Illustrations by David Vogin.
Illustrations by David Vogin.

What Price College?

With rapidly rising tuition rates, national concerns about student-loan debt, and widely varying financial-aid options, families are discovering that getting into college may be less of a hurdle than figuring out how to pay for it.
September 12, 2013

Toward the end of a 2012 college tour that took them to nearly a dozen schools, including Auburn, Emory, Duke, Northwestern, William and Mary, and the University of North Carolina at Chapel Hill, David Williamson ’87 turned to his oldest son, Cameron, and asked which schools were the top contenders.

“I don’t even know why that is relevant,” Cameron said, “until we know what kind of scholarships I might get.”

David was shocked by his son’s answer. “I’m a bit more tolerant of debt than my wife; she was ambivalent about Cam even looking at many of the schools on his list for fear that he’d fall in love with one that he would be unable to attend due to expense. My approach was more one of ‘look everywhere, apply anywhere, then see what comes in—you never know what will happen.’ We had already had more than one conversation about it. But the fact that he had internalized that to the point that he couldn’t even rank his top five without that caveat blew me away.”

With four intellectually ambitious children who are likely to pursue graduate or professional school, the Williamsons weren’t just weighing what it would cost to send Cameron to college. They faced the probability of financing more than a decade’s worth of higher education by the time all four were fully launched professionally.

“When you think about investing what amounts to a quarter of a million dollars for one child to go to an elite institution like Duke, and multiply that times four children, you really have to weigh the pluses and minuses,” says Williamson.

Cameron’s caution proved prescient. Duke offered him admission to the Class of 2016 but no financial aid. Emory offered a full Woodruff merit scholarship, worth two years at its Oxford campus followed by two years at its Atlanta campus. And at that point, says Williamson, the decision-making became easy. Cameron is pursuing a major in political science with a minor in economics at Oxford College, where he is the student government president.

As tuition rates continue to climb faster than both the rate of inflation and average family income, families like the Williamsons are asking themselves tough questions. Can we afford to send our children to Duke, where the total cost including room and board for 2013-14, could be more than $58,000? Is the value of an elite private education significantly better than at a state school, which costs appreciably less? How much debt will our child or family have to incur? Will we qualify for financial aid?

In 2001-02, Duke spent $30.7 million on undergraduate need. In 2012-13, that figure had climbed to more than $132 million.

According to a 2013 Lumina Foundation and Gallup poll, Americans are nearly unanimous in agreeing that having a degree beyond high school is important, particularly as it correlates to better jobs and higher income. A 2011 study by the U.S. Census Bureau confirms this perception: A college graduate with a bachelor’s degree can expect to earn $1 million more over the course of her lifetime than someone with just a high-school diploma.

Yet the country’s slow recovery from the 2008 financial crisis has made many Americans cautious about making major investments, including the often high-ticket cost of higher education. Adding to the anxiety are a host of related economic issues—rising student debt loads, discouraging employment prospects for recent graduates, and consumer confusion about the comparative value and expected outcomes of the educational offerings available—private vs. public, for-profit vs. nonprofit, community college vs. four-year institutions.

In his address to the Academic Council this past May, President Richard H. Brodhead acknowledged this intense scrutiny on the price, purpose, and promise of higher education. “The value of higher education has been put in question as it rarely has been before,” he said. “This is not a bad thing. Many legitimate questions are being asked, the status quo is very far from ideal—and since higher education today is assuredly creating the future we will live with tomorrow, this is a matter of the most critical importance.”

Duke in the Higher Ed Ecosystem

Private nonprofit institutions range from small liberal-arts colleges to major research universities. Currently there are about 1,600 private, nonprofit institutions nationwide, enrolling a total of 3.4 million students. At the top end of this cohort are the elite private research institutions that include Duke, Stanford, Harvard, MIT, Yale, and Princeton.

