Jennifer Fleming's second-semester tuition bill was a happy occasion. That's because her college, Marlboro, a nontraditional school in Vermont, decided to cut tuition by $1,500 last year. "You can't imagine how thrilled my father was when our bill actually decreased after the first semester and stayed the same thereafter," says Fleming. Not only did Marlboro reduce its tuition from $20,400 to $18,900 in order to attract more middle-income students, but the college also promised to keep the lid on tuition, increase merit aid and lower the amount of borrowing required. Fleming estimates the tuition and aid changes will save her $10,000 over four years.

Hallelujah! The new age of largesse, or at least moderation, is upon us...for a while anyway. After decades of spiraling increases, tuitions are settling down and in a few cases even sliding backward. This year prices rose on average less than 5%, the lowest rate of increase in 12 years, according to the College Board. For private colleges, the average 4.6% increase was the lowest in 27 years.

Tuition restraint has come none too soon, as fees have doubled since 1980. In the period from 1990 to 1996 alone, tuition rose 44%, while the median household income increased just 13.8%, according to General Accounting Office statistics. We can thank the robust economy for much of the slowdown. The booming stock market has helped fill college endowments and state coffers to the brim. What's more, many colleges — concerned by possible repercussions from government and public outrage over high prices — have been implementing creative cost-containment measures.

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The problem has been, in part, that colleges are so darn expensive to run. Tuition increases are typically compared with the rate of inflation — price increases have been running at about 2 percentage points ahead of the Consumer Price Index — but that's not really a fair comparison. The basket of goods and services that make up a college's costs are simply not equivalent to the CPI, says Stanley Ikenberry, president of the American Council on Education (ACE) in Washington. The three biggest costs that colleges must bear are salaries, technology, and library and lab costs — all of which are steeper on average than, say, food or clothing.

Over the past few decades, parental expectations have also risen. Many colleges have felt forced to build luxury dorms, sparkling athletic centers and dazzling technology labs to keep both parents and donors happy. Add this reality to the fact that many states had to cut support for public colleges during the fiscally constrained early '90s, and you have many administrations caught in a fiscal bind. "If they cut back they would be criticized for allowing quality to erode," notes Ikenberry. "One should always expect college tuition and fees to run slightly ahead of inflation."

Luckily, though — just as the pundits were warning that college was becoming hopelessly unaffordable or an expense that would put the middle class into deep debt — the economy picked up steam, and the bounty has begun to spill over to college budgets. Endowments more than tripled from 1990 to 1999, growing at a healthy rate of 12.9% annually, at the 367 schools surveyed by National Association of College and University Business Officers.

Endowments are usually earmarked for special projects or scholarships, but recently some schools have started to dip into their nest eggs to offset tuitions. Williams College announced earlier this year that it would keep its tuition, room, board and fees unchanged for the coming year. The college's attention-getting move — no other school of its caliber has taken such action — was in direct response to the school's swelling treasure chest. Williams' endowment rose from $333 million to $1 billion over the past decade, while tuition and fees went from $20,760 to a frightening $31,520. "This seemed like a year where we could afford to hold the line on tuition and share some of our increased wealth with our current students," says Williams' provost Catharine Hill.

Other highly selective college have made concessions as well, though none yet of Williams' magnitude. Dartmouth and Brown are holding tuition increases to just 3.5% and 4% respectively this year, the lowest percentage increase in more than 30 years. Some institutions have chosen to increase financial aid to help the neediest students, rather than decrease tuition. Wesleyan University announced that it would devote $1.5 million this year to cut by 29% the amount of debt students are expected to shoulder. Rice put a cap of $9,900 on the amount of need-based loans students could take on over four years.

While private schools have been making all the news, public schools have also been paring back on tuition increases. State appropriations for higher education increased steadily in the late '90s; last year they rose an average of 7% nationally. In response, some public systems, like Virginia's, Massachusetts', California's and New York's, have used the revenues to fix or cut tuitions across the board. The California system rolled back its fees to just $1,428 a year, from $1,584 two years ago, and promised this spring to keep prices flat for the next four years. "The legislature wanted to make up for the increases of the mid-'90s when the economy was bad," says Charles Reed, chancellor of the California State University system. "It's a question of access."

