Finance Subcommittee
June 27, 2014 Meeting
Agenda
I.
Introduction and Comments from Chair
II. Discussion Regarding Work of the
Subcommittee
III. Background and Context
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–
–
–
Overview of Tuition/Financial Aid Pricing
Cost of Education
AccessUVa Overview
Endowment Overview
IV. Discussion and Next Steps
2
I. Introduction and Comments from Chair
3
Finance Subcommittee
BOV Members
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•
•
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•
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John A. Griffin, Chair
Frank B. Atkinson
Kevin J. Fay
Victoria D. Harker
John G. Macfarlane, III
George Keith Martin, Ex-officio
Project Team
•
•
•
•
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•
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Pat Hogan
John Simon
Milton Adams
Melody Bianchetto
Megan Lowe
Dave Martel
Jim Matteo
Colette Sheehy
4
II. Work of the Finance Subcommittee
Finance Subcommittee Charge
Develop a financial/pricing model (including a long term financial plan) that promotes:
Affordability for low-income and middle-income students and their families
Predictability of tuition and fee costs and associated financial aid
A sustainable student financial aid program
Sustainable funding for instruction that preserves and enhances academic excellence
Diversity and inclusiveness
Process efficiencies and savings achieved through the Organizational Excellence
initiative
5
III. Background and Context
A. Overview of Tuition/Financial Aid Pricing
B. Cost of Education
C. AccessUVa Overview
D. Endowment Overview
6
III.A. Overview of Tuition/Financial Aid
Pricing
7
Overview of Tuition/Financial Aid Pricing
• Low tuition/high aid:
– In-state tuition pricing at public universities meeting
100% of need (UVa, UNC, Michigan, UC Berkeley)
• May include differential tuition for certain programs
• May be packaged with tuition guarantees
• Low tuition/low aid:
– Public universities not meeting 100% of financial need
• May include differential tuition for certain programs
• May be packaged with tuition guarantees
8
Overview of Tuition/Financial Aid Pricing
• High tuition/high aid:
– Private universities meeting financial need, offering
high merit aid, or both
• Discount rates average 45% for private institutions
participating in NACUBO’s 2012 Tuition Discounting Survey
• May be packaged with tuition guarantees
– Out-of-state tuition pricing at public universities
meeting 100% of need (only UVa and UNC)
• May include differential tuition for certain programs
9
Tuition Pricing Considerations
• High Required Costs to Deliver Program – High
equipment requirements (engineering, nursing), low
faculty ratios (nursing), low economies of scale/other
(architecture)
• High Cost to Deliver Differential Product – World-class
faculty or high touch student services
• Market Demand – Value to the student/parents. Highly
selective admission, prestige, high quality of education,
excellent placement rates, high mid-career earnings
10
University of Virginia Tuition/Financial Aid Pricing
A Hybrid of Various Approaches
• High Tuition/High Aid
– Out-of-state students and those in differentially-priced programs who
have demonstrated financial need
• High Tuition/Low Aid
– Out-of-state students and those in differentially-priced programs who
do not demonstrate financial need
• Low Tuition/High Aid
– In-state students who have demonstrated financial need
• Low Tuition/Low Aid
– In-state students who do not demonstrate financial need
11
University of Virginia Tuition/ Financial Aid Pricing
What it Does Well
Recognizes taxpayer contributions through a general subsidy for all
Virginia students
Sets out-of-state tuition at close to market rates
Recognizes higher costs of certain specialized programs through
differential tuition
Majority of students (e.g., College) pay flat rate, regardless of
discipline
Increases affordability and socio-economic diversity by providing
financial aid that meets 100% of need
12
University of Virginia Tuition/ Financial Aid Pricing
How it Could be Refined
Provide flexibility to fund and sustain strategic priorities
Allow a multi-year focus
Fully recognize market demand
More effectively communicate University’s value
proposition
13
University of Virginia’s Value Proposition
• Key Quality & Value Rankings:
–
–
–
–
#2
#3
#2
#1
best public university, US News & World Report
best value public college, Princeton Review
best college value, Kiplinger’s
annualized return on investment, PayScale.com
• Commitment to Affordable Excellence:
– In-state tuition as a % of median income: 18.9% (among the
lowest of all national public institutions)
– Need-blind; meet 100% of need for all undergraduates
– Loan caps below state and national average student indebtedness
levels; lowest quartile among all national public institutions.
