Finance Subcommittee June 27, 2014 Meeting
Agenda I. Introduction and Comments from Chair II. Discussion Regarding Work of the Subcommittee III. Background and Context 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 Project Team John A. Griffin, Chair Frank B. Atkinson Kevin J. Fay Victoria D. Harker John G. Macfarlane, III George Keith Martin, Ex-officio 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 best public university, US News & World Report #3 best value public college, Princeton Review #2 best college value, Kiplinger s #1 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. University of North Carolina Chapel Hill 2. University of Virginia 3. University of Florida 4. College of William & Mary 5. University of California Los Angeles 6. University of Michigan 7. University of Maryland College Park 8. University of Wisconsin Madison 9. University of California, Berkeley 10. University of Georgia US News & World Report, Best Public Universities (2014) 1. University of California Berkeley 2. University of California Los Angeles 2. University of Virginia 4. University of Michigan 5. University of North Carolina Chapel Hill 6. College of William & Mary 7. Georgia Institute of Technology 8. Pennsylvania State University 9. University of California Davis 9. University of California San Diego PayScale.com, Annualized ROI (2014) 1. University of Virginia 2. Georgia Institute of Technology 3. Harvard University 4. College of William & Mary 5. University of Washington 6. University of Texas Dallas 7. New Mexico Institute of Mining & Tech. 8. Stanford University 9. Cooper Union for the Advancement of Science & Art 10. University of Michigan Princeton Review, Best Value Public College (2014) 1. University of North Carolina at Chapel Hill 2. New College of Florida 3. University of Virginia 4. North Carolina State University 5. University of Michigan 6. University of California Los Angeles 7. University of Florida 8. College of William & Mary 9. Truman State University 10. State University of New York at Binghamton 15
Peer Institution Undergraduate Tuition & Fee Increases, 2009-10 through 2013-14 Peer Institution 2013-14 Tuition & Fees* * Reflects tuition and required fees for a full-time, first-year student. ** Result of the implementation of the William & Mary Promise. 2013-14 Tuition & Fees Increase Five-Year Tuition & Fees Increase Cornell all students $45,358 4.5% 19.5% Duke all students $45,376 4.0% 17.1% Maryland out-of-state $28,348 3.9% 18.2% Michigan out-of-state $40,392 3.2% 15.6% Pennsylvania all students $45,890 4.9% 17.8% UC-Berkeley out-of-state $35,742 0.0% 12.9% UCLA out-of-state $35,575 0.0% 12.7% UNC Chapel Hill out-of-state $30,122 5.9% 28.1% University of Virginia in-state $12,668 3.7% 28.3% University of Virginia out-of-state $40,054 4.8% 25.7% Vanderbilt all students $43,668 2.0% 11.4% Virginia Tech in-state $11,455 4.9% 33.1% Virginia Tech out-of-state $27,211 5.0% 24.4% William & Mary in-state (incoming class)** $15,463 13.9% 43.2% William & Mary out-of-state $38,440 2.9% 24.1% 16
$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 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 $0 Estimated Series1 Total Price Estimated Series2 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 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Private Average = $45,073 Overall Average = $23,007 UVa = $12,668* Public Average = $11,974 * 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 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 UVA = $40,054 * Private Average = $45,073 Overall Average = $38,015 Public Average = $34,486 * 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 $45,000 $40,000 $35,000 UVa=$42,184** $30,000 $25,000 Average = $27,595 $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 $5,900 $16,500 Libraries, academic technology, deans' administration Operating and maintaining academic and support facilities Administration $6,300 $7,100 Admissions, registrar, dean of students and other student services 27
Who Pays for Education-Related Spending? $3,600 Students and families $10,600 $21,000 State taxpayers 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 $ 19.6 $ 12.4 $ 32.0 State grants 5.8-5.8 External grants, private loans, PLUS loans 4.8 3.2 8.0 University restricted (athletic, endow) 4.9 5.2 10.1 Subtotal dedicated sources 35.1 20.8 55.9 Funding From University Unrestricted Sources 17.0 29.0 46.0 Total SOURCES $ 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 $ 19.1 $ 16.2 $ 35.3 Work study 0.5 0.3 0.8 Loans 1.4 0.7 2.1 Subtotal 21.0 17.2 38.2 All Others With Need Access UVa Grants & scholarships 19.3 22.6 41.9 Work study - 3.6 3.6 Loans 11.8 6.4 18.2 Subtotal 31.1 32.6 63.7 Total USES $ 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
Endowment Spending (in millions) University of Virginia Endowment Spending Policy Inflation Growth Within a Band $250 $200 $150 4.50%* 5.00%* 5.50%** 5.25% 4.63% 4.83% 4.95% 4.68% $100 4.00%* $50 $0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Projected FY15 Potential Lower Limit of Band (4%) Potential Upper Limit of Band (6%) 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 Rolling Average FY HEPI 5 Year 2005 3.90% 2006 5.10% 2007 2.80% 2008 5.00% 2009 2.30% 3.8% 2010 0.90% 3.2% 2011 2.30% 2.7% 2012 1.70% 2.4% 2013 1.60% 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
1984 UVa Endowment Growth Endowment Held by Rector & Visitors (In $ Millions) as of June 30, 2013 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 $4,000 $3,500 $3,000 $2,500 Market Value 6/30/84 $ 213 Gifts 513 Inflation/Purchasing Power 704 Performance 3,223 Distributions (1,044) Market Value 6/30/13 $ 3,609 $2,000 $1,500 Performance Net of Distributions $1,000 $500 $- Gifts Added (inflation-adjusted) 1984 Market Value (inflation-adjusted) 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