Editor’s Note: This article is the second in a series that will examine the current financial state of the College. In recent years, the College has run budget deficits and has been forced to rein in spending in order to ensure long term financial stability. These articles will aim to inform the Middlebury community about the College’s financial situation, dispel rumors, raise new questions and, hopefully, spark new debates about how the College operates and spends its money.
A flawed policy intended to limit Middlebury College’s yearly tuition increases has been a major contributor to its current financial troubles, and will require significant tuition increases in coming years.
The policy, first announced by then-Middlebry President Ronald D. Liebowitz in 2010, capped the annual increase in the College’s comprehensive fee at one percentage point above the Consumer Price Index, which is commonly used as an indicator of inflation.
At the time, Liebowitz described the policy, known informally as “CPI + 1,” as a necessary step towards controlling the increasing costs of a liberal arts education. “We need to recognize that the demand for a four-year liberal arts degree, while still great, is not inelastic,” he said in a February 2010 speech. “There will be a price point at which even the most affluent of families will question their investment; the sooner we are able to reduce our fee increases the better.”
By 2014, however, the College was forced to revise its policy. Facing rising budget deficits, the College announced that CPI + 1 would apply to student tuition only, rather than the comprehensive fee, which includes room and board. Ultimately, in April 2015, the College fully ceased its implementation of the policy, though a news release noted that the formula “moved Middlebury College from the top to the near bottom on its peer list of most expensive liberal arts institutions.”
David Provost, executive vice president for finance and administration, spoke with The Campus about the policy’s repercussions and how they may be addressed. According to Provost, the College’s biggest error was to voluntarily limit its own revenue stream without a plan to address rising expenses — namely in financial aid and other operating costs.
“It was a nice gesture to [implement the policy],” Provost said. “But what’s absent for me is any plan on how we were going to control costs.”
From 2012 to 2016, Provost said, the College generated new revenue at a rate of only 1.8 percent, while expenses increased by five percent. To compensate for that deficit, Provost expects that the College will raise tuition by four to five percent above the rate of inflation in next year’s budget.
Provost said that the College expects its yearly tuition growth to stabilize at roughly three percent by 2020 or 2021. By that point, it hopes to achieve financial stability — a state in which its revenues meet or exceed its expenses.
Once that process is completed, Provost expects the College’s tuition to rank in the middle to top third of its so-called “peer overlap institutions” — a group that he defined as “where [Middlebury students] didn’t go, but where they applied to.”
Provost anticipates an increase in financial aid funding next year along with tuition, asserting that tuition growth “won’t significantly affect our ability to attract a lot more high-need students.”
In the long-term, Provost said that President of Middlebury Laurie L. Patton hopes to increase the College’s endowment in order to fund financial aid, moving away from the current system, which funds aid largely through revenue collected from tuition payments.
The first article in this series, detailing how the College has spent more than anticipated on financial aid, can be found here.
