The University of Minnesota has been in the news lately. Of course, the U is always in the news, but rarely are the stories about low tuition.
But it’s true. The U is one of the nation’s great values in public education, especially if you’re a resident of the 46 states where the public university charges “national” tuition.
After a 20-year overhaul of the U’s undergraduate programs showed dramatic improvement in outcomes, but failed to improve recruitment of students from outside the Upper Midwest, university leadership decided to cut prices for students paying national tuition.
In-state (“resident”) tuition continued to climb, causing fits at the Legislature over use of taxpayer money to subsidize tuition for kids from Chicago and California.
“I’m agnostic about who comes to the U,” says state Rep. Bob Barrett (R-Lindstrom). “I am focused on fairness, though.”
What’s not well understood is the context of this act of market competition. The U is inevitably criticized for not acting enough like a business, but it’s also pilloried when it acts like one. Tuition repricing was part of a rethinking of undergraduate education at the school’s Twin Cities campus that was so thorough that the experience is almost unrecognizable to graduates over 40.
How and why the U sets prices can’t be understood without going inside that reinvention and the market forces that drove it within the resource-desperate and increasingly competitive world that is higher education.
All things to all people
“Commitment to Focus” was the name of a small 1985 report produced by short-tenured president Kenneth Keller (1985-88), in which he argued the U faced a future of insufficient resources that would require it to pick and choose within its massive mission. A core component was undergrad education.
At the time the U welcomed almost any high school graduate with a pulse. Applications to the College of Liberal Arts were made on a postcard. Weaker students needing remedial education could be admitted to General College, spend their entire time there, and graduate with a degree. But with a burgeoning community and state college system duplicating many of the U’s functions, Keller wanted a reset.
The fundamental question then and now is “Should all 18-year-olds have access to higher education?” asks Robert McMaster, the U’s dean of undergraduate education. “Yes. Should it be to the U? No.”
The U was big, the U was accessible, but it’s not clear that the U was effective. “Complacency had developed by the 1980s,” recalls Tom Devine, a 1979 graduate and a regent since 2012. More pointedly, Ken Keller notes: “We were proud of our education system without any evidence the U was good.”
What’s at stake
Keller felt the U needed to up its undergraduate game by both shrinking its student body and making it more academically rigorous—a process that would raise admission standards by requiring a more academically prepared student body. A basic truth: “There’s no good evidence I can find anywhere of a major research university without an excellent undergraduate program,” says retired U president Robert Bruininks (2002-11).
It’s poorly remembered, but a decade of public and legislative resistance followed Keller’s call to focus.
“Selectivity is a sore subject from a political standpoint,” says ex-U president Mark Yudof (1997-2002), now a law professor at the University of California at Berkeley. “But it’s the only way to control the quality of what you do. There has to be a place for everyone, but it’s not possible at a first-class university.”
To many, excellence is an end in itself. But it comes with a price of exclusivity. In the Midwest, that’s not an easy sell. “On the coasts, if you tell the public you want to be the best, it’s not questioned,” says a longtime U insider who asked not to be named. “In Minnesota, people see snobbery.”
The architects of the U’s upward mobility have an answer. “The Minnesota economy requires a more highly educated workforce than most states,” says Bruininks. “It’s integral to the existence of our companies.”
Talent retention is a buzzword in economic circles these days. Minnesota is a state with a respected education system pumping out more than its share of smart kids. According to U alumni office data, two-thirds of students who get their education at the U stay in the region. A majority who leave the state don’t return.
“Do we want the best Minnesota kids to go to Berkeley,” only to remain in California, asks McMaster. “The best faculty migrates to the best students. And the best faculty attracts the best graduate students.” That meant middling undergraduate programs would impede the U’s efforts to attract faculty and grad students.
Looking beyond the border
An integral part of this strategy was increasing the percentage of kids attending from outside the Upper Midwest. “We have to be net importers of talent,” insists Bruininks.
The administration’s rationale for more students from outside the Upper Midwest is complex. National and foreign students pay higher tuition. The U makes money on each one, it says. At the same time, it is facing a declining number of high school graduates in its regional reciprocity states of North and South Dakota and Wisconsin.