Despite the current economic climate, these schools have seen admissions applications continue to climb, even with “sticker price” tuition rates above the $40,000 mark. (Interestingly, none of these schools are among the twenty most expensive institutions, which include New York University, Harvey Mudd College, Bard College, and Rensselaer Polytechnic Institute.)

That’s true at Duke, where the number of applicants for undergraduate admission grew from 20,000 to almost 32,000 during the recession and its aftermath. Duke’s dean of undergraduate admissions, Christoph Guttentag, has worked in the field for more than thirty years. “Every time tuition at private colleges hits a five- or ten-thousand-dollar mark, there’s speculation that it’s reached a point where people will no longer pay,” he says. “Duke, like other selective colleges, has so far been unaffected because of our ability to offer strong financial-aid packages and because people understand the value of an education like ours. But we’re in a fortunate situation, and many colleges don’t have all the advantages we do.”

College counselors advise families to focus on an institution’s net price, rather than its sticker price, when comparing costs. The net price is the amount a family is expected to pay after any grants or scholarships are applied to the sticker price. This past February, the White House launched its College Scorecard, which provides data about graduation and loan-default rates, the median amount students borrow, and net price, among other measures. Duke’s average net price is $22,879—a decrease of 9.3 percent between 2007 and 2009.

Still, no one is claiming a Duke education is cheap. “People ask why Duke is so expensive, and the answer is pretty straightforward,” says vice provost and dean of undergraduate education Steve Nowicki. “We pride ourselves on having an eight-to-one student-faculty ratio, 70 percent of our classes have twenty or fewer students, and more than half of our undergraduates engage in some kind of faculty-mentored research while they are here. This kind of higher education is a very labor-intensive enterprise, offered by highly trained and skilled professionals. And the personalized form of education Duke provides, by some of the most accomplished researchers and scholars, costs money because it is so labor-intensive.”

Calculating Costs: Apples to Oranges

In her role as director of the Duke Alumni Association’s admissions program, Carole LeVine ’86 talks to hundreds of families a year who hope to send their children to their alma mater.

“It’s not unusual for me to hear stories from alumni where another school has offered their child a scholarship or additional financial support,” she says. “Students who are admitted to Duke are often strong candidates for merit scholarships at other schools. And some schools are able to provide additional financial assistance that Duke is not able to offer.”

The result, says LeVine, is that alumni parents and their children may struggle with the decision to accept a scholarship opportunity or a more robust financial-aid package over attending Duke with less financial assistance. “For many families, the hope of continuing the Duke tradition has been a part of their lives for eighteen years. In a matter of a few weeks, between the time admissions decisions are posted and an offer has to be accepted, the prospect of the next generation attending Duke may quickly fade.”

Aspiring college students and their families spend years navigating the college admissions process. Today’s students typically apply to a range of institutions, from the so-called safety schools where they have a good chance of being accepted, to the “stretch” schools that are more academically competitive, and a number of midrange institutions in between.

Except for perhaps the wealthiest families, the question of cost is a key factor shaping where to apply and matriculate. Two-thirds of all full-time students in the U.S. receive some form of grant aid, so families are eager to learn what their financial-aid awards will be, the better to understand the actual net cost of attending a particular school.

But calculations of net price, and types of financial aid available, can vary widely from institution to institution, sometimes by $10,000 or more. Students don’t learn the actual amount of financial aid they can expect to receive until they are offered admission. Thus, the exhilaration of being accepted to one’s dream school might be deflated quickly by an offer of minimal financial aid—or no aid at all.

“There is a lot of anxiety about how to pay for college, because you really can’t figure that out until it’s upon you,” says Alison Rabil, vice provost and director of financial aid. “It’s a complicated process. Some schools just ask families to fill out the FAFSA form”—the standard Free Application for Federal Student Aid—“while other places, including Duke, ask for additional information. And then each institution calculates aid differently. For example, some schools expect a larger financial contribution from the student than others. Or they may take into account a family’s high medical expenses or private-school tuitions for siblings, while others don’t.”

