Why Private Higher Education?
What Grandparents Need to Know
About the Unique Educational Advantages Provided By
America’s Private Colleges & Universities
by James Johnston, Ed.D.
Former Director of Admissions and Financial Aid
Wharton Graduate School of Business
University of Pennsylvania
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Table of Contents
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Forward
The Basics
o Diversity and Choice
o College or University
o Selectivity
A Brief History
Current Trends
What is a Private College or University?
o Names are Deceiving
o Accreditation
o The Purpose of this Booklet
o A Note about Cost
o To Summarize
Three Myths about Private College Education
The Private College Advantage
o Values
o Graduation Rates
What About Cost?
o Actual Cost
o “Opportunity” Costs
o SAGE Tuition Rewards
What You Should Do Next
10 Facts about Private Colleges & Universities
2
Forward
If you’re like most grandparents, helping to ensure successful lives for your grandchildren –
financial, career and personal success – is one of the most important things left for you to
accomplish. And helping to fund their college educations is a great way to help -- for two
reasons:
1. The cost of higher education is increasing so rapidly that many families need
grandparents’ help.
2. Education is the best, most lasting, loving memory grandparents can give to their
grandchildren.
In a CBS.MarketWatch.com article, Marshall Loeb, the author, found that, “Grandparents are
playing a bigger role in paying for college. With escalating college expenses, more and more
parents are looking to their own parents for covering tuition bills.” Loeb quoted a recent study
that indicated that more than half of all grandparents either are helping, or plan to help, pay for
their grandchildren’s college costs. He also found that:
•
•
70 million Americans are grandparents.
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They spend $35 billion annually on their grandchildren.
Only 2% invest in 529 college savings plans. The rest use annuities, mutual funds,
stocks, bonds and cash to help fund their grandchildren’s educations.
At Asset Marketing Systems, we share your concern – and we’ve done something about it.
Teaming up with SAGE Scholars, the nation’s premier saving program devoted exclusively to
private colleges and universities, we’ve found a way that may help you provide up to one year’s
tuition for each of your grandchildren – without touching your retirement or other assets.
Sound too good to be true? It’s not. Over 200 private colleges and universities (and the
number is rapidly growing) located throughout the country are offering scholarships called
Tuition Rewards™.
Read on to discover how you can participate in this innovative program – and what unique
value private colleges and universities can bring to your grandchildren. And to you!
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The Basics
What a great country we live in! Our colleges and universities – what we call “higher
education” – are the envy of the world. In fact, every year over a half-million foreign students
leave their homelands to study in the United States.
Keep in mind that a college education isn’t a sure-fire guarantee of success and happiness.
Many senior citizens didn’t go to college – yet have done very well for themselves. Furthermore,
many younger folks also didn’t go to college and have been successful. Look at Bill Gates, the
founder of Microsoft. He’s perhaps the world’s richest man – and a college dropout!
But, on average:
•
College graduates’ first jobs pay over $15,000 more than high school graduates’ first
jobs.
•
College graduates average 89% more in yearly earnings than high school graduates.
•
College graduates earn $1.3 million more in their lifetimes than high school graduates.
•
College graduates tend to socialize with, even marry, other college graduates.
•
College graduates are more apt to be leaders at business, government, religious and social
organizations.
Here’s how the number of high school graduates attending college has increased:
% of High School Students
Attending College
Year
Percentage
1960
45.1%
1980
49.3%
1998
65.6%
Diversity and Choice
One important aspect of America’s wonderful higher education system is our variety of
educational choices. We have two-year and four-year undergraduate institutions; public and
private; single sex and coed; large and small; rural and urban; historically Black, religious, and
non-sectarian; technical, liberal arts, and business administration; and just about any other kind
you could possibly imagine.
After finishing an undergraduate degree (generally a Bachelor of Arts or Bachelor of
Science), many students continue to pursue higher degrees: Masters, Doctorates, or specialized
degrees in Law and other professions. Again, the choice of fields of study and the variety of
institutions offering advanced degrees is amazing.
College or University
Some people confuse the terms “College” and “University”, thinking that a university must
mean a higher quality education than a college. In reality, the terms simply refer to the level of
degrees given and have nothing to do with quality. A college only offers an undergraduate twoyear or four-year degree, but a university offers at least one degree at the masters or doctorate
level.
For example, the undergraduate portion of Harvard University is called Harvard College.
Foreign students, especially from Latin America, sometimes insist upon attending a U.S.
university, since, in Latin America, “Collegio” frequently means high school and “Universidad”
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means college or university.
interchangeably in this booklet.
