In November 2017, leaders from St. John's College met to discuss the three-century-old institution's annual tuition increase. They expected the meeting would be straightforward. For years, the small liberal arts school — with campuses in Annapolis, Maryland, and Santa Fe, New Mexico — raised its sticker price by around 3%.
Yet St. John's leaders knew something had to change. In just two decades, the college's tuition had ballooned from $19,500 to $51,200 — growing at a rate three times that of inflation.
So Panayiotis Kanelos, president of the Annapolis campus, crunched the numbers to predict how much annual tuition would be in 10 years if St. John's stayed on the same course. That figure? A whopping $70,000.
"Where does it stop?" Kanelos asked. "We just planted a flag and said, for us, it stops here." That meant cutting the posted price by 33%, dropping annual tuition to around $35,000. It was a figure the college had not seen in more than a decade.
St. John's joins a growing number of private institutions to slash prices in a bid to attract students put off by rising college costs. Ten colleges reset their tuition in 2018, the year St. John's announced its cut, and some 50 colleges reduced prices in the decade prior, according to Forbes.
That tuition revenue often must be made up elsewhere, either through enrollment increases — which not all colleges experience after resets — or alternative funding sources. At St. John's, officials plan to offset that lost revenue through a combination of reduced administrative spending and a $300 million capital campaign that will be used to grow the endowment and shore up finances.
Nationwide, liberal arts schools are leaning more on fundraising to plug holes in their budgets.
"For liberal arts colleges, particularly small private liberal arts colleges, fundraising has ... been part of the fabric of what we do," said Kassandra Jolley, vice president for advancement at Mount Holyoke College. But as more colleges look to offer seats to "students who have the talent, but perhaps not the resources," she added, "our need for fundraising has grown."
Building the foundation
St. John's tuition reset is not a last-ditch effort to grow its enrollment, which hovers around 900 students across both campuses. Rather, it's part of a larger shift toward a philanthropy-centered financial model, officials said.
It's not the first time St. John's has made major changes. As the third-oldest college in the U.S., it offered military training for a time and opened its doors to women beginning in 1951.
The college's current form was most directly influenced, however, by the Great Depression, which dealt a major financial blow that caused it to lose accreditation. To breathe new life into St. John's, officials rolled out a liberal arts program that students still learn.
Dubbed the New Program, the curriculum is centered on studying the "Great Books" of authors and philosophers in the Western canon. Professors — or tutors, as the college calls them — do not conduct lectures but instead guide students through discussion in seminar-style classes.
Pride in this model emanates from all corners of campus. Shakespeare is referenced in recruiting materials, which read, "To apply or not to apply?" and Kanelos keeps a burgundy "Make America Read Again" cap in his office.
St. John's also eschews the flashy amenities other colleges use to attract students; there are no swimming pools, deluxe eateries or decked-out dorms at either campus. Still, shifting away from tuition-based revenue was a risky bet.
The college spends nearly $60,000 a year to educate a single student. That is considerably more than the $51,000 average that four-year private nonprofit colleges spent per full-time student in 2016. And that's unlikely to change, as St. John's is committed to keeping class sizes small and not employing adjunct faculty, which colleges often lean on to cut expenses.
Meanwhile, its tuition revenue was on the decline even before the reset. About 10 years ago, students provided the college with 75% to 80% of its revenue, said Mark Roosevelt, who serves as both the collegewide and Sante Fe campus president. In the 2018 fiscal year, St. John's drew just 31% of its revenue from tuition. The rest came from cash and pledge contributions (25%); endowment distributions (18%); and student housing, bookstore profits and other nonacademic services (17%); as well as other revenue such as federal grants and state appropriations.
Benjamin Baum, vice president of enrollment, chalks up the decrease to two factors: an increase in need-based aid for low-income students and merit scholarships for top applicants.
St. John's isn't alone. During the 2018-19 academic year, tuition discounts are expected to reach a record high of 52.2% for first-time, full-time freshman at private nonprofit institutions, according to a recent survey by the National Association of College and Business Officers (NACUBO).
As such, private colleges are looking more to fundraising to sustain the growth in institutional grants, said Richard Ekman, president of The Council of Independent Colleges, which represents more than 700 colleges, universities and other organizations.
"There is a real commitment to enrolling students who need college," Ekman said. "These are increasingly low-income and first-generation students, so colleges are responding by tilting their fundraising toward scholarship fundraising and — in most of these colleges — away from buildings, endowed professorships and all other sorts of things."
