How to Ease the Tuition Load

By Ezra Bowen.

Carla Stough's parents were mighty proud when they learned she would graduate in the top ten of her high school class in Billsburg, Pa. But because money in the family is very tight (Carla's mother is a cook, and her father is disabled), there seemed no possibility that Carla could go on to a top college after graduation. In February, however, the Stoughs heard that she had qualified for special admission to selective Bard College in Annandale-on- Hudson, N.Y. Under the Bard plan, Carla will owe only the modest annual sum of $3,742, which she would have paid at her local state university in Shippensburg, instead of Bard's normal $14,550. Furthermore, Bard will match any additional financial aid Shippensburg might have offered, so that Carla's actual costs when she starts school in the fall may be, literally, carfare.

The Bard offer has been taken up by 65 students since the program was < launched in January. It is one of a growing number of innovative financial plans aimed at bringing families relief from the daunting college costs of today, not to mention the average annual increases of 7% that threaten to put a tag of $100,000 or more on a turn-of-the-century education. One such measure has passed the Michigan house of representatives and is pending before the state senate. If the bill passes, as expected, it would enable Michigan parents with newborn babies to invest roughly $3,000 in future tuition with a new state authority. In return, the children would be guaranteed a full four years at any of the 15 colleges in the state system starting in 2005. For the state, meanwhile, the money would have ballooned in a way that private investments rarely can. "We have tax-exempt status that we can share with our people," explains Michigan Governor James Blanchard. "E.F. Hutton can't do that."

Colleges, however, can -- and do. Duquesne University in Pittsburgh provided the model for the pay-now, go-much-later concept a year and a half ago, when it initiated a plan, originally for the children of alumni, by which a payment of $4,450 to the school bought four years' tuition 18 years later. Some 600 have signed up, including nonalumni students, who have since been brought into the program. Canisius in Buff'lo and the University of Detroit now provide similar plans. All three also offer rate-for-'ge variations. A 17-year-old bound for Detroit, for example, can put up $20,284 now for four years starting in 1987 (actual cost: $29,075), while a ten-year-old needs only $14,572 for his projected $46,687 tuition. Detroit offers free testing and counseling for participants from age six. Says Peter Remington, Detroit's vice president for university relations: "We'll be able to advise parents about areas to work on with their children."

These plans carry a double whammy. The child, when grown, has to attend that school, although Duquesne, Detroit and Canisius allow transfers, with tuithon credit, after one or two years. And if the youngster balks or fails to qualify for admission, parents are refunded only their initial payment, without interest.

Northwestern has used tax-exempt revenue bonds to finance low-cost, variable- rate tuition loans (8% to 8.25% so far). Many of the loans, which have paid an average $6,000 apiece to about 4,500 borrowers in the plan's three years, are aimed at middle-class parents whose relatively comfortable incomes ($40,000 to $100,000) disqualify their children for conventional forms of need-based aid. In addition, the Massachusetts-based Consortium on Financing Higher Education, whose 30 members include Northwestern, Harvard, Yale and Stanford, provides supplemental $2,000 to $15,000 loans to the same kinds of families. This past March, Stanford for the first time extended low-interest, long-term loan plans to parents in the highest income (more than $250,000) bracket. Though such help for the haves may seem a bit anomalous, tuition experts like Tally Wickstrom, director of financial aids at Purdue, point out that colleges have simply begun to adopt the funding techniques that have long applied to other large consumer investments, like housing. "If I walked into a bank and asked for a housing loan," says Wickstrom, "and the officer told me, 'O.K., but pay it back in four years,' I'd chuckle."

Perhaps the most comprehensive of all these creative financial schemes is the three-year-old University of Pennsylvania plan, which covers many other costs besides tuition. Prospective Penn parents can pay tuition for all four years now at the 1986 annual rate ($11,200), take an unsecured tuition loan of up to $42,000 at 9 1/2% with ten years to repay and enter into a revolving tuition- credit arrangement that lets them borrow as they go along, or arrange credit for up to $6,000 in vouchers that the student can sign like checks at, say, the college bookstore or even the computer shack. Some 1,800 students are using the Penn plan, but Assistant Director Diane-Louise Wormley says this is only the beginning: "We hope to hit all the undergraduates."

Educators criticize some of these plans as too gimmicky and bottom-line oriented, with too little emphasis on students' abilities. Among the more controversial programs: Goucher College's 100th-anniversary gift of two scholarships at 1885 rates ($100 per year), and Fairleigh Dickinson's "twofdr," under which a student's sibling can enter at half the regular tuition of $5,670. One critic of such gambits is Bard President Leon Botstein, who scorns them as "desperate marketing of a silly kind" designed for show rather than education. Citing his plan, which is limited to students who rank among the top ten in their high school classes, Botstein says, "We've thrown a gauntlet down to other places on the issues of quality and merit."

With reporting by John Edward Gallagher/New York and William J. Mitchell/Detroit