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The skinny on levelized-tuition plans
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In general, built-in inflation rates range from 8 percent to 10 percent among schools, though specific rates and formulas can vary from state to state, as well as from school to school. What all levelized plans do have in common, however, is that parents pay one fixed rate for all four years of attendance no matter what happens to the school's budget.

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"So many people look at college on a year-to-year basis. We're trying to open people's eyes and get them to look at the entire college experience and make some plans for the length of their college stay," says Tommy Dismukes, vice president of enrollment for Huntingdon College in Montgomery, Ala. "This is our way of showing people that we're going to assist them, to show them that they can start making plans for college."

At Huntingdon College, which calculates its tuition inflation rate differently than most schools, incoming freshman students who locked in costs in the past two years paid a relatively modest surcharge -- 4.8 percent -- over the prevailing tuition rate. Maximizing enrollment and efficiently managing operating expenses helps keep costs in line, Dismukes says.

Fixed-rate challenges
While levelized-tuition plans do give families the ability to financially plan, Jim Barrett, director of admissions at Hiram College in Hiram, Ohio, warns that when universities face an unexpected drop in funding, levelized-tuition programs can, in some cases, wind up costing families coming into the program a higher rate than they would have received without the fixed-rate plan.

"With levelized programs, the natural challenge is that unexpected costs must be borne on the backs of the incoming class," Barrett says. "Rather than spread out a 2 percent increase over each year of students, you may have to put a 7 percent increase on new students." For years when state budgets run dry and endowments don't yield as much as desired, schools with levelized plans that cover the entire student body have no choice but to put all the financial strain on incoming freshmen, since all other students already have their tuition rates locked.

Barrett notes that this scenario predominantly affects public universities that heavily rely on funding from the state. Private institutions with sizable endowments such as Hiram often have the ability to temporarily subsidize tuition inflation so that incoming students won't have to pay a significantly higher tuition inflation rate than previous classes. However, keep in mind that while private colleges may keep tuition inflation costs down, they are generally much more expensive to attend than public universities.

Read the fine print
For students thinking about attending a school with a levelized-tuition program, Mark Kantrowitz, publisher of the financial aid Web site Finaid.org, recommends reading the fine print, making absolutely sure that there's no clause that allows the school to change your tuition price for any reason, and ensuring that you understand what happens to your tuition if you need to withdraw from school for a semester or two, or you need an extra year to graduate.

 
 
Next: "You could end up paying more each year."
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