And geographic diversity is a recruiting inducement in itself. Students from other places don’t want to attend a high-caliber university populated by only Minnesota kids. “Minnesota is not quite geographically diverse, in my eyes,” says Jim Conroy, chair of post-high school counseling at New Trier High School in Winnetka, Ill. “Kids from worldly families want to be exposed to a worldly university.”
For years the U relied on Minnesota and reciprocity kids to fill its campuses. Reciprocity students pay the in-state tuition rate of their home states. (Minnesota kids have similar prerogatives in those states.) The system grew out of an era when not all regional state schools offered a full array of academic specialty programs.
It’s important to note that barely 5 percent of U undergrads were national students when tuition was cut. The decision was made to incentivize tuition to attract more of these kids and fewer reciprocity-state kids.
Sound strategy or grand giveaway?
Bruininks made a recommendation to the regents to lower tuition for the national students as a recruiting tactic. In 2011 those students saw a tuition decline of more than 25 percent, from nearly $23,000 to $16,650. In subsequent school years national tuition saw sub-5 percent increases, so that it stood at $19,310 last spring. Under legislative pressure, the U raised national tuition for this fall by 7 percent, to $20,660.
“Why are [taxpayers] spending millions on the U when they could raise $90 million [by charging national students Big 10 average tuition] without disadvantaging the taxpayer?” (see above) says Barrett, who sits on the House Higher Education Policy and Finance Committee.
In a newspaper op-ed, his colleague Rep. Abigail Whelan (R-Anoka) questioned the U’s unwillingness to freeze resident tuition while the U offers below-market-rate tuition to national students. But Whelan also validated the U’s thesis in her commentary, quoting research that shows the state has a net outflow of 8,000 college kids each fall, despite access to lower resident tuition at the U than non-resident tuition any other national public university.
Minnesota’s resident tuition (not including costs or room or board), at $12,240, is the fourth-highest of the public universities that make up the Big 10, but national tuition is at or near the bottom. President Eric Kaler, who inherited this strategy from Bruininks, says the criticism misses a critical point—the tuition cuts have been revenue-positive, and the U has not changed its percentage of undergrad slots for Minnesota kids in decades.
“In 2001,” says Bruininks, “we brought in 1,266 national students, making up 6 percent of the undergrad student body and producing $26.5 million in revenue. In 2014 the U had 3,067 national students, 13 percent of the student body, with more than $100 million in revenue.” He notes that Minnesota resident enrollment grew nominally between those two benchmark years. (The number of international students, who pay full price, quadrupled during that period.)
It’s also important to understand where the U is recruiting. “They are coming to affluent suburbs because these are families who can pay,” notes college counselor Conroy.
“[Minnesota is] cheaper than the University of Illinois for my kids and $10,000 less than Big 10 average,” says Sue Biemeret, college counselor at Adlai Stevenson High in the Chicago suburb of Lincolnshire. “When they dropped prices, suddenly Minnesota wasn’t ‘too cold.’”
The hope, say administrators, is that the U will no longer need to incentivize national students when the U’s reputation catches up with the data. Bruininks is not convinced this is an inevitability.
“I believe Minnesota needs to retain an advantage related to quality and cost,” he explains. “I would keep the price moderate and the quality high.”
With pressure to push national tuition upward, the U will soon see if it can consolidate its gains or if it remains “too cold.” Many in the college counseling universe told TCB they expect the U to remain a tuition bargain long into the future. “The recruiting issue that they can’t change,” says Phil Trout, Minnetonka High college counselor and president of the National Association for College Counseling, “is the weather. Many kids dismiss [Minnesota] out of hand. Cost can make you rethink that. ”
Not the baby boomers’ U
To understand how thoroughly the U has reinvented undergraduate education, it’s essential to go back before Ken Keller’s presidency to when the post-World War II GI Bill brought a huge influx of students to the U throughout the 1950s.
“The model evolved into one of intermittent attendance,” explains Devine. “It came out of the freedoms of the 1960s and the Vietnam War. Also during that period, the state made scholarship monies available to private colleges that focused on a four-year residential experience. The U never combatted that effectively.”
President Malcolm Moos (1967-74) “was really successful in attracting federal research dollars for medicine and science,” which flowed to and grew the U’s graduate programs, explains Devine. “It really caused undergrad education to take a back seat.”