• Student Performance:
– 93.3% graduation rate (highest among all national public
institutions)
14
Key Quality & Value Rankings
Kiplinger’s Best Public College Values (2014)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
University of North Carolina – Chapel Hill
University of Virginia
University of Florida
College of William & Mary
University of California – Los Angeles
University of Michigan
University of Maryland – College Park
University of Wisconsin – Madison
University of California, Berkeley
University of Georgia
US News & World Report, Best Public
Universities (2014)
1.
2.
2.
4.
5.
6.
7.
8.
9.
9.
University of California – Berkeley
University of California – Los Angeles
University of Virginia
University of Michigan
University of North Carolina – Chapel Hill
College of William & Mary
Georgia Institute of Technology
Pennsylvania State University
University of California – Davis
University of California – San Diego
PayScale.com, Annualized ROI (2014)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
University of Virginia
Georgia Institute of Technology
Harvard University
College of William & Mary
University of Washington
University of Texas – Dallas
New Mexico Institute of Mining & Tech.
Stanford University
Cooper Union for the Advancement of
Science & Art
University of Michigan
Princeton Review, Best Value Public College
(2014)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
University of North Carolina at Chapel Hill
New College of Florida
University of Virginia
North Carolina State University
University of Michigan
University of California – Los Angeles
University of Florida
College of William & Mary
Truman State University
State University of New York at Binghamton
15
Peer Institution Undergraduate Tuition & Fee
Increases, 2009-10 through 2013-14
Peer Institution
Cornell – all students
Duke – all students
Maryland – out-of-state
Michigan – out-of-state
Pennsylvania – all students
UC-Berkeley – out-of-state
UCLA – out-of-state
UNC – Chapel Hill – out-of-state
University of Virginia – in-state
University of Virginia – out-of-state
Vanderbilt – all students
Virginia Tech – in-state
Virginia Tech – out-of-state
William & Mary – in-state (incoming class)**
William & Mary – out-of-state
2013-14
Tuition &
Fees*
$45,358
$45,376
$28,348
$40,392
$45,890
$35,742
$35,575
$30,122
$12,668
$40,054
$43,668
$11,455
$27,211
$15,463
$38,440
2013-14
Tuition &
Fees
Increase
4.5%
4.0%
3.9%
3.2%
4.9%
0.0%
0.0%
5.9%
3.7%
4.8%
2.0%
4.9%
5.0%
13.9%
2.9%
Five-Year
Tuition &
Fees
Increase
19.5%
17.1%
18.2%
15.6%
17.8%
12.9%
12.7%
28.1%
28.3%
25.7%
11.4%
33.1%
24.4%
43.2%
24.1%
* Reflects tuition and required fees for a full-time, first-year student.
** Result of the implementation of the William & Mary Promise.
16
2013-14 Total Price vs. Net Price for Virginians
Public & Private Peer Group
For a student with family income of $40,000, 4 in family, 1 in college, and no assets
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Estimated
Total Price
Series1
Series2
Estimated
Net Price After Grants
17
2013-14 Total Price vs. Net Price for Virginians
Public & Private Peer Group
For a student with family income of $80,000, 4 in family, 1 in college, and no assets
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
18
2013-14 Total Price vs. Net Price for Non-Virginians
Public & Private Peer Group
Using Net Price Calculators for a student with family income of $40,000, 4 in family, 1 in college, and no assets
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
19
2013-14 Total Price vs. Net Price for Non-Virginians
Public & Private Peer Group
Using Net Price Calculators for a student with family income of $80,000, 4 in family, 1 in college, and no assets
