A Dad (me) kicks the tires on Duke’s tuition benefit

Benefits are an important reason that employees value jobs, and Duke University’s tuition benefit for the children of employees is an example of one that makes Duke an attractive place to work. Interestingly, my experience is that outsiders greatly over-estimate the value of the benefit, as do many employees with young children.

To whit, I was at a social gathering the other night and someone said “it must be so great working at Duke since your kids can go to college for free!?” That is, of course, not true, but I was armed with more facts than before because I have a daughter who is a rising senior in high school, and so I am paying great attention to such issues. The actual tuition benefit goes like this (for 2 children, with each getting 8 semesters of coverage; I have 3 kids).

  • I pay a deductible equal to $2,912/semester (this deductible is 50 cents more than UNC-Chapel Hill’s tuition per semester for this year, the most expensive state school in NC)
  • After the deductible I can receive up to 75% of Duke’s tuition to go toward tuition at Duke or another University, ($15,865.50/semester or $31,731/year).

My daughter is interested in Barnard so I work through that example here, and it is what I am trying to plan on because it is about as expensive as they come, so if she goes somewhere else (the list of possibles is long at this point) it will be less. Barnard’s tuition for 2012-13 is $20,925/semester, so I would pay $2,912 (deductible) + $2,147.50 ($20,925-$2,912-$15,865.50)= $5,059.50 x 2 =$10,119 for a full year in tuition. Mandatory fees are $1,652/year and a shared dorm room is $8,240/year. Freshmen at Barnard must purchase a full meal plan which comes to $5,570/year. I can cover her on my health insurance plan, so she wouldn’t have to pay the $1,280 student health insurance fee. So, we are up to Duke paying $31,731 toward tuition for a full year at 2012-13 prices and I/we would be responsible for:

  • $10,119 tuition
  • $15,462 in fees, room and board

Not sure exactly how much to estimate for other expenses, but I have heard uttered from my daughter’s lips the phrase “it would be so cool to be able to go see Wicked on broadway on the weekends!” so I will say $10,000/year which would give Barnard at cost of attendance of about $65,000/year.

So, if you are looking for a bottom line of what the Duke tuition benefit covers:

  • The cost of attendance at UNC* or NC State is about $20,000/year for N.C. residents (other state schools are less). If my child went there, I would have to pay the full cost because the per semester deductible for the Duke tuition benefit is set at just above the cost of tuition at these Universities.
  • Or my child could go to a school like Barnard (or other private university) with me/us paying $30,000-$35,000/year depending on cost of living, fees and room and board (and Duke paying ~$32,000/year).

If a child obtains scholarships for tuition, that reduces Duke’s tuition benefit. If a kid gets an undeclared scholarship it can be applied to room and board without reducing Duke’s benefit. In the end, the benefit is a far cry from “your kid goes to college for free” it is more like “your kid can go to a private school for about half price or about 50% more than UNC” which is still a valuable benefit. And I understand the benefit to somehow be tax free, which means that it would take on the order of ~$45,000 in income to produce that purchasing power, of course depending on your tax bracket.

The Duke tuition benefit is a valuable, tax free benefit to employees. However, it is unclear to me why so many people think the benefit is much more lucrative than it actually is.

*I went to UNC. Three times.

cross posted at freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

27 thoughts on “A Dad (me) kicks the tires on Duke’s tuition benefit”

  1. Don

    Well in fairness to other people, they think that because it’s way more than they get as tuition help. Where I see at Stanford these plans make an eye-opening difference is when (as often happens) a child of faculty member/employee attends an out of state public university, in which case Stanford tends to pay the entire tuition bill full stop (It’s less than 50% of Stanford current tuition). AND as you note because the tuition payment is university to university, there is another hidden benefit — you are not taxed on the benefit as an individual.

    Keith

  2. How is it in Duke’s interest to differentially attract people with more kids to its faculty, relatively to those with few or none?

    1. It’s a fair question, but I suspect they’d make a different comparison, and say they’re better able to recruit faculty with kids (or planning to have kids) than is another, competing school with no such perk.

    2. How is it in the interest of a university to have *any* family-friendly policy?

      Answer: Because it’s a commonly reported concern of women faculty, it encourages them to take the jobs and to stay in them.

  3. Wow, talk about your first world problems. I have a client whose slumlord/employer violated the minimum wage laws for YEARS while charging her rent to live is a rotting hovel without running water. Part of his confidence that he will not be held to account seems justified by the fact that everyone I consult about her case takes one look at her, with her toothless bottom jaw (oddly, her dental care is not the best) and suggests that she will be lucky to get anything, much less what she is owed.

    This is in a state capital in one of the richest countries in the world.

  4. $10K a year to amuse your daughter? I mean, seriously? If you can afford things like this, why are you even talking to us about the rest of it? Why are you pretending that rational assessment of budgetary considerations is happening here?

