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August 09, 2012 2:26 PM A Dad (Me) Kicks the Tires on Duke’s Tuition Benefit

By Don Taylor

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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 The Reality-based Community]

Don Taylor is an associate professor of public policy at Duke University, where his teaching and research focuses on health policy.
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Comments

  • John Wright on August 09, 2012 10:01 PM:

    The economic model of U.S. universities is broken. Tuition growth, net of financial aid, is slowing and government funding is being reduced. At the same time, university cost structures are too fixed, with too many redundancies across departments, and a bloated administrative burden where everyone seems to be a "dean" of something.

    It seems obvious where we're headed.... massive cost reductions from reduced financial aid, pared back academic programs, and faculty/administrative layoffs. It's already happening at Tier 2 institutions.

    Like most Fortune 500 companies, which long ago eliminated pensions and retiree beneifts, universities will be forced to eliminate these types of generous faculty perks. As soon as Harvard, Princeton, Stanford, etc... make the first move all others will quickly follow.

    Thus, I'd enjoy it while you can and tell your daughter to start saving now for her kids' college educations.

  • Don Taylor on August 10, 2012 10:07 AM:

    @John Wright
    I agree the financial model of research universities is unsustainable....I don't know as much about colleges that focus primarily on teaching. And as someone who has written a fair amount about the need for tax reform, hard to see how such a benefit is/should be tax free