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
20
2013-2014 Undergraduate In-State Tuition and Fees
Select Peer Group – Public & Private
$50,000
$45,000
Private Average = $45,073
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
Overall Average = $23,007
UVa = $12,668*
Public Average = $11,974
$5,000
$0
* Includes orientation fee
** Amount shown applies to first-time freshmen and transfer students only. Continuing students pay a lower rate.
21
2013 - 2014 Undergraduate Out-of-State Price
Select Peer Group – Public & Private
$50,000
$45,000
$40,000
$35,000
Private Average = $45,073
UVA = $40,054 *
Overall Average = $38,015
Public Average = $34,486
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
* Includes orientation fee
** Amount shown applies to first-time freshmen and transfer students only. Continuing students pay a lower rate.
22
2014-2015 Undergraduate In-State Tuition and Fees
Virginia Public Institutions
$20,000
$15,000
UVa=$12,998**
Average = $11,136
$10,000
$5,000
$0
* Amounts shown apply to first-time freshmen and transfer students only. Continuing students pay lower rates.
** Does not include orientation fee.
Tuition and E&G Fees
Non-E&G Fees
23
2014-2015 Undergraduate Out-of-State Tuition and Fees
Virginia Public Institutions
UVa=$42,184**
$45,000
$40,000
$35,000
$30,000
Average = $27,595
$25,000
$20,000
$15,000
$10,000
$5,000
$0
* Amount shown applies to first-time freshmen and transfer students only. Continuing students pay a lower rate.
** Does not include orientation fee.
Tuition and E&G Fees
Non-E&G Fees
24
III.B. Cost of Education
25
Cost of Education
• Cost of education (to the institution) is
defined as total costs expended on an
average student, including:
Instruction
Need-based Financial Aid
Libraries
Academic technology
Student services (admissions, registrar, student
affairs)
– Operating and maintaining academic and
support buildings
– Administration
–
–
–
–
–
26
2013-14 Education-Related Spending per FTE
Student (all students) = $41,000/year
$1,900
Instruction
$3,300
Need-based
Financial Aid Financial Aid
Libraries, academic technology,
$5,900
$16,500
deans' administration
Operating and maintaining
academic and support facilities
Administration
$6,300
Admissions, registrar, dean of
$7,100
students and other student services
27
Who Pays for Education-Related Spending?
$3,600
Students and families
State taxpayers
$10,600
$21,000
Donors
Other
$5,800
28
What Do A Typical In-state Undergraduate's
Tuition and Fees Pay For?
3.8%
Instruction
6.1%
Auxiliaries *
12.9%
34.8%
Libraries, academic technology, deans'
administration
Need-based financial aid
12.1%
Operating and maintaining academic
and support facilities
Administration
13.6%
16.7%
Admissions, registrar, dean of
students and other student services
* includes Student Health, University Transit, Athletics and Recreation, and other student programming
29
III.C. AccessUVa Overview
30
What is AccessUVa?
• AccessUVa is the need-based financial aid program
for the University of Virginia. It guarantees meeting
100 percent of the demonstrated financial need of all
students admitted to the University.
• Demonstrated need is met with a combination of
grants, loans, and work study.
• Nearly all financial aid that is not need-based carries
donor established restrictions, such as for geographic
origin or academic program.
31
Need Blind + Meeting 100% Need
• Most, if not all, public universities see accessibility as part of
their mission. Many offer admission without considering an
applicant’s ability to pay – this is need-blind admissions
– Several public universities have need-blind admissions
and also meet 100% of the need of in-state students,
including Michigan, UC-Berkeley, and William & Mary
– Only 2 public universities in the country have needblind admissions AND meet 100% of the need of all
in-state and out-of-state students: UVa and UNC
32
How Do We Meet 100% of
Demonstrated Financial Need?
AccessUVa guarantees that we will offer a financial aid package, including
loans, work study, and grants, that meets 100% of demonstrated need.
Portions can be declined.
1. Federal loans: maximum of $3,500 subsidized loan for low income
Virginians and $7,000 for all other students
2. Federal work study: maximum of $3,000 for low income Virginians and
$4,000 for all other students
3. Federal grants
4. Virginia state grants to neediest Virginians only
5. Endowment and gift funds fulfilling donor restrictions
6. For any remaining unmet need, tuition and unrestricted funds fill the gap
• Out-of-state tuition funds aid for out-of-state students
• In-state tuition funds aid for in-state students
33
How Do We Fund 100% of
Demonstrated Financial Need?