    If she wants more than a thousand dollars a month in amusement (given a nine-month academic year) in a city full of free or cheap-to-access museums and performances, and at a college undoubtedly chock-a-block with theater productions, can’t she find a way to afford it herself? She can dine at a fine restaurant and see a Broadway show on your dime when you visit her for the weekend. In the meantime, she can experience something vaguely resembling a student lifestyle with a modicum of independence.

    And given that you apparently intend to fund your daughter’s amusement to this inconceivable level if she goes to Barnard, would you really deny her the same if she goes to UNC? A thousand dollars can probably cover the total cost of seeing a Broadway show for a student attending Reed or Evergreen if they buy the plane tickets in advance …

    This whole “I will amuse my daughter to over a grand per month” nonsense may be true, but it’s immensely gauche to talk about it in what purports to be a discussion of budgeting, and in any case it shouldn’t be a differential consideration between the subsidized fancy New York school and the (excellent) local public university.

    1. Was a bit of a flip comment, but my main point is that Elon’s tuition in Elon College NC is about the same as Barnard’s but the cost of living in and around and getting there and back (move in, thanksgiving, christmas, spring break, is 4 round trips home right off the bat) is lots different and I suspect Manhattan is the most expensive place she could decide to attend college. Also, my experience with listening to parents talk about posted “cost of attendance figures” is that they never quite cover the true costs, and again, Manhattan is expensive. Here is a bit more on the tuition benefits of U chicago and Stanford http://donaldhtaylorjr.wordpress.com/2012/08/09/tuition-benefits-at-other-universities/. Some interesting differences, and evaluation of them really depends on what you think of as the default (public university whose price and prestige differs lots by state) or a private uni.

      1. Or she could do what I did in college: take a job, and do free things for fun. Manhattan is (oddly) full of them.

        Tell your kid I’m 45, with two graduate degrees in professional fields, and my annual budget included exactly one pair of tickets to “Wicked”.

        You can leave off the “Listen up, Buttercup, …” if you think it’ll be better heard without.

        PS I went to Carolina when it was $500 a semester. And managed to put myself through law school for a TOTAL cost (books, food, basement apartment, health ins., everything, complete) of $33,000. All three years. Not that long ago.

        1. I was a frosh at UNC in 1986 and I think undergrad tuition was around $5-600/semester. It is still about as cheap as they come, but has been going up lots faster in recent years. I have gotten several emails from folks saying lots of free stuff to do in Manhattan, and the comment on Broadway is best understood as a 17 year old who thinks NYC is really cool and thinks she wants to live in a big city than a comment on her expectations.

  5. $32K/year is a ton of money. So what if outsiders don’t know the exact details. They know you get a huge benefit, and you do, so they know the essential facts.

  6. There are piles of ways that students can get cheap theater tickets. They generally take lots of time (waiting for the rush tickets to be given out etc.) but kids are good at waiting around. “Wicked” is not a wild luxury.

    1. Very true. Doesn’t sound like this young lady is predisposed towards those more strenuous means of obtaining access to luxuries.

      1. It is very inappropriate to be unkind to a specific teenager whom you’ve never encountered and about whom you know almost nothing. I’d suggest that someone with a realistic prospect of acceptance to Barnard is quite likely to be acquainted with strenuous effort of one sort or another. I criticized Dr. Taylor’s declared readiness to fork over this astronomical sum, and I criticized Dr. Taylor’s weighing the sum on the Barnard side of the equation and not the public university side – but that doesn’t mean I made any assumptions about the merit of his daughter, and I really don’t think you should, either.

  7. A “flip” number should be something like $3000, even if it includes essentials like winter clothing and transportation. (FYI, round-trip airfare Raleigh – NYC runs about $200.) 10K implies you’ll be clothing her at Bergdorf’s, subsidizing biweekly dinners at MASA, and underwriting a Hamptons spring timeshare. Nothing wrong with these expenditures if one can afford them, but one doesn’t discuss them in polite society.

  8. My cousin works for USC, which offers free tuition for children of faculty members. Neither of her children were admitted. 🙂

    1. Do you think the admissions office might weight against accepting the children of faculty members, to avoid the expense? Or do you think it just happened they weren’t accepted, independently of her faculty status?

  9. it is unclear to me why so many people think the benefit is much more lucrative than it actually is.

    You are talking about a benefit that is worth, by your calculation, $45K in pre-tax income. And you’re complaining that many people think it’s worth more than that??? And you are someone who, AFAIK, is a major beneficiary of the high tuition charged these days by American universities??

    Wow. You’ve just joined that guy at Chicago who was complaining about how tough it is to get by on only $250K/yr.

    1. Of course I benefit from people paying lots to attend Duke. Here is a round up of some posts I have written about the cost of college generally being unsustainable http://donaldhtaylorjr.wordpress.com/2012/08/10/posts-on-the-cost-of-college/ I very much think that the rate of inflation of tuition is unsustainable, and that the financial model of the research university will have to undergo big changes (I don’t know as much about teaching-focused colleges from the inside). The cross subsidies within research universities are very complicated and large, and the idea that great teaching comes from great research needs more thought.

