University Tuition Freeze: A Surprising Way to Raise Revenue

In the midst of falling enrollment and an ill-timed change of leadership, the University of Alaska (UA) is currently struggling to cut a bloated budget. The UA system, which includes three main campuses – Anchorage, Fairbanks, and Southeast – desperately needs to implement sensible budget cuts. While it may seem like an insurmountable task, other universities have managed to cut their budgets while maintaining educational quality. Purdue University, for example, has frozen its tuition cost for five years (and counting), while reducing its cost to the public.

Purdue began its tuition freeze in 2013 and has not raised the cost of attendance since, including for the current 2020/2021 academic year. The beneficial impacts of the tuition freeze have been staggeringly positive for the university. Purdue has seen a 37 percent increase in applications for admission, and enrollment is at its highest ever. Consequently, Purdue has gained revenue – a $100 million increase since before the tuition freeze. The University of Alaska could benefit from increased enrollment and revenue, driven by students and parents eager to save on tuition costs. This measure might also prevent students from leaving the state, which would help Alaska’s businesses and industries.

Purdue’s ability to hold the line on tuition is derived from administrative cuts; for instance, the school cut “the university’s lobbying budget, fired several highly paid administrators, and eliminated low-enrollment academic programs.” Purdue reduced spending by $40 million in the first two years of the tuition freeze. After state budget cuts in 2019, the University of Alaska was faced with a $70 million reduction in funding over three years, and managed to reduce spending by $25 million in the first year. Is cutting the remaining $45 million doable? Absolutely.

Purdue’s efforts have helped students reduce their total debt and lowered costs for the university. In addition to freezing tuition, Purdue offers the Back a Boiler program. According to the website, the program is an income share agreement (ISA), through which students pay a certain percentage of their anticipated salary in their fields of study after graduation. The agreement is typically completed in about 10 years, whereas traditional loans can take double that time – or more – to repay. Not only does an ISA usually cost less than traditional college loans, but there is no interest accrued. And when an ISA ends, it ends, even if the student has paid back less than they originally borrowed. Purdue has more than 1,200 enrollees in Back a Boiler; it is popular with both parents and cost-conscious students. If the University of Alaska offered an income share agreement, it could further increase enrollment and set up graduates for future success free from decades of student loan debt.

Notably, Purdue’s per student revenue increased every year through 2017, the last year for which data is available, demonstrating that the university, its students, and Indiana taxpayers don’t have to suffer in order to implement significant budget cuts. In contrast, the University of Alaska has implemented a five percent increase in resident tuition this year, while simultaneously cutting or scaling back more than 40 programs. Through wise cuts to administrative fluff and cost-lowering innovations in other areas, the UA system could keep providing quality educations while reducing costs and tuition.

Purdue’s President has some wise words for universities like ours trying to navigate a path forward: “We didn’t try to get more money from the state. We didn’t shift from full-time faculty and fill the ranks with cheaper, part-time adjunct faculty.” Though the pandemic has clouded the path forward, the University of Alaska’s continued survival could benefit from a tuition freeze, combined with much-needed cuts to superfluous administrative staff and innovative spending reductions in other areas. Thoughtful cuts could not only avert the budget crisis now but would lead to a sustainable University of Alaska system for years to come.