to pay for the operations of the University.”

Craig explained that universities are also highly-people oriented.

“It’s compensation and salaries. Better than 60 percent of the costs of the University are related to salaries and fringe benefits,” Craig said. “Generally, salaries are going to go up each year, and so that’s another cost that needs to be covered. One of the big drivers on the compensation side hasn’t even been salaries, but the cost of medical insurance. Those numbers have climbed significantly.” 

Other costs credited for rising tuition rates included the physical maintenance of the campus and its facilities, as well as maintaining student amenities including wireless internet, cable television, and other technological operations. 

Lynn Petrovich, CPA, has been doing research on Form 990s and non-profit entities for over a decade, and has been volunteering at Jersey Shore tax clinics for 15 years, examined the Monmouth University Form 990s and tax information leading up to a Nov. 30 talk she held at the University. Her examination of the forms, which are filed to the IRS for informational purposes, found that between 2012 and 2015, the University made approximately 98 million dollars in what is known as excess revenue.

“Pretty much what I see, across the board, with regard to tax-exempt higher education gouging students, it’s not uncommon for non-profit entities or state entities to just be stockpiling cash away and raise tuition at the same time,” she said. “That’s pretty common. And [I believe] that’s criminal, because it’s forcing students to pay more when they actually have money that could mitigate some of the tuition that’s there… They don’t call it profit, they call it excess revenue, but if it were Microsoft or if it were GE, it would be profit.”

“The financial statements summarize all the fiscal activities of the University,” explained Craig. “This includes the operating budget, which is largely the piece funded from student revenues, including tuition. But it also includes funds received from external donors that are restricted to activities not funded with the operating budget.”

Non-funded items would include gifts and grants given to support academic programs in addition to their budget funding, as well as funding scholarships, research, endowments, and capital projects. According to Craig, in the past 10 years 18 million dollars has been received in endowment gifts, and over 27 million dollars of what has been spent on capital projects comes from gifts and grants. Much of the new campus construction has also been funded by a combination of gifts and set-aside University funds.

“Since budgets are estimates based on many assumptions, excesses of revenues over expenditures can occur in the operating budget for a number of reasons,” Craig explained. “For example, if enrollment comes in higher than projected, if planned salary positions aren’t filled or if projected expenses are less than planned, unexpended balances are generated. In addition to these, the budget is developed each year with a contingency amount built in to protect against unforeseen issues that may arise.”

Budget balances are reviewed by the University Board of Trustees at the end of the year, and decisions are made on their allocation. According to Craig, excesses are usually added to the endowment or used toward funding capital projects, allowing the University to minimize the use of debt for projects.

“I sent a letter to Monmouth in December expressing several concerns including the yearly profit, the compensation to adjunct professors, the increase in tuition, access to the campus calendar, etc.,” said Petrovich, who attended Monmouth University as a part-time student in the 1980s and 1990s, graduating in 1993. “Monmouth sent me a letter in return. They did not acknowledge tuition increases of four percent per year, but did say scholarships also increased by about seven percent.”

Petrovich’s letter, sent to University President Grey Dimenna, Esq. on Dec. 9, 2017, received a response from John Christopher, J.D., University Vice President and General Counsel, on Dec. 20.

“The issues you raised are significantly more complicated than stated in the couple of paragraphs in your letter,” said Christopher’s response, provided by Petrovich. “Specifically, the University is a not-for-profit organization and as such has not accumulated any “profit” as asserted. Revenues received are put to use for the benefit of students in the form of facilities improvements, increased scholarships, and a variety of other ways.”

According to the response, Monmouth has also been ranked at or near the top of the Federal Fiscal Responsibility Calculation, calculated by the United States Department of Education, for more than a decade.

However, there is some disagreement about whether the rising tuition rates benefit the faculty and students.

“It is hard to justify increases in tuition in higher education today,” said Marina Vujnovic, Ph.D., Vice Chair of the Monmouth University Faculty Council and the Corporate and Public Communication Program Director. “I believe it is becoming irresponsible to keep increasing tuition while income in America is stagnating. People are graduating with enormous debt. The question becomes: are we selling education or debt? It is an unsustainable model.”

According to Monmouth University’s 2015 Form 990, a total of 108,338,043 was spent on salaries and compensations for the University’s 3,537 employees. Nearly 5 percent of the total was paid to just fifteen employees, thirteen of which are administrators.

