University could experience tuition slowdown

The University could experience a slowed growth in tuition revenue, a shift that contributed to its decision last month to double its cash reserves.

As enrollment inches closer to the city-imposed population cap, the student body’s growth rate is stabilizing, stifling long-term growth in tuition revenue. The anticipated slowdown led partially to the University taking on more cash, Senior Vice President for Student and Academic Support Services Robert Chernak said.

The University’s admissions, fundraising and research policies are influenced by the cap.

Full-time enrollment for undergraduate and graduate students totaled 16,394 last fall, just 159 students shy of the Foggy Bottom Campus cap. The cap, part of the 2007 Campus Plan, served to quell neighbors’ concerns about a swelling University population.

University officials previously said market conditions made it beneficial to take on the cash, but declined to say specifically why GW needed additional cash beyond enhancing liquidity, or the institution’s ability to quickly pay off debts.

An April 12 Hatchet analysis of market basket schools found that GW is keeping higher cash reserves than its peer institutions, a trend Chernak later attributed in part to the enrollment cap.

The University had about $620 million in cash on hand as of last month.

Executive Vice President and Treasurer Lou Katz said he did not expect tuition revenue to level off due to the enrollment cap, declining to elaborate further. He denied that an anticipated slowdown in tuition revenue played any role in his decision to double cash reserves in March.

Katz the University is forecasting that tuition revenue is expected to grow year over year
6 percent.

Chernak said the “shrewd move” was timed to take advantage of low interest rates, as cash was relatively cheap to acquire and hold while traditional revenue stabilizes.

“Down the road, the University is going to have to develop other sources of revenue,” he said. Chernak, who will retire in June after more than two decades at GW, oversees the offices of financial aid, undergraduate admissions and student life.

Additional revenue brought in each year, “is going to have to come through non-traditional sources,” Chernak said, pointing to fundraising and research grants as possible avenues for money.

Last year, net tuition revenue tallied more than $538 million, according to annual financial reports – a $32 million boost from 2010 – representing nearly half of the University’s total revenue. Investments, grants, contracts, rent and auxiliary enterprises contribute to revenue, though no single category matches a third of tuition income. This year’s report will be released in July at the end of the fiscal year.

The financial pressure of topped-out enrollment has also fueled the growing push for fundraising in recent years, another means of bringing in revenue, Chernak said. Last year, the University raised a record $113 million. The Division of Development and Alumni Relations is designing a comprehensive fundraising campaign, likely to be publicly launched in 2014.

Development is looking to recruit seven-figure donors as well as increase annual alumni giving, a push that will partially fund the $275-million Science and Engineering Hall.

University President Steven Knapp said after February’s Board of Trustees meeting that he hoped growing philanthropy would break GW of its dependence on tuition as its primary source of revenue.

There “is not a lot of flexibility to increase enrollment” even as the University rolls out plans to become more attractive to applicants, Chernak said.

Chernak said one opportunity to rake in tuition dollars comes from encouraging fall study abroad options – which deflate the student population statistics – and by founding international programs. The University’s strategic plan, set to be unveiled at May’s Board of Trustees meeting, will emphasize global partnerships.

The Museum Studies Program became one of several graduate programs to shift off campus this semester to reduce the student count on Foggy Bottom.

The crunch could also lead to future evaluation of the fixed-tuition program, though it’s not currently an option that’s being considered, Chernak said.

The policy ensures undergraduate students a flat tuition rate for up to five years, stifling revenue buildup.

Knapp has focused on minimizing the rate of tuition growth since he began his tenure in 2007. The Board of Trustees set next year’s tuition and fees at $45,780, about 3.7 percent higher than the year before.

Katz also maintained that the University currently has no plans to change the tuition policy.

“Each year, we look anew at our tuition policy,” Katz said in an e-mail. “Fixed tuition is being continued.”

Katz said fixed tuition serves as a comfort to families struggling to plan for college during the recession.

“Anecdotally, we hear from parents and students that knowing what to expect in tuition fees is a help during these especially tough economic times,” he said.

Alongside fixed tuition, the University offers a guaranteed stable financial aid package for the duration of an undergraduate’s term. While the overall pool of institutional aid dollars continues to grow each year, this year’s freshmen were offered fewer dollars on average despite higher demonstrated need.

Katz said previously that the level of financial support offered to students is not sustainable.

This post was updated on April 19, 2012 to reflect the following:
The Hatchet updated this story to reflect new information that was provided after publication.

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