Since 2011, any postsecondary institution that receives federal student aid has been required to post a net-price calculator on its website. This tool is supposed to help prospective students determine how much they might be expected to pay after any loans, scholarships, or income from work-study jobs are deducted from the sticker price.

But formula-generated figures based on estimates can be deceptive. On the online forum College Confidential, parents and students share frustrations about some of the vaguely worded terms used in the formulas and what they mean from school to school. There also is speculation that calculations tend to skew toward more generous packages than schools eventually award, with the rationale being that schools don’t want to dissuade applicants. As one college financial coach told The Wall Street Journal, “It sets expectations that might lead people to think they can afford something they can’t.”

Financial Aid at Duke

Duke maintains a need-blind admissions policy for U.S. citizens and permanent legal residents, meaning that these applicants are considered without regard to their financial situation. International students are treated somewhat differently, depending on whether they plan to apply for financial aid. Because non-U.S. citizens are ineligible to receive federal aid, they typically cost the university more money than U.S. citizens. Since federal aid is not available, international applicants indicate on their applications whether they plan to apply for aid. Those who don’t are put into the regular admission pool; those who do are considered separately.

In addition to Duke’s need-blind admissions policy, the institution promises to meet 100 percent of demonstrated need for all admitted students. Demonstrated need is calculated by subtracting the expected family contribution (EFC) from the total cost of attendance, which includes room and board, tuition, books, and personal expenses. Families earning less than $60,000 are not expected to make a family contribution. For those above that threshold who apply for financial aid, the EFC can be sobering.

“We pay for lower-income students to a large extent, and higher-income families are able to afford the total cost, but it’s the families in the middle who are really feeling the squeeze,” says Rabil. “Unfortunately, we see a lot of middle-class families who have not saved enough for college or who are expecting to pay for college from their salary or maybe home equity. And that just won’t cut it. You can’t start saving when your child starts high school and expect to have enough to pay for college. Saving for college is a long-term proposition.”

Currently, 45 percent of Duke’s undergraduates receive some form of need-based aid, while a much smaller percentage receive merit scholarships (3.1 percent) and athletic scholarships (3.7 percent). For those families that receive no financial aid, some are paying the total cost, while others take out second mortgages or private loans, borrow from grandparents, dip into retirement plans, or arrange payment plans that will take years to pay back. These include many families that consider themselves middle class or upper-middle class, falling somewhere in the range of roughly $75,000-$150,000. Yet, according to the U.S. Census Bureau, the median family income in 2012 was $50,054. Families earning more than $150,000 annually are among the top 5 percent nationally; those earning more than $250,000 are in the top 1 percent.

Students don’t learn the actual amount of financial aid they can expect to receive until they are offered admission. Thus, the exhilaration of being accepted to one’s dream school might be deflated quickly by an offer of minimal financial aid—or no aid at all.

Rabil says the goal of her office is to make it possible for every student exceptional enough to gain admission to attend. “That doesn’t mean it’s easy. There are families who are mad at Duke because we didn’t give them a big financial-aid package and decide it’s not worth it to them to invest money in a Duke education. That’s a choice they have to make.”

She is quick to note, however, that she and her financial-aid team meet with far more families who are grateful for the assistance Duke can provide. “We see ourselves as providing opportunity and access to families who might not otherwise be able to consider a Duke education. We’re the ones cheering the loudest at graduation, because we know that there was no way that student could have come to Duke had it not been for the financial-aid package we were able to offer.”

That’s been the case for Jania Ramos ’14, who came to the U.S. from Cuba in 2002, when she was ten years old. During the summer between fourth and fifth grade, Ramos taught herself English while her mother worked long hours at a minimum-wage job. By the time school started that fall, Ramos was keeping up with, and soon surpassing, her American classmates.