We generally use the two terms, College and University,
Selectivity
It seems that every day, we read an article in the newspaper or a magazine, or hear a report on
the radio or TV, about how hard it is to get into college. Some schools are incredibly selective!
For example, some Ivy League and other schools admit less than 15% of their applicants.
Recently, Harvard had more applications from students with perfect SAT (Scholastic
Aptitude Test) scores and/or graduated #1 in their high school class than spaces available.
Swarthmore College in suburban Philadelphia rejected over half its applicants with perfect SAT
scores in math or verbal.
Of the almost 2,200 four-year colleges and universities, however, only two or three percent
are extraordinarily selective. The remainder admit high percentages of qualified applicants and
admit virtually all their very qualified candidates. The Atlantic Monthly magazine estimated, in
its November 2003 issue, that less than one-tenth of all high school graduates “are involved in the
struggle for places in the most selective schools”.
Furthermore, in the same issue, the magazine stated, “A school’s selectivity does not
necessarily reflect the quality of the education it offers.” In fact, a recent study concluded that
future earnings of students with similar abilities and credentials were not particularly influenced
by the selectivity of the schools they attended.
Without regard to selectivity, carefully conducted studies have shown that graduates of
private colleges and universities believe that they received superior educations in terms of
outcomes -- that is, job opportunities, creation, and maintenance of personal values, making
friends and, in some instances, finding spouses. We at AMS believe in the value of higher
education – but we’re particularly excited about our ability to help you plan and provide for your
grandchildren’s private college education.
A Brief History
The beginnings of higher education, as we know it, can be traced back many centuries to
Europe. Groups of scholars banded together to provide learning opportunities for students.
Among the most famous of scholars was Abelard, whose teachings attracted other scholars and
ultimately was responsible for the creation of the University of Paris in 1150 A.D.
In 1386, the University of Heidelberg was founded, modeled after the University of Paris.
The University of Heidelberg had four distinct areas of learning, or “faculties”: Schools of
divinity, law, medicine, and liberal arts. By 1390, 1050 students had attended Heidelberg.
Harvard College, founded by John Harvard in 1636, is considered to be America’s first
institution of higher education. Begun as a theological seminary, Harvard started a movement
that has led to a private educational system that has educated many of America’s – and the
world’s – most prominent and influential citizens, creating knowledge and nurturing values and
achieving great scientific discoveries.
A number of America’s Founding Fathers were involved in establishing private colleges and
universities -- or were themselves early students of these institutions. For instance, Benjamin
Franklin helped create the University of Pennsylvania (1740); Aaron Burr and other Presbyterian
ministers started the College of New Jersey (1746), now Princeton University; and, Alexander
Hamilton, first Secretary of the United States Treasury, was a student at Columbia in New York
City.
Many of America’s largest and best-known public universities were founded as a result of the
Morrill Land-Grand Act of 1862, which provided funding for colleges to offer scientific
education for farmers and mechanics.
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As public four-year colleges, initially charging little or no tuition, became increasingly more
popular, the concept of public two-year colleges, frequently called “community colleges”, caught
on. In the decade of the 1960’s, over 500 new colleges (about one per week!) were begun, and
many were public two-year colleges.
Today, over half of all new students are enrolled in public two-year colleges, studying for
specialized certificates or the two-year Associate of Arts, Associate of Science, or Associate of
Business degrees. Most four-year colleges, public or private, accept transfer students who have
completed Associate degrees from public two-year colleges and give partial or full credit for
courses already successfully completed.
Current Trends
Beginning in the 1990’s and continuing today, the two most prominent trends in higher
education are:
1. Online education. Many colleges, public and private, have jumped into the rapidly
growing field of online education, teaching courses via the Internet. Many educators
think that online instruction will be the “future of education”.
2. For-profit education. Traditionally, colleges are organized as non-profit entities.
However, a growing number of degree-granting colleges and non-degree granting
technical and business schools have begun competing for students – especially older,
part-time students who attend school after work. In fact, one extremely successful
school, the University of Phoenix, recently became the first degree-granting for-profit
college to surpass $1 billion in annual revenues!
What is a Private College or University?
In the United States, we differentiate between public and private colleges and universities.
The technical, legalistic distinction is in how each is governed. Public institutions are
governed by state-appointed or approved Trustees, who are responsible for setting tuition rates,
approving the hiring of senior staff and determining that the institutions are meeting broad-based
educational goals of the state. In return for this control, state funds (your taxes!) subsidize the
cost of educating public college and university students.
