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Reopening, 3

Two years ago we were sure that the most important aspect of Maud’s presidency — the topic which historians would focus on 50 years from now — was her efforts to bring free speech (back) to Williams. How wrong we were! Maud’s decisions during the CV-19 pandemic will define her place in the history books. Let’s spend a week or two discussing her latest message.

Note this framing in the national news stories about Maud’s message:

Bloomberg: “Williams College Cuts Price 15%, Cancels Sports Due to Virus”

Forbes: “Williams College Cuts Tuition 15% And Cancels Sports For Fall Semester”

Newsweek: “Williams College Tuition Cuts Could Prompt Some Schools to Reduce Costs”

Nice job, Jim Reische! That is some positive press! I especially like Newsweek‘s spin that we are a national leader in cost cutting. Yeah, Williams!

Here is Maud’s letter on tuition:

Williams is reducing our comprehensive fee by 15 percent for all families on a one-time basis for academic year 2020–21, relative to the amount we’d previously announced for the coming year. Families on financial aid will have their expected family contribution reduced by 15 percent. This reduction recognizes the fact that the pandemic and associated challenges are requiring us to cancel Winter Study as well as fall athletics competition and many student activities, among other opportunities that we usually encourage families to expect as part of their student’s education.
We’ll also waive the work-study contribution for the entire 2020-21 academic year for all students receiving financial aid. And the annual Student Activities Fee will be eliminated for the year, for all students.

Because tuition is paid in exchange for teaching, academic credit, and non-academic services that the college will provide, regardless of whether we’re in-person or remote, please understand that tuition (excepting room and board) will be the same for all students, whether they participate in-person or remotely.

Details here. Comments:

1) This price-cutting (probably) would not have happened if the stock market had not recovered so strongly. Williams, and every other elite college, was in real trouble three months ago, with markets down so much. But the dramatic rally has left the S&P 500 up more than 10% over the trailing 12 months. Williams (and its endowment) has a fiscal year which ends on June 30, so things look quite good. Indeed, if you had told the trustees a year ago that the market would be up this much — after one of the strongest 10-year bull markets in history — they would have been very pleased. Big picture: We are rich enough to afford this gesture.

2) Our prices, whatever they are, should not impact our calculation of “expected family contribution.” The two have nothing to do with each other! If Williams thought, last month, that your family was rich enough to pay $50,000 toward your child’s education, then there is no necessary reason for us to change that judgment. (Of course, if your situation has changed — you were fired because of the global recession, say — then, obviously, we should adjust our expectations. But we do that every year, for any family which undergoes a financial hit.) How can an across-the-board cut be justified by anything else other than Maud’s desire for popularity?

3) I don’t like the idea of price cuts. Williams is a luxury good. We should never cut our list price — although we should, and do, engage in a great deal of price discrimination. I especially don’t like tying such decisions to the minutia of whether or not fall sports are cancelled. Williams is not a cafeteria, a place where what you pay depends on what you choose to participate in (broadly speaking). You pay the same, regardless of whether or not you play varsity soccer. Therefore, we should charge the same, whether or not varsity soccer happens this year.

4) The exact 15% price cut on everything is too cute.

5) Here is what Williams reported in December:

Today, we have:

6) How much is this discount costing Williams? Tough to say! $12,000 times 2000 students is $24 million. That seems like a lot! But it is also an overestimate since some families have an expected contribution of zero. So, price cuts for them have no effect on revenue. Also, note that a 15% decrease on family contribution does not cost us $12,000, unless the family is paying almost the full price already. So, the total cost might be $15 million? Better calculations are welcome in the comments.

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5 Comments To "Reopening, 3"

#1 Comment By Fragestellar On July 2, 2020 @ 1:48 pm

Surely the Great DDF can do a net revenue and cash flow analysis?

Is the discount ‘costing’ Williams, or a revenue maximization move in what is likely to be a *highly competitive marketplace?*

#2 Comment By David Dudley Field ’25 On July 2, 2020 @ 2:39 pm

No doxing, please.

Without this policy, revenue for 2020-2021 would be $90 million (or whatever). With it, revenue will be $75 million. That is a cost, however you slice it.

#3 Comment By Falk Land On July 2, 2020 @ 7:37 pm

By implementing this policy, the college is incentivizing students not to take time off, which will have bigger implications in future years, when students return to paying full tuition. If many students take time off, next years freshman class will necessarily have to be smaller, and the effects will be felt in tuition revenue in years to come.

The good PR that also comes out of this is just an added bonus.

#4 Comment By abl On July 3, 2020 @ 11:40 am

$12,000 times 2000 students is $24 million.

I would also assume that Williams will not be resuming with 2000 students. A significant percentage of the student body (10%? 15%?) will likely take the year off.

I would also assume that this move will have a short- and long-term positive impact on alumni giving. I doubt that it will it be enough to fully counterbalance the $10-15 million in revenue Williams is losing this year, but it’s something else that will close the gap further.

#5 Comment By Fragestellar On July 3, 2020 @ 1:55 pm

Doxing? Surely the whole (Williams) world knows who runs this wee foggy floggity flog of a bog?

What is the point of not saying it, other than some rather perverse virtual game of flollow the Fleeder? Follow follow, Follow follow, Flawwwlow the Rules?!

And $12K x 2000? WHAT? Not every student is full fare by far, right? Net revenue p/s is about $25K, right Morty?

Surely the game here is to *compete for the high fare seats*, right? Surely that’s the game across the entire elite higher education market?

And surely there’s going to be some free agency? Anyone tried calling up Notre Dame and making an offer?