When it came time to think about college, Ramos knew that her path to higher education would come down to how much financial aid an institution could offer. Her mother had landed a better job, working at a company that makes bulletproof vests for the military, but there was still no way her income could begin to cover the costs of college. On a spring day in April 2010, Ramos learned that she’d been accepted to Duke and would receive a full financial-aid package. The first time she set foot on campus was that fall, when she and her mother made the fourteen-hour drive from Coconut Creek, Florida, to Durham for freshman orientation.

Throughout her time at Duke, Ramos has availed herself of every opportunity she can. She’s been premed since freshman year (she’s wanted to be a doctor for as long as she can remember) and has shadowed Duke physicians specializing in pediatric emergency medicine and neurology. Through DukeEngage, she helped launch an education program for children at Durham’s El Centro Hispano and studied health disparities in South Africa. As a member of the student-led Duke Global Brigades, she has helped deliver health-care supplies and care to underserved communities in Panama and Honduras. She studied physics at the Duke Marine Lab and worked in associate professor of evolutionary anthropology Brian Hare’s Canine Cognition Lab. And she’s managed to make time for club volleyball and learn the Lindy and the Charleston through Duke Swing, the student swing-dancing club. (She’s the Duke Swing president this year.)

“I can’t imagine what my life would have been like if I had not come to Duke,” she says. “My mom went through so much to get us to the United States so that I could get a good education. I’ve been very lucky, but I’ve also worked very hard.” After taking a gap year, Ramos plans to apply to medical school with a long-term goal of working in emergency medicine or global health.

In 2001-02, Duke spent $30.7 million on undergraduate need-based aid; in 2012-13, that figure had climbed to $132 million. Part of the escalation was due to enhancements that Duke made for students receiving financial aid. Duke now covers housing costs for financial-aid recipients, regardless of their room choice (single or double, apartment or residence hall, and so forth). Aid packages also cover additional course fees above and beyond tuition—spring-break research trips that are part of a class syllabus, for example— as well as the equivalent of two summer semesters of academic enhancement— summer classes, research opportunities, or internships, for example. Duke also provides health insurance for those who have inadequate coverage or none at all.

“We want to make sure that every student at Duke has the same chances and opportunities as every other student,” says Rabil.

To sustain its commitment, Duke launched, in 2007, the Financial Aid Initiative, which raised more than $308 million for student-aid endowment. (Although that endowment, like others, lost value during the economic downturn, it has since regained much if not all of what was lost.) The current Duke Forward campaign has a $230 million goal for financial aid. And donors such as Bruce ’77 and Martha Karsh have deepened the pool of endowment funds available. To date, the Karshes have donated $85 million for undergraduate financial aid, which includes $20 million for international students.

Rabil says that institutional support, even in the midst of other cutbacks, is a testament to the promise that Duke has made to the accomplished students who secure an admissions offer. “During those years when Duke administrators implemented a hiring freeze, offered early retirement to reduce the number of staff, and did not award raises to any employees, my budget for student financial aid went up,” she says. “The university has made a huge commitment to making sure that the very best students can afford to come here. So that commitment to financial aid feeds directly into our institutional commitment to diversity, access to education, and equity—things that we as an institution value.”

Debt Perspectives

For families and students who must take out loans, apprehension about student debt is understandable. The most recent estimates show student borrowing through federal and private loans to be close to $1 trillion. That figure includes graduate and professional-school students, and students at all institutions, including community colleges and for-profit schools.

While news accounts of students working multiple minimum-wage jobs to pay back loans of $50,000 (or more) are starkly sobering, the reality of what most students face is not quite as alarming. According to the College Board Advocacy & Policy Center, the average student-loan balance for all age groups in the first quarter of 2012 was $24,301. For bachelor’s-degree recipients, median debt was about $7,960 at public four-year institutions, $17,040 at private not-for-profit four-year institutions, and $31,190 at for-profit institutions.