Private colleges, unlike public institutions, receive little or no direct financial support from
their state legislatures. This means two things:
1. They must look to other sources of income, including more reliance on tuition and
support from alumni, foundations, and corporations; and,
2. They are not governed by publicly-appointed Boards and have more freedom in how they
operate.
Both public and private institutions also receive indirect support from financial aid
(scholarships, loans, jobs) given directly to students from state and federal sources.
Number of U.S. Colleges & Universities
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Public
Private
2-year
1,085
135
4-year
628
1,541
6
Full-Time Undergraduate Students
Public
Private
2-year
5,697,388
251,043
4-year
6,055,398
3,308,460
The nation’s first colleges, beginning with Harvard in 1636, and the first universities
(University of Pennsylvania, 1740) were private, not public, institutions. As you can see from the
table above, 1,676 colleges are private (71% of four-year institutions); at the Bachelors’ degree
level, they enroll 35% of all full-time students at four-year colleges. 46% of the U.S. Congress
graduated from private colleges, as did President George W. Bush, his father, Bill Clinton, John
Kennedy and Richard Nixon.
In fact, 22 of the 33 college-educated Presidents of the United States graduated from private
colleges or universities. Furthermore, 50% of business/corporate CEOs (Chief Executive
Officers) and senior executives with undergraduate degrees graduated from private colleges and
universities.
Names are Deceiving
It would seem to be easy to identify an institution as being public or private by its name – but
that’s not the case. Try these (answers at bottom of page):
A. University of Pennsylvania
B. New York University
C. University of Miami (Florida)
D. Miami University (Ohio)
E. College of William and Mary
F. University of San Diego
G. San Diego State University
H. University of California, San Diego
Private: a,b,c,f
Public: d,e,g,h
Accreditation
Public and private colleges and universities are approved, or accredited, by the same
agencies. These agencies, which in turn are accredited by the federal government, approve of the
overall mission, financial health and success meeting each college’s stated goals and objectives.
The colleges are reviewed periodically by professors and senior staff of peer-group institutions.
In addition, major fields of studies, such as business, nursing, teacher educations and so forth,
also have accrediting organizations. The point is: Both public and private schools are subject to
the same rigorous peer-review process to insure that students are offered uniformly high
standards of learning.
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The Purpose of this Booklet
It’s important to realize that we support higher education, whether private or public.
However, important differences exist between the two types. Graduation rates, average class
size, creating and nurturing of traditional values, leadership opportunities and classroom
instruction are just a few of the areas where private colleges and universities have, on average,
measurable advantages over their public counterparts.
In fact, some large public universities are now claiming to be “like private liberal arts
colleges.” Witness the following quotes from written recruiting materials of the University of
Arizona and the University of Minnesota, respectively:
•
“You’ll have all of the advantages of a small liberal arts college within the context of a
large public research university.”
•
“Honors students enjoy the best of two worlds: the uncommon depth and breadth of
study at one of the nation’s finest universities, plus the extra challenge, personal
attention, and sense of community often associated with small, highly selective
private colleges.”
Why do public universities claim to be, in many important ways, similar to private colleges
and universities? Simple: Private institutions offer advantages important to many students and
their families – and this booklet will show you these advantages, and how your Financial Planner
may be able to help you create guaranteed scholarships at many private colleges throughout
the country.
A Note about Cost
Maybe your family thinks it simply can’t afford the extra cost of a private four-year
education. Surprisingly, the true cost of a private four-year college education is often less
expensive than a public four-year college education! Read on – you’ll find educational doors
opened that you might not have even considered.
To Summarize
Education is good! Private higher education is good. So is public education. They have
similarities – and differences. In planning for college, or choosing a college, you should be aware
of the unique advantages that give private education its very special place in American Society.
Three Myths About
Private College Education
1. Myth: “Private or Public – what’s the difference? A degree is a degree.”
Fact: It’s true that both private and public colleges give accredited, four-year undergraduate
degrees – but there are important differences. Specifically:
•
Values. A major study showed that private colleges graduates seem to believe their
institutions do a better job in developing, encouraging and nurturing the exact kind of
personal values you want your grandchildren to possess.
•
Graduation Rate. Your grandchildren will, on average, graduate at least a year sooner
from a private college.
•
Cost. It often costs less to complete a private undergraduate degree.