Increasing the endowment to support scholarships is at the core of the St. John's campaign. Officials hope to add $200 million of the target $300 million raise to the endowment. That would bring the fund past $300 million and allow it to support two-thirds of financial aid. In 2016 fiscal year, the college's $136 million endowment covered only about 18% of aid.
So far, St. John's has locked down more than $200 million in donations and pledges, which Kanelos attributes to the campaign's focus on affordability and accessibility. "If we went off and said, 'I want to build a football stadium,' I don't think we'd see a dime," he said. "We want to give out lots of aid to students forever. And they respond to that."
Betting on alumni
Alumni support has been the linchpin of the campaign and tuition reset. During interviews with more than 100 donors and alumni, an "overwhelming" share said they supported reducing tuition, said Phelosha Collaros, vice president of development and alumni relations.
"(Those interviews) gave courage to the people who already thought it was the right direction, and it started to assuage any concerns for people who had questions about it," Collaros said.
A survey of more than 700 alumni brought more momentum to the idea. In it, the majority (77%) of respondents said they couldn't afford to send a child to St. John's today. A slightly smaller share said they didn't believe the high tuition "correlates with the quality of education offered" (71%) and that St. John's should lower its tuition (69%).
What's more, the majority (53%) of respondents said a tuition reset would make them more likely to donate or give more to St. John's. So far, alumni account for nearly half (49%) of overall donors.
"We don't do sports teams, we don't do flashy things, we don't even have extravagant dorm rooms. We do discussion."
Annapolis campus president, St. John's College
Some of those include big gifts, such as the Winiarski Family Foundation's pledge to match up to $50 million in donations to St. John's, as well as $25 million each from alums Warren Spector and Ron Fielding, who chair the college's campaign and board, respectively.
St. John's has pulled in small gifts as well. From July to December 2018, the college received 2,038 donations under $2,500, compared to 1,431 over the same period the year before. The college attributed those increases to support for its new funding model, though giving to higher education reached record levels last year, likely due to a strong stock market.
"What we're really hoping to see is the continued outpouring that we've had from the community since we've launched the campaign," Collaros said. "We've had gifts of all sizes — just kind of a swelling of contributions to the organization at every level — which matters so much to us for the future of the college."
Cutting costs judiciously
Fundraising alone won't bring financial stability to St. John's, officials note. The college has been wrangling with a budget deficit, which peaked at $12 million in 2016, said Roosevelt, who was an early advocate of budget cuts.
Since Roosevelt took the helm overseeing collegewide administrative affairs in 2016, St. John's shrunk that gap to about $4 million. Officials expect to eliminate it by 2021.
Beyond stabilizing revenue, St. John's had to make tough decisions about where to trim costs. The wrong cut, Kanelos said, can damage a school's reputation.
"Usually what goes wrong is a school finds itself in a precarious financial situation, and they determine they have to cut finances, lower costs and do it as quickly as possible," Kanelos said. "So they start to change the kind of institution that they are out of financial desperation."
Protecting St. John's "Great Books" curriculum was essential. "We realized the only reason for St. John's to exist is our academic program," Kanelos said. "We don't do sports teams, we don't do flashy things, we don't even have extravagant dorm rooms. We do discussion."
Instead of making cuts that could limit the impact of its academics — such as shrinking the pool of institutional grants or hiring adjuncts — the college turned its eye toward the administration. Some decisions were obvious, Kanelos said, such as eliminating two switchboard operator positions.
Others were less so. In total, St. John's eliminated roughly 40 administrative positions by removing redundancies across the two campuses. Now, operations such as the registrar and human resources are conducted collegewide.
St. John's is also building out its graduate program in the hope of generating more revenue, Kanelos said.
In April, the college announced a partnership with the nearby U.S. Naval Academy to provide officers with a master's degree in liberal arts so they can return to the academy as instructors, The Capital reported. And this summer, it is rolling out a graduate certificate in liberal arts education for teachers.
Despite St. John's recent successes, Roosevelt said the push toward a sustainable funding model will be ongoing.
"I don't think we announce victory and say we've cut our costs, are having a successful capital campaign and had good admissions," he said. "We deliver an extremely expensive, distinctive education, therefore we need to be lean administratively in supporting it."
Correction: This article is updated to include Roosevelt's position as collegewide president.