2013-14 (projected)
IS
OOS
Total
(in millions)
Funding From Dedicated Sources:
Federal grants, loans, & work study
State grants
External grants, private loans, PLUS loans
University restricted (athletic, endow)
Subtotal dedicated sources
Funding From University Unrestricted Sources
Total SOURCES
$ 19.6 $ 12.4 $ 32.0
5.8
5.8
4.8
3.2
8.0
4.9
5.2
10.1
35.1
20.8
55.9
17.0
29.0
46.0
$ 52.1 $ 49.8 $ 101.9
34
How Do We Distribute Financial Aid?
2013-14 (projected)
IS
OOS
Total
(in millions)
Low Income Access UVa
Grants & scholarships
Work study
Loans
Subtotal
All Others With Need Access UVa
Grants & scholarships
Work study
Loans
Subtotal
Total USES
$ 19.1 $ 16.2 $ 35.3
0.5
0.3
0.8
1.4
0.7
2.1
21.0
17.2
38.2
19.3
11.8
31.1
22.6
3.6
6.4
32.6
41.9
3.6
18.2
63.7
$ 52.1 $ 49.8 $ 101.9
Low Income is defined as a family income under $46,100.
35
III.D. Endowment Overview
36
University of Virginia’s Endowment Spending Policy
• Provides reliable, predictable distributions and preserves
purchasing power
• Inflation growth within a band/“snake in a tunnel”
• Increase prior year’s payout by 5 year rolling average of
Higher Education Price Index (HEPI)
• Compare to a band of 4% - 6% of prior year market value
• If resulting pay-out is within band, no action required by
Board and pay-out is automatically increased
• If resulting pay-out is outside the band, the Board may reset the payout within the band
37
University of Virginia Endowment Spending Policy
Inflation Growth Within a Band
$250
(in millions)
Endowment Spending
$200
5.00%*
$150
5.50%**
4.50%*
$100
5.25%
4.63%
4.83%
4.95%
4.68%
FY13
FY14
Projected
4.00%*
$50
$0
FY07
FY08
FY09
Potential Lower Limit of Band (4%)
FY10
FY11
FY12
Potential Upper Limit of Band (6%)
FY15
Actual Distribution
* Rate set by Board because inflationary change would have caused rate to fall below the band.
** Rate set by Board because inflationary change would have caused rate to fall above the band.
38
Five-Year HEPI Rolling Average
FY
2005
2006
2007
2008
2009
2010
2011
2012
2013
HEPI
3.90%
5.10%
2.80%
5.00%
2.30%
0.90%
2.30%
1.70%
1.60%
Rolling Average
5 Year
3.8%
3.2%
2.7%
2.4%
1.8%
39
UVa’s Spending Policy – 2014-15
• 5 year rolling average of Higher Education Price Index
(HEPI) = 1.8%
• Increasing FY14 payout by 1.8% moved us to 4.68% of
the 6/30/13 MV ($143.2 million)
• No action was required by Board and pay-out
automatically increased by 1.8%
• Board will address 15-16 spending distribution in Fall
as part of planning assumption. Board can take action
to re-set the distribution at a point between 4% and
6% of the 6/30/14 MV at that time.
40
Impact of Re-setting Rate within Band
Additional endowment return from each 25 bp increase
(in millions)
Restricted
$
5.7
Designated to Schools and Other
$
0.2
Unrestricted and undesignated
$
1.6
Total
$
7.5
41
UVa Endowment Growth
Endowment Held by Rector & Visitors
(In $ Millions)
as of June 30, 2013
$4,000
Market Value 6/30/84
Gifts
Inflation/Purchasing Power
Performance
Distributions
Market Value 6/30/13
$3,500
$3,000
$2,500
$
213
513
704
3,223
(1,044)
$ 3,609
$2,000
Performance Net of
Distributions
$1,500
$1,000
Gifts Added (inflation-adjusted)
$500
1984 Market Value (inflation-adjusted)
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
$-
42
IV. Discussion and Next Steps
43
Topics for Future Meetings
• Pricing of Cornerstone Plan
• More thorough analysis of Cost of Education
• Background and update on Organizational
Excellence
• Any additional information requested by Finance
Subcommittee
44