2. Myth: “Private College is only for rich people.”
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Fact: According to the National Association of Independent Colleges and Universities
(NAICU), which provide several of the facts in this booklet, the average family income of
students attending private colleges and universities is lower than the average at public
flagship universities.
3. Myth: “My grandchild won’t qualify for financial aid.”
Fact: Most private colleges and universities have both “need” and “non-need” based
financial aid. Approximately 85 percent of full-time undergraduates at private institutions
receive some form of financial aid. The AMS-provided Tuition Reward Program guarantees
every participating grandchild a scholarship – in some cases up to one full year’s tuition!
The Private College Advantage
Values
All of us, whether parents or grandparents, wish for happy, productive, successful lives for
our children and grandchildren. College is no guarantee of those successful outcomes, but it does
increase the odds. And private colleges and universities, according to the alumni of both private
and public institutions, do a better job than their public counterparts in providing many aspects of
successful lives.
A recent study, “What Matters in College after College” conducted by an independent
research group, Hardwick Day, found that “the undergraduate experience that students encounter
at small, residential liberal arts (private) colleges is more effective in producing meaningful and
lasting benefits than the education experienced at large, public universities…”
In particular, Hardwick Day found, in a study for the Annapolis Group, that graduates of
private colleges and universities were more satisfied than public college and university graduates
about four important values: Career Preparation, Broad Skill Development, Personal Values and
Community Involvement. Aren’t these the values we hold dearly? And wish for our
grandchildren?
Graduation Rates
College is a great experience. But, after four years, most grandparents hope their
grandchildren will complete their undergraduate degrees and get on with their lives – either
taking a job or beginning graduate school.
Here’s an amazing fact: according to a study -- “Degree Attainment at American Colleges
and Universities” conducted by Alexander Astin and Leticia Oseguera of the UCLA Higher
Education research Institute -- students attending private colleges and universities are more than
twice as likely to graduate in four years than their public school counterparts.
In fact, the authors found that, in their study, just 28% of students at public universities
graduated in four years, compared with 67% of private universities. Comparing private colleges
was equally amazing: private college students in 197 nonsectarian, Catholic, and other Christian
colleges were 2.2 times more likely to graduate in four years than the 7,457 public college
students in the study.
Graduation Rates in 4 Years
Public
universities
Private
universities
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Number of
Schools
Graduation
Rate
20
28.1%
18
67.1%
9
Public
colleges
Nonsectarian
(private) colleges
Catholic (private)
colleges
Other Christian
(private) colleges
27
24.3%
75
56.3%
38
46.4%
84
51.0%
What About Cost?
After reading about the unique benefits that private colleges and universities offer, you’re
probably thinking, “Yes – but how much more is this going to cost?” As mentioned earlier, the
true cost of a private education is often less expensive than a public education! Here’s why:
Actual costs
The amount that families actually pay for college doesn’t cover the total cost of education.
At public colleges, the difference is covered primarily by taxpayers. In other words, your
neighbors’ tax dollars may be helping to pay for your grandchildren’s education at a public
university – and your taxes are helping to pay for others’ public educations.
At private colleges, the difference is covered not by direct tax dollars but primarily by
private, corporate, and foundation contributions, income from endowments and research grants.
The costs families cover, whether the college is public or private, include:
• Tuition
• Room and Board
• Books
• Transportation, Entertainment, Miscellaneous.
Many folks don’t realize that the cost of a year’s textbooks can exceed $1,000. The costs
of and room and board, books, fees, transportation and general living expenses often is greater
than the cost of tuition at public colleges and universities!
“Opportunity” Costs
This is a term used by economists to describe income someone does not receive because he
or she does not do something.
Now, remember what you’ve previously learned – that, on average, students at private
colleges graduate at least a year faster than at public institutions. While the public institution
student is back in school, paying tuition, room and board, and everything else, for the fifth year,
what is the private college student, who has graduated, doing? Working! Or, starting graduate
school a year earlier than the public college student.
Let’s assume that the private college graduate takes a job at $35,000 and has an after-tax,
take-home income of 70% of that, or $24,500.
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Cost Comparison:
Public vs. Private College Education
Public
Private
Tuition
$6,000
$20,000
Room & Board
$8,000
$8,000
Books, Misc.
$2,000
$2,000
$16,000/yr.
$30,000/yr.
Annual Cost
Times 5 years
$80,000
Times 4 years
$120,000
Plus ‘Opportunity
Cost’*
$24,500
$0
Total Actual
Cost
$104,500
$120,000
* Opportunity Cost: Not in job market because still in school. Loss of salary (average, after
taxes)
So – it would seem that, in return for the unique advantages provided by a private college
education, your family is going to have to pay only $15,500 more for a private college degree
than from a public institution.
