Making Moves: Freezing the Cost of Higher Education

It takes money to run a successful school. Ideology aside, it’s a business (more specifically a commercial non-profit). The ongoing goal is to maintain the highest level of academic and athletic performance while maximizing the productivity growth and profit of the school, all done at the lowest operating cost. Add to that the growing demands and rising costs of technology in academics.

Of the 31.1 million 18-24 year olds in the U.S. in 2011, a whopping 42% enrolled in college in the same year according to the U.S. Department of Education. Enrollment for older students is also increasing. Total enrollment estimates currently top 21 million students, who shell out on average $9,000 in-state to $22,000 out-of-state per year at public colleges. Even though the numbers seem eye-popping and wallet-gouging, it’s a steal.

We all know firsthand that education does not come cheap. What we may not know is that many universities have not collected enough revenue up front to meet their operating costs for decades.

State university revenue is collected primarily in the form of donations, state subsidies, and tuition. Many of these larger universities can also rely on revenue from sporting events. So long as donations and sports bring in a consistently large amount of money and states do not decrease funding, universities can offer greatly discounted tuition.

However, this practice is a double-edged sword, evident when the economy plunges. In fact, universities and their attendees have relied on state and local government funding since the 1950s, but this funding has decreased steadily from 60% to nearly 30% of total cost since 1980. During tough times, schools raise tuition at the ire of hard-working parents and students, who hope to build a future without risking financial ruin. Schools have no choice – or do they?

Recently, Purdue University did something that seems to have flipped the script. Mitch Daniels, the former federal director of the Office of Management and Budget and two-term Indiana governor known for implementing austerity measures to balance the state budget became president at Purdue University in January 2013. Prior to his arrival, Purdue was suffering from budget deficits, aging buildings, and looming tuition spikes like other state universities. Instead of raising tuition to cover costs, he froze tuition.

Over a two-year period, Purdue University was headed into the red, to the tune of $65 million. They were facing a potential loss of $40 million in revenue and a proposed $25 million for hiring new faculty for their nationally ranked engineering program. In what the Editorial Board of USA Today suggests as “Belt Tightening 101,” Daniels has added higher-deductible health care plans, reduced administrative bloat and cut food service costs to alleviate deficits. In addition, he took on the penny-pinching measures of selling university cars, reducing college storage space, and repurposing furniture. Daniels decided that “counting every $10,000 saved as a ‘student tuition equivalent’ ” shows customers and donors that Purdue values their investment.

The university’s overall initiative, Purdue Moves, focuses on affordability/accessibility, STEM leadership, world-changing research, and transformative education. This initiative, with university approval, is doing so well that tuition freezes will be extended through the 2015-2016 academic year. The graduating class of 2016 who entered in 2012 will experience the school’s first flat rate tuition since the class of ‘76.

The nation is noticing. Even though Purdue is not the first to freeze tuition, it is making a splash. After the Wall Street Journal, USA Today, and the Chicago Tribune all published articles raving about Purdue’s accomplishments, several university campuses have announced their efforts to freeze tuition. Included are Penn State University, University of Illinois (Urbana-Champaign, Chicago, and Springfield), University of Minnesota, and Iowa schools (University of Iowa, Iowa State University, and University of Northern Iowa), among others. It’s a start – and hopefully more than just a trend – in higher education.

Photo credit: Tax Credits