Access, in fact, is one of the main reasons Marlboro cut its tuition and boosted merit aid. "Middle-class kids were turning down acceptances," says Marlboro's president Paul LeBlanc. "The No. 1 factor sited was cost." After lowering their pricey tuition to just below $19,000, applications increased and more middle-income students accepted admission than ever before. "It turned the situation around. Our incoming class was 30% larger, and we recruited a better caliber of student."

To fund the cuts, Marlboro didn't reach into its endowment. Instead, the college used $350,000 in surplus revenues from its new graduate center, which offers one of the first e-commerce programs in the country. Amazingly, Marlboro's generosity had a rebound affect. After the tuition cuts were announced, the college received a $12 million grant to fund, among other things, faculty support and student aid.

For many colleges, containing costs, rather than searching for more revenue, has been a priority. Some institutions have banded together to negotiate group discounts on expenses like phone services, electricity and workers compensation policies. Others share resources like admissions, library databases or technology labs. The Associated Colleges of the South, a 15-member group that includes Davidson and Morehouse, created a Virtual Library Project in 1997 that provides an electronic database and a mechanism for member schools to share information with one another. The California state system launched an Internet site three years ago that allows students, parents and high school counselors to access admission and financial-aid information via the Web. Since the site was created, electronic admissions have increased 187% — and saved $3.5 million in the first two years. The site won the American Council on Education's academic excellence and cost management national award this past June.

The consumer outcry over seemingly endless tuition increases has made colleges wary of more government regulation that could result in more paper work and, ironically, more expense. In February the Senate Committee on Governmental Affairs held a two-day hearing on rising college tuition. Though the committee rejected the idea of imposing cost controls, it did consider creating incentives to keep costs in check. The committee also offered rather strong language to colleges. "Are colleges and universities doing everything possible to maximize value for money in education?" questioned William Massy, a higher-education researcher at Stanford University. "The answer is No."

Colleges are becoming much more sensitive to the charge that they cannot manage costs. "Anytime the Federal Government becomes involved, there's a lot of nervousness," says the ACE's Ikenberry. "That's one reason the academic community has been responsive. They want to send a signal." Gordon Winston, director of the Williams Project on the economics of Higher Education, acknowledges that was why he recommended that Williams freeze its tuition. "Elite schools were concerned that that we were annoying the public by automatically raising tuitions," he concedes. "We were forming a problem for ourselves — a political problem. One of the strong schools, like us, should make a gesture that when we have good fortune elsewhere we can make adjustments."

Nor can private colleges afford to antagonize government. Winston conducted a study in the early '90s on the benefit of tax exemptions for private schools and found that Williams' tax benefits were equal to 20% of the college's total budget. "We realized we were playing fast and loose with a significant portion of our income," he says.

In all fairness to higher education, the situation may never have been as dire as the headlines made it out to be. Yes, prices have risen at a breathtaking rate. Today the total cost to attend a four-year private school is $23,651, and $10,909 at a public school. For those who want to go to Harvard or its ilk, the total tab could cost upwards of $120,000. Yet, the truth is that 80% of students attend public schools at which tuition alone averages $3,356 a year, and 55% of public students receive some kind of aid. Sure, that leaves out the additional cost of room, board and fees, but those are charges that students would have to pay even if they weren't in college. Of those students who attend private schools, 80% receive aid that averages about $10,800 a year.

The cries of the media and government officials may have helped bring costs down, but they have also created confusion among consumers. A 1997 study by the ACE found that people overestimate the average price of tuition at four-year public colleges by 212% and at private schools by 31%. "I think it's a real issue that has been blown out of proportion," says Winston.

What's important now is that colleges are looking for ways to limit their costs and increase revenues in order to hold the line on prices. Both the publics and privates realize that if tuitions get too far afield it, will be difficult to attract students from all economic strata. "There was a sense of panic for a while," says Ikenberry, "partly based on facts, partly based on poor communication." He adds, "The facts have now improved substantially."

Source: TIME/The Princeton Review's The Best College For You 2001