Why Newton's Lasell University cut its tuition and fees by $20,000 a year

In the aftermath of President Joe Biden's decision to cancel $10,000 to $20,000 in student loan debt for millions of Americans, economic experts have been highlighting the need to take action on an issue at the center of the college debt debate: tuition prices. Lasell University, a small liberal arts school in Newton, is trying to do just that. Administrators announced plans to cut costs for students by nearly $20,000, about a third of the yearly price tag. Lasell’s president, Michael B. Alexander, joined GBH’s Morning Edition hosts Paris Alston and Jeremy Siegel to talk about why the administration decided to lower the sticker price. This transcript has been lightly edited.

Jeremy Siegel: I want to begin by highlighting some reporting from our colleague Kirk Carapezza that showed that many schools do not lower tuition. And one opinion on why is because it's better marketing to keep tuition high and then give big scholarships. Tell us about why you think your new approach is better.

Michael B. Alexander: Well, I think what Kirk mentions there is what used to be the case. If you go back 10, 15 years ago, there was kind of this cachet called the so-called "Chivas Regal effect." People thought if your if your tuition was higher, then you must be better, you must offer a better education. And I think there was something to that. There was evidence to support that. In more recent times, that evidence has gone away. People decide where to go based on the net cost, what it is that they have to pay out of their own pocket to come. Now, it is true that if you have a high tuition price and then high amounts of scholarships, it gives people bragging rights. You know, "Oh, I got $120,000 worth of scholarships."

And, you know, that's a feel-good thing, and there may still be some families that are influenced by that in their choice of college. But really, it comes down to what's the experience that you're going to have at the college you choose, and what's it really going to cost you out of your own pocket, which means cash and loans together? That's what it really comes down to. The evidence now is that the so-called "Chivas Regal effect" only applies at the really elite colleges that have huge endowments. And for the bulk of institutions like Lasell, that's not so much of a factor anymore.

Paris Alston: Looking at the Lasell website, it says that this reduction in price, which is from about $59,000 to $39,000 better, reflects the actual out-of-pocket costs that the majority of current students at Lasell pay after scholarships are factored in. So that being said, are you still going to offer scholarships?

Alexander: Yes, for some people. It doesn't get you all the way. I mean, anybody that's paying more than $39,500 now for tuition and standard room and board will pay less. And we certainly hope that it will attract more people to apply for whom that lower cost would be more efficient. But the bulk of people pay less than that because of the scholarships that they receive. And so for those people the amount they pay won't change that much because the tuition is being reduced and their financial aid is being adjusted in accordance. So it's really to get the difference between what they actually pay and what the published price is to be smaller.

Siegel: How, at the end of the day, is that financially sustainable for the school? If people are still getting financial aid to pay roughly the same amount they might be paying now. If they have financial aid, but then you're also reducing the costs for people who might not be getting financial aid, how does that work out financially?

Alexander: The expectation is that we will receive more applications and more people; that more people will stay because of the lower price; and that, therefore, we will have more total students. To make up for those who are currently paying more than $39,500, you need about 20 to 25 additional students. And our expectation is that that will get significantly more than that because of this change in price.

Alston: This comes a few years after a merger between Mount Ida College and Lasell fell through, which led to Mount Ida's closure. That was also something that happened under your tenure. President Alexander, you're also set to retire in June after 16 years at Lasell. So, first of all, I want to say congratulations, but also thinking about the threat facing small colleges right now, How do you see this setting up Lasell to withstand those threats long after you're gone?

Alexander: We think that by making this adjustment, that will attract more people to us in what's really a declining market for a traditional-age undergraduate students. There are just fewer of them available and fewer that are going to be available. So by providing a value that students and their families can see. At the same time, what we've been doing in preparing for this is shoring up our financial resources behind that. We have a lot of assets. We've been building up our endowment. We've been building up the other kinds of reserves and looking at our costs and reducing our costs.

And we have Lasell Village, a continuum of care retirement community that's premier, the best retirement community, perhaps, in the country. It's very successful and that's another asset that we have that puts us in a more favorable position as those changes are happening. We've been preparing for this for years and we're trying to stay ahead of the game. And if we've done that properly, it should last well beyond my tenure and for another 171 years.