Sunday, January 25, 2015

Belt Tightening 101

Belt Tightening 101

Mitch Daniels has helped Purdue keep costs down for students.

A billboard on the highway heading into West Lafayette, Indiana—home of Purdue University—warns, “There’s a train coming.” It’s meant as an invitation to join the Boilermaker sports bandwagon, but it might just as easily refer to the skyrocketing costs of college tuition nationwide. Purdue president and former Indiana governor Mitch Daniels wants to do something about it. Prior to his arrival in 2012, tuition at Purdue had gone up every year for 36 years, with annual hikes averaging close to 6 percent in the previous decade. Daniels has frozen tuition for three straight years and slashed room and board costs by 10 percent. “Instead of asking our students and their families to accommodate their budgets to our spending,” he says, “let’s see if we can’t adjust our spending to their budgets.” Purdue’s class of 2016 may graduate without ever having seen a tuition hike.
Erica Smith, a recent communications graduate from Michigan City, says that the tuition freeze was long overdue. She financed her education with loans she’ll be repaying for at least 25 years. “I feel hopeless almost,” she says. “But most of my friends have as much debt as I do. We joke about paying it till we die.” Smith says that cost hikes while she was a student added between $4,000 and $6,000 to her overall debt. “If tuition continues to rise, Purdue will be out of reach for middle-class people, like my niece,” whom she hopes will one day follow her to West Lafayette.
Daniels achieved the tuition freeze in part by postponing raises for some administrators, and some faculty members volunteered to forgo raises as well. Information-technology consolidation, bulk purchasing, eliminating off-campus storage, disposing of surplus property, and improving cash management also contributed—all techniques from Daniels’s playbook as governor. The former Indiana governor’s efforts to control costs have attracted national attention. “Daniels should teach an online course for college administrators,” USA Today editorialized. “Call it Belt Tightening 101.” The tuition freeze is “a courageous step in the right direction,” says Danette Howard of the Indiana-based Lumina Foundation, which makes grants for postsecondary education. Howard speaks from experience, having served as secretary of higher education in Maryland after a four-year freeze in that state sent average tuition from eighth-highest in the country down to 27th.
Why has tuition increased so relentlessly over time? Some of it comes from factors beyond schools’ control. “Government has imposed a whole lot of this administrative cost on the colleges. Many of the tasks being done on campuses now are simply trying to keep up with the avalanche of regulations and compliance that goes with it,” Daniels says. The American Action Forum found, for example, that hours spent complying with federal education paperwork requirements approximately doubled from 2003 to 2013.
States have also reduced funding for public colleges and universities, leading schools to try to make up the shortfalls through tuition hikes. Indiana’s cuts were smaller than those of many other states, but it rescinded $34 million in funding earlier this year when state revenues fell short of projections. Banks also make huge loans to students because the federal government guarantees repayment. Universities get the cash in advance—they “pocket the money,” as Daniels notes—with no risk if the student defaults. It’s a win-win for everybody, except heavily indebted student borrowers, who’re “left not better off but worse off in way too many cases,” according to Daniels. “The machine is going ‘Tilt,’ and it should.” (See “Slimming the College Tuition Beast,” Summer 2014.)
For undergraduates and their parents, a tuition freeze is a no-brainer. But others worry about the potential long-term effect on Purdue’s academic standing. The school boasts a top-ten rating in engineering and agriculture, among other well-regarded programs. “I don’t believe that anyone on the faculty objects to tuition freezes, or other strategies for keeping costs in check, as long as those efforts do not diminish the excellence of our institution,” says Patricia Hart, newly installed president of the University Senate. Recent master’s degree recipient Derrick Snyder agrees. “The serious downside from the tuition freeze is retaining faculty and staff,” he says. “I fear that the reputation Purdue has built as a leader in STEM fields could be at risk if something isn’t done to retain talent at all levels.” Pay is particularly important at Purdue, he says: while Greater Lafayette has a strong reputation within Indiana for quality of life, it doesn’t possess the national reputation of other midwestern university towns, such as Madison or Ann Arbor.
Daniels wants to reassure those who worry that controlling tuition will drive high-quality faculty away from Purdue. “Nobody ever cut their way to success,” he concedes. “The top line matters a lot.” And he agrees that fund-raising remains as vital to his job as cost-cutting. “I want to grow this university, at least at the margins. We’re teaching things the nation really needs.” But Daniels understands what many of his fellow university presidents seem more reluctant to grasp: the status quo is not sustainable. That may not fit on a billboard, but it’s the truth.
Aaron M. Renn is an urban analyst, consultant, and publisher of the urban policy website The Urbanophile.

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