      On the topic of the post, a benefit is simply one part of a labor contract. Duke sends out a doc each year greatly expanding on the concept of “total compensation” and during 3 years of 0% salary increase across the board at the Univ, an explicit argument made was that the line would be held in benefits that were tax free (like employer paid health insurance premiums, college tuition, etc) and in that way employees would be better off than with small salary increases. In that context, I do find it interesting that people over-estimate the benefit (which I said was large and tax free), especially because it pays $0 for public universities in NC, which are very common choices (for many good reasons) for the children of Duke employees. I also find the interaction between the tuition benefit of private universities and their in state options to be interesting (Stanford’s is far friendlier to in state Calif choices as compared to Duke, for example). What is the goal of the differences? Why would Duke pay $0 for UNC, but Stanford pays half the cost of attendance for Berkeley or UCLA? I don’t know the answers, but find these to be interesting questions. I guess most people don’t find them to be interesting, which is fine.

      1. Don,

        Sorry to offend, but as I read your post it does have an air of complaint to it, beyond wondering about the rationale for different policies. If I made $1,000,000/yr as a business executive and someone said, “Wow, you’re President of XYZ Corp. Must be nice to draw a multi-million dollar paycheck,” I think I would be received poorly if I complained that the public overestimated my income.

        Leaving other matters aside, I suspect that the reason people think your children can go to Duke for free is that that in fact used to be the policy at many private universities. Children of faculty members could attend for free, and this was based on the idea that it was nice benefit with low marginal costs to the university and so nobody thought much about it.

        Then things got complicated. More competitive admissions meant that faculty children were more often not admitted, especially at schools like Duke, and their parents naturally sought a comparable benefit. Further, it was noticed that this was a substantial tax-exempt benefit, and hence should comply with non-discrimination rules regarding benefits that accrued only to higher-paid employees – faculty member sin this case – but not other employees. The need to cover more employees led schools to adjust the total benefit downward, and the complaints about applicants being rejected made them come up with various schemes for children who go elsewhere.

        I suppose the variation in plans reflects each school’s particular circumstances with respect to the makeup of its staff, the pattern of admissions, and so on. Maybe Stanford rejects more employee-family applicants or wants to hold down the number going there, or even applying, while Duke doesn’t care. Maybe it just has more money.

  10. Don,

    Does Duke deliberately set its tuition deductible at the UNC-CH/NCSU level? If so, why? Also, is Duke an option for your daughter, or does the school have a policy banning children of the faculty from attending?

    1. Kids of Duke faculty can attend Duke and can get the tuition benefit to defray the cost of Duke. Early on my daughter decided she did not want to go to Duke….we live 5 minutes from campus and she has lived in Durham most of her life so wanted somewhere else.

      They do set the deductible equal to UNC tuition apparently, thought that is not acknowledged in any materials for employees that I can find, but that has apparently been the policy for some time. This is a story from 2011 on the topic http://blogs.newsobserver.com/campusnotes/duke-employee-tuition-program-still-wont-cover-unc-schools

      I am unsure of the policy reasoning for having a very generous benefit for a private university (or out of state public) but no benefit for the in state options in North Carolina. It could be a way to limit benefit costs (if lots of Duke employee kids choose in state public univs) or there could be some other theory at work. I don’t know and haven’t asked HR at Duke. An interesting bit of data would be where kids of Duke employees go to college (incl health system I think there are on order of 35,000 employees). Of course, it is cheaper to pay full freight at UNC (~$20,000/year) than it is to attend Duke or similar priced private university with the max benefit (~$30,000 +/- a couple of thousand depending on the school).

      1. (Paying lots for private college tuition, but only above some cutoff) may be a way to limit costs to Duke, but it is certainly discriminatory:
        – Lowly-paid people will be more likely to consider the total costs to them, and choose the State U option, thus not getting any benefit.
        – Highly-paid academic superstars and administrators are more likely to send their children to private colleges, for them the additional costs weigh less on their family budget.
        So whatever the original intent, the effect is that the benefit is likely to accrue disproportionally to the better-off faculty and administrators.
        At the same time, the existence of some unspecified benefit may help to attract employees, who only find out its limitation when it is too late (as apparently did Prof. Taylor).
        I consider myself very very lucky that my employer (Stanford) pays the whole tuition for my son to attend a Cal State U. And he seems to get a very good education. What the private colleges sell for their excessive price is exclusivity and access.
        (My rant on this at http://delong.typepad.com/sdj/2010/11/stinking-fishwrap-the-new-york-times-edition.html#comment-6a00e551f08003883401348925dddd970c ).
        Then, off-topic, the ‘financial award’ letters from many colleges seem to be a sales tool, rather than a disclosure. Most schools seem to charge an enormous tuition, and then give as ‘scholarship’ a smallish rebate on it, so as to attract a paying student. I talked to too many parents telling me their child got a ‘scholarship’ to [Ivy league or similar U.], and parents then mortgaging their house so as not to deny this chance to their child; the actual grant part of the scholarship was only small (and the interest on a parent loan 8+ % ?).

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