In the late 1980s the U campus was 80 percent commuter, and only 15 percent of undergrads graduated in four years, while 20 percent came in through General College. “We had one of the largest undergrad populations in the country,” recalls Keller. “We were impersonal, bureaucratic. We had a sense of mission, but it was not the right one.”
Then came a state fiscal crisis that brought the first broad cutbacks in taxpayer support in the U’s history. “We had to make choices,” says Keller.
The U’s graduation rates, poor by any standard, became the focus.
Keller’s white paper, says Devine, “would be the most significant document of the last 40 years at the U. What he laid out was what the institution is today. It’s an amazing achievement that the vision was so solid that four successive presidents maintained it.”
Competing for the best students
A university cannot upgrade its student body by fiat. It has to earn their interest. “You don’t recruit for selectivity,” explains recently retired dean of admissions Wayne Sigler. “Supply and demand determines selectivity.” The U tackled supply by initially reducing the size of its undergraduate programs (they are now bigger again), but it also had to improve academics to drive demand.
“If we want the best and the brightest we have to be selective or they won’t come here,” says McMaster. “Because they want to be part of something excellent.”
“I was told this fall that a 3.7 GPA and an composite ACT of 28 was the  target,” says Biemeret. “Five years ago it was 3.5 and 24. That’s real progress.”
The U’s honors college “is one of the most selective in the country,” says Conroy. The prestigious college within a college is “a real selling point with our kids.”
One of the U’s longtime millstones, its urban setting, morphed into an advantage as the U began to focus outside the region. “We’re selling the urban setting as fantastic for internships and practicums,” says Conroy. “You can’t do that in Iowa City or Ann Arbor. Plus, urban schools are just hot now.”
After two decades of reinvention, though, “regional recruiting was showing only very modest gains after a decade of effort,” recalls Bruininks. “We had to get creative.” That’s when national tuition came down.
Tuition: A value proposition
In 1980, resident tuition at the U of M was $927 a year. It has only fallen once since and sustained double-digit increases in many years. With non-discounted total cost of attendance for Minnesota kids now at $25,000, a resident student has to be prepared to spend $100,000 for a college education.
“The university raised tuition more than it needed to and banked it,” says Rep. Gene Pelowski (DFL-Winona), who recently chaired the House Higher Education Policy and Finance Committee. “We discovered in 2013 the U had budget reserves of nearly a billion dollars.”
Recent presidents argue that the U has done a good job holding the line on tuition. “You can’t be a low-tuition university and be a great university,” says Bruininks. “I feel very comfortable with the value proposition we offer,” says Kaler.
Not all agree. Ken Keller, though supportive of the U’s undergraduate evolution, is concerned about cost. “When I came to the U,” he says, “College of Liberal Arts students paid 25 percent of the cost of their education—now it’s 70 percent. It is impossible to maintain quality and diversity at that ratio.”
“I used to be able to work in my dad’s golf shop for the summer to earn what I needed to go to Winona State,” says Pelowski. “Try that today.”
State of indifference?
The greatest change in the U’s education funding mix over the last half-century is a dramatic decline in state support, especially adjusted for the rampant inflation in higher education. From 1980, when the state carried 42 percent of the U’s expenses, to the current day, when the number has dropped into the high teens (see page 39), the trend is inexorable.
“The Legislature has disinvested in the university’s mission over the last 15 years,” says Bruininks, who adds that most of the state’s interest today is focused on graduate programs.
Key legislators don’t disagree. With the pressure to finance everything from state elder care to early childhood education, the U, with alternate ways of raising funds, “doesn’t rank as high as other state obligations,” says Rep. Bud Nornes (R-Fergus Falls), chair of the House Higher Education Policy and Finance Committee.
The result is the U’s increased reliance on donor financing. Keller says he managed the first major fundraising campaign in the ’80s, which raised $300 million. There have been many others since.
The predominant sentiment at the Legislature seems to be not a lack of support for the U, but frustration with its financial opacity and a sense that it is inefficient and indifferent to that fact.
Within the halls of academia, that assessment evokes both empathy and frustration. “The shine is off higher ed due to our aging population, who are focused on their own needs,” surmises Yudof. “But higher ed is inherently labor-intensive. It’s hard to see productivity gains. The whole country is seeing huge improvements, and we look static.”
This article is reprinted in partnership with Twin Cities Business.