New program locks in MSU tuition costs

The university’s Board of Governors on March 10 approved and set rates for the Choice and Predictability in Tuition program, or CAP-IT, beginning in the 2006–2007 school year.

For the first time at MSU, students will have the option of locking in a tuition rate for two years, avoiding the inevitable tuition increase in the second year and, ultimately, saving some money. The lock-in rate will be slightly higher than the current tuition rate but is expected to be lower than the second year’s rate, said MSU Chief Financial Officer Kent Kay.

Tuition increases at MSU are expected each year, as inflation takes it toll and cuts are made to state and federal contributions. Tuition has increased an average of 7.85 percent a year since 2003.

“One of the comments that’s made regularly is, ‘What is it going to cost me next year?’” Kay said. “We’re trying to give students some choices, because today’s student likes to have choices and a little bit of predictability.”

The Missouri-resident-student cost per credit hour for the 2006–2007 school year will be $173 for Missouri residents and is predicted to rise to about $182 for the 2007-2008 school year, a 5.2 percent increase. Under the two-year fixed tuition plan, the rate would be locked at $176 per credit hour for both years.

For 30 credit hours at $182 per credit hour, in-state students would pay $5,460, compared to $5,280 for 30 credit hours at the locked-in rate.

Also part of the CAP-IT program is the prepayment plan, allowing students to prepay tuition for two, three or four years at a fixed rate. Prepayment could result in savings of up to several thousand dollars.

Mike Barnett, MSU student body president, said he’s heard mostly positive feedback from students.

“One of the biggest problems is not having any idea how much your education is going to cost when you start,” he said. “With this program, you can know for sure and have that planning ability.”

However, the program won’t be right for everyone, Barnett said. While some are willing to lock in at a slightly higher rate because they assume tuition will increase, others would rather take their chances.

“Some people think there isn’t a sizable enough cost savings, or that the predictability is not really important to them, for whatever reason,” he said.

Investments risk

While CAP-IT is intended to save students money, MSU officials are hoping to make a little money from the program.

Kay said the university plans to invest the revenue from the two payment plans – particularly the prepayment option – and possibly turn a profit. The additional funding would, at the least, offset any lost funding that could result from students who lock in lower tuition rates, if the investments are successful.

“We’ll have to identify the income generated off of those students and we’ll have to invest that money,” Kay said. “We’re taking the risk on the investment market.”

Kay said he doesn’t anticipate any resentment from students who don’t utilize CAP-IT and pay more than students who do take part in the program. He compares the situation to a student who receives a scholarship and one who doesn’t, while both receive the same student benefits and campus programs.

Other elements of MSU’s CAP-IT program include a stronger emphasis on keeping students on a four-year track to graduation and a more aggressive financial aid program – allocating as much as $1 million extra in aid next year – to help students save money. Details of both initiatives are still in planning phases, Kay said.

A trend in the making

Other local universities have yet to implement similar payment plans, though officials at both Evangel and Drury universities say there’s always discussion about ways of making tuition rates more predictable.

While MSU may be ahead of the local curve, universities across the country have been using similar payment options for years.

At Vanderbilt University in Nashville, Tenn., students have been able to lock in a four-year tuition rate since 1988. Patsy Hudson, manager of student accounts at Vanderbilt, said the guaranteed tuition plan is a popular choice.

“(Tuition) goes up every year, and this program does away with that,” she said.

In Illinois, all public universities have been required by law to offer a tuition-lock option since 2004. University of Minnesota, George Washington University and Baylor University, have similar programs.