But, we’re saving the best for last!
SAGE Tuition Rewards
As was mentioned in the Foreword of this pamphlet, AMS Financial Planners have teamed
up with SAGE Scholars to offer Tuition Rewards™, guaranteed scholarships of up to one year’s
tuition at participating private colleges.
As a participant in Tuition Rewards, you can give each of your grandchildren scholarships
that are provided by private colleges and universities throughout the United States. And – they
cost you nothing.
•
You pay nothing to join.
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You may enroll as many grandchildren (or other relations) as you wish.
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The scholarships are not based on “need”.
•
Best of all – the scholarships do not come out of your assets. The colleges provide
them by agreeing to accept a discount off full tuition -- in much the same way that you
might negotiate a discount off the purchase of a lease or new car.
Why would colleges agree to take up to one year’s tuition cost off the total price of
education? For two reasons:
1. In return for giving the discounts, colleges are provided basic educational and
demographic information (name, address, age, etc.) of participating grandchildren -- so
that, beginning in 9th or 10th grades, colleges can communicate with them. No financial
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information about parents, grandparents, or other sponsors is given. Student names are
never provided to any non-participating colleges or to other groups.
2. Colleges know that students who come from families, including grandparents, with
financial resources make better students – and alumni.
Now – let’s take another look at the actual cost of a college education.
From the previous table:
Actual Cost of College
Actual Cost
Less: Tuition
Rewards Scholarship
-- Example
Actual Cost after
Tuition Rewards
Public
Private
$104,500
$120,000
$0
-$20,000
$104,500
$100,000
So, in the final analysis, on average – taking into consideration the difference in years to
finish, “opportunity cost” and Tuition Rewards – a private college education may be less
expensive than a public education!
In fact, if your grandchild qualifies for financial aid, the cost of a private college may be even
less than illustrated above.
Each student considered for Financial Aid is first determined to have, or not to have financial
“need,” which is determined as follows: The family – defined in different ways, depending upon
the college – completes a standard form, FAFSA (Free Application for Federal Student Aid).
This requires a declaration of both student and parental income, assets, and, to a lesser extent,
obligations.
Using federally-approved formulas that place more emphasis on income than assets, a figure
called the Expected Family Contribution is generated. The EFC, as the name implies, is the
dollar amount that the family is expected to contribute, annually, to the student’s total college
costs (tuition, room and board, books, travel, incidentals, etc.)
The EFC figure is a constant – that is, it does not change depending upon the cost of
college.
For example, a family with an EFC of $18,000 would not receive need-based aid at a college
where total annual costs were $13,000 per year – but would, theoretically, receive up to $14,000
at a college where total annual costs were $32,000 per year. In other words, this family would
pay just $5,000 more, per year, to send a child to a $32,000/year college than a $13,000/year
institution!
As a result, a private college education may be considerably more affordable than you realize.
What You Should Do Next
Meet with your AMS Advisor. He or she can:
1. Enroll you in Tuition Rewards, if appropriate.
2. Help you enroll your grandchildren.
3. Start you with a $500 Bonus (not “hard” dollars -- but, rather, a discount off tuition).
4. Further explain the program and determine if it is right for you.
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10 Facts About Private Colleges & Universities
1. There are more than 1,500 private four year colleges and universities in the United States
2. Half of the colleges and universities in the United States are private
3. More than 3 million students attend private colleges and universities.
4. Proportion of U.S. college graduates who earn degrees from independent colleges and
universities:
•
Bachelor’s: 34 percent
•
Graduate: 43 percent
•
Professional (law, medicine, engineering, or business): 60 percent
5. 50 percent of senior corporate executives with an undergraduate degree earned it at a
private college or university. Of those with graduate degrees, 62 percent received them at a
private institution.
6. 46 percent of U.S. Congressional representatives earned their undergraduate degree from
a private college or university.
7. 22 of the 33 (67 percent) college-educated presidents of the United States graduated
from private schools.
8. 69 percent of 2002 Rhodes Scholarship winners were enrolled in private colleges and
universities.
9. 58 percent of 2001 National Merit Scholars enrolled in private colleges and universities.
10. In 1997, the average income of independent college and university bachelor’s degree
recipients four years after graduation was $38,806 for a graduate of a private doctorate-granting
institution, and $34,340 for a graduate of a public doctorate-granting institution.
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