According to the Chronicle of Higher Education, which catalogues data for public and private colleges, Paul Brown, Ph.D., the former President of Monmouth University, received a salary of $698,887 in 2015, the most recent year available. In 2014, he had made $676,564, a severe jump from his 2013 salary of $243,201.

“As far as allocation goes, it is not a secret that universities have experienced an administrative bloat,” said Vujnovic, who is also an associate professor of communication. “There are good things that are funded from tuition money, but what justifies enormous increases in administrative overhead and administrative pay? We should all ask ourselves: is this fair? Is it sustainable?”

According to the Monmouth University Facts In Brief promotional materials, the University had 975 full time employees, including in 2017, along with 452 part-time employees. However, of those numbers, only 310 full-time and 365 part-time employees were faculty. According to Christopher’s letter to Petrovich, “adjunct professors generally earn between three thousand and six thousand dollars for each three credit course, depending upon the discipline and their credentials.”

“I don’t know that the tuition increases are going to the benefit of the student, or to the benefit of the professors,” said Lorna Schmidt, Director of Advising. “Can I say that they don’t – you know, add classes or increase equipment, have better equipment available to students, things like that? I don’t know. But it doesn’t feel like it does. It feels more like there are more people hired to do other work. As we like to say in communication, it’s all about perception. The audience can only receive a perceived message. That’s the perception that is out there.”

According to both Craig and Alasio, the University attempts to off-set costs as much as possible by offering various forms of financial aid to students. Financial aid, which includes scholarships, grants, loans, and work-study employment, can come from a variety of sources, including the federal or state government, the University itself, or private outside sources. According to Alasio, awards are given on the basis of either academic achievement, financial need, “some other special characteristic”, or a combination.

“During 2016-2016, 4,771 undergraduate students received some form of financial aid; this represents 95 percent of undergraduate students,” said Alasio. “Monmouth University has attempted to mitigate the impact of tuition increases by significantly expanding the amount of scholarships and grants offered to students.”

However, while tuition increases on an annual basis, some scholarships may not.

“Tuition affects all students,” Petrovich said. “Scholarships do not. They are handed out based on certain criteria (athletic, academic, need), and they may be heavily lopsided towards athletics (a full athletic scholarship could tilt the percentage toward sports, and that doesn’t help the average student.”

“There are slight increases (about 200 – 300 dollars) to federal and state grant funds each year,” said Alasio. “Monmouth University grants and scholarship amounts are guaranteed throughout the duration of the student’s enrollment, provided that the student maintains the required level of academic performance. We believe that this allows families to count on a certain dollar amount each year, and plan their finances accordingly. Before they enroll, students are advised of the guaranteed, fixed amount in multiple formats.”

According to Alasio, approximately 64 percent of Monmouth students take out student loans, with an average loan package of $7,977.

“On average, Monmouth University students graduate with approximately 28,000 dollars in federal student loan debt,” Alasio said. “This is significantly lower than at private colleges and universities nationally, where 75 percent of students graduate with an average debt of 32,300 dollars.”

“I see so much student loan debt,” Petrovich said, of her work with the tax clinics. “I see senior citizens who have their Social Security garnished for old federal debt. I had an 80 year old guy come in this tax season, 80 years old. He was in subsidized housing. The only reason be came in is because he had a little W-2 and a third of his Social Security was garnished for an old federal loan that he took out for his daughter. It’s just a black hole.”

“Most students do not have unlimited resources and must consider cost as a factor in their decision-making process for choosing where they will enroll,” said Alasio. “The cost of doing business or simply keeping the lights on has gone up and so must tuition. We make sure that prospective students are clearly informed of their out-of-pocket costs (cost minus financial aid) very early on in the decision making process. Even with early and clear information, there are some students who sadly cannot afford the cost of a private education at Monmouth University and choose to enroll elsewhere.”

“If you went on The Chronicle of Higher Education, where they have everybody’s tuition rates every year and you looked, you would hardly find any place that, in a given year, doesn’t have a tuition increase,” said Craig. “The costs to operate go up, and the source of revenue is the students. The challenge is how do you do the things that are necessary to provide the environment that the students need, and to provide the services that the students need, and keep the cost increases under control.”

Form 990s and other informational tax information is considered public record and is available online. Those interested can go to guidestar.org, which offers free access to a variety of up-to-date information about non-profit entities.