Duke caps the amount of loans that it asks students to incur at $5,000 a year. While students and families may choose to incur additional debt on their own, the average debt for Duke undergraduates is still well below the national average, at around $19,000. And they rarely default on their loans—only 1 percent default within three years of entering repayment, compared with 13.4 percent nationally.

Ellie Shockley ’06 says that her estimated debt at graduation was one of the key factors for accepting Duke’s admissions offer over those from the University of Virginia and Vanderbilt. “Even though Duke’s tuition was higher, I could tell that I would have to incur loans at the other schools that would ultimately have led me to graduate with more debt. So I had to balance the prospect of paying less in the short run, or earning a Duke degree that would carry with it the prestige that would pay off in long-term job possibilities.”

In addition to the loans she took out, Shockley received financial aid and worked various jobs throughout her undergraduate career. Currently she is completing her doctoral degree in social psychology at the University of Chicago, with a research focus on social identity, political psychology, and social cognition, and hopes to land a faculty position in academia.

Dean Steve Nowicki says that asking families or students to incur a maximum of $20,000 of debt in packaged loans might sound daunting, but it’s important to put the figure in perspective. “If the debt you have for a college education is about the same as the debt you would have for buying a new car, that seems okay—especially since the car depreciates and the education does not. But we do see families who haven’t saved much for college who take out big loans and go into debt to send their child here. We can’t tell them not to do that. That is a value decision that every family has to make for itself.”

Worth the Cost?

While Duke’s graduation rate (94 percent) and average student debt upon graduation are much better than national averages, assessing the value prospect of a college degree is more complicated and nuanced than simply comparing those indices. Institutionally, and through membership in COFHE (the Consortium on Financing Higher Education), a group of thirty-one highly selective private colleges, Duke tracks a much broader array of metrics. Duke asks seniors and alumni to indicate their level of satisfaction about various aspects of their Duke experience, and the results are consistently and overwhelmingly positive.

For example, Duke surveys alumni at various intervals following graduation (five years, ten years, and so forth) to assess how alumni value their education over time. The most recent results, which polled members of the classes of ’89, ’99, and ’04, show that roughly 92 percent are very or generally satisfied with their Duke education. And parents of current students are pleased, too. In 2012, nearly 94 percent of all Duke parents reported being very or generally satisfied with their child’s education.

Ultimately, every family has to make choices about higher education based on what it values and what it can afford. “Education is the single most valuable thing a family can give its child,” says President Brodhead. “It remains true that the best and brightest students and their families want the rich educational experience that a Duke education provides.”

But the investment works both ways, he notes. Duke takes a chance on every student it admits, from those who pay full fare to those who qualify for full financial aid. For Ph.D. candidate Ellie Shockley, whose family income from her parents’ jobs as a carpenter and nurse didn’t come close to covering Duke’s sticker price, that investment transformed the trajectory of her life. “It completely changed me as a person. At Duke, I was immersed in a culture filled with smart, interesting people who were totally different from the people I grew up with. And I had access to faculty and research opportunities that set me on the career path I’m on now. I would do it all over again.”

Duke's Tuition and Cost of Attendance | Ten Year History

Onward and upward: Tuition costs contribute to—but do not cover—institutional enhancements such as hiring top-tier faculty members and implementing new technologies; the cost of attendance includes housing, meals, and mandatory fees. 

Commitment to Undergraduate Financial Aid | Ten-Year History

Intentional investment: Duke expanded its financial-aid packages just as the economy faltered in 2008, resulting in greater expenditures as more families have applied for financial aid. 

Distribution of Net Tuition Paid by Duke Students | 2012-13 Academic Year

Sliding scale: In 2012-13, about 55 percent of students paid full tuition and 45 percent paid less than full tuition, with 20 percent paying no net tuition. The data exclude students who received only federal aid, who did not attend the entire academic year, or who received athletic or merit scholarships.