This commentary was originally featured in Forbes on October 31, 2017.
Over the past decade, a growing chorus of students, parents, and state legislators have urged tuition reductions or freezes on their public colleges and universities. To this request, defenders of the higher education status quo have rejoined that freezes will materially undermine their universities’ ability to provide an excellent education for their students. For example, here in my home state of Texas, the University of Texas-Austin president, Gregory Fenves, justified his 2015 request for a three percent tuition increase for the 2016-17 and 2017-18 academic years on the following basis: “[S]imply keeping pace with cost escalation requires additional annual recurring revenue of $30 million to $40 million. Most cost escalation is related to competitive compensation and required benefits for faculty and staff, which is central to UT Austin’s excellence.”
Fenves goes on in his 2015 tuition-increase request to point out that “this will be the first tuition increase for resident undergraduates since Fall 2011.” Unmentioned is why UT-Austin did not raise undergraduate tuition in 2014. As the Austin American-Statesmanreported, the school’s monetary mercy toward its students and their parents was not initially its design. Instead, it was “nudged” by then-governor Rick Perry: In 2014, “[t]he regents had been poised to approve increases — 2.1 percent . . . until Perry called for a freeze on prices hours before the board met. . . .”
In his 2015 request to increase tuition, Fenves explained the ill effects of such freezes. “Since 2009 . . . revenue increases for UT Austin have fallen well short” of what’s required to “carry out UT Austin’s mission as a preeminent public research university. Advancing excellence requires revenues beyond cost escalation. . . .”
Nor is Fenves alone in his judgment—far from it. Most public college and university leaders would agree with his assessment that tuition freezes and continued academic excellence are well-nigh mutually exclusive.
But then, along came Mitch Daniels.
Daniels assumed the Purdue presidency in January 2013, after concluding his second term as Indiana’s governor. In his quest to make college more affordable, he wasted no time. As reported on the school’s website: “Breaking with a 36-year string of increases, Purdue commenced a series of tuition freezes in 2013,” which continue to this day, totaling six consecutive years of freezes in a row. Moreover, “room and board costs were cut by 5 percent and have remained steady since 2013,” making Purdue less expensive for today’s students than it was when he first took office. Add to this student-friendly formula a “first-of-its-kind partnership with online retailer Amazon.com,” which is saving Purdue students an average of 30 percent on their textbooks each year.”
These reforms have helped to reduce the burden of student loans on Purdue students, whose “borrowing has dropped 23 percent.” This is especially important given the fact that, today, student-loan debt has reached an historic high of $1.4 trillion, which exceeds total national credit card debt.
Has Purdue’s laudable concern for students’ and parents’ pocketbooks undermined its efforts to advance excellence? For what it’s worth, in September, U.S. News and World Report released it 2018 rankings of America’s best colleges. Purdue came in at No. 18 for best public university, up from the previous year's 20th placement.
Purdue’s success should make every university leader and every state legislator ask, “How was this done, and how can we bring these savings to our students?”
To begin, President Daniels reduced the cost to students of campus dining services by ten percent. He took advantage of Purdue’s size to further streamline its purchasing. He sold off redundant property, reduced the size and cost of rental storage by half, and mended used office furniture rather buying new replacements.
In a 2014 interview with the Chicago Tribune, Daniels commented on the strategic vision guiding his fiscal reforms: “When you impose a (budget) limit, people suddenly begin to do common sense things they should have done before . . . When money is easy, when you can dial up tuition or fees, people tend to postpone even the most basic efficiencies."
With this observation, Daniels sums up nicely the history of higher education finance over the past half-century: The money spigot—student tuition payments, state and federal funding, and donors’ contributions—seemed endless. Thus, according to one study, tuitions went up 440 percent nationwide from the mid-‘80s to 2008, and student-loan debt necessarily went up with them.
Worse, when confronted with the facts about tuition hyperinflation, defenders of the higher education status quo generally have responded by blaming state legislators and, by implication, the taxpayers who elected them. Taking another example from my home state: Last year, a higher-education group, called the Lincoln Project, met with UT-Austin president Fenves to publicize its report calling on state legislatures to “reverse cuts.” “Tuition cannot keep going up indefinitely at rapid rates,” remarked Robert Birgeneau, Lincoln Project co-chairman and former chancellor at the University of California, Berkeley.
I addressed the “state-funding-cuts-made-us-raise-your-tuition” argument here. Looking at Texas, the country’s second largest state, I found that, between 2000 and 2010, state funding dropped approximately 16 percent on an inflation-adjusted, per-fulltime-pupil basis. But, during this same period, average Texas public university tuition and fees collected (not advertised and then discounted) increased by roughly 76 percent.
How does a 16 percent funding cut warrant a 75 percent tuition increase? The higher education establishment has yet to answer this question. Perhaps the answer emerges when we reflect on Daniels’ observation, “When money is easy, when you can dial up tuition or fees, people tend to postpone even the most basic efficiencies."
In this light, Birgeneau’s proposed solution lays bare the chasm separating the higher education establishment from reformers like Mitch Daniels. Daniels agrees wholeheartedly that “tuition cannot keep going on indefinitely at rapid rates.” But Daniels is trying—and succeeding—at lowering universities’ costs, rather than merely passing along the (ever-larger) bill to already-cash-strapped state legislatures and the taxpayers they represent.
In recognizing this difference in approach, we come also to recognize that the remedies required to address higher education’s financial crisis are much less a challenge to the intellect and much more a challenge to the political will of campus and statehouse leaders. Daniels’ six-year winning streak is likely to bolster the courage of other would-be reformers, both on campus and in the legislatures.
In the final count, Purdue’s success is serving as a one-school wrecking crew of the “state-funding-cuts-made-us-raise-your-tuition” myth. In so doing, it provides a road map for the rest of us, if we have the will to follow it.