How to systemically improve Penn State affordability

I’ll be heading to Penn State again soon for one brother’s graduation and the start of another brother’s undergraduate career. We’re proud Penn Staters in my family, and part of being a family means being willing to speak the truth.

Barry Fenchak, a Penn State alum who has been writing on the Penn State Board of Trustees, came across my radar because he is presently running to join the board. One of his posts, “Where Does Tuition Money Go?”, stuck out to me because he picks up an issue I wrote about after looking through “Penn State Facts 2014,” a little informational booklet the administration produced (and maybe still produces?) that showed that in 2013-14 Penn State brought in $1.532 billion in revenue from tuition and fees but spent only $1.175 billion for instruction and academic support. Those numbers exclude the $275 million in revenue Penn State received from Pennsylvania state appropriations from that year.

Penn State has long been bringing in far more revenue from tuition and fees than it spends in academic, instruction, and faculty expenses. In 2013-14 that meant a tuition revenue surplus courtesy of Penn State students and families of more than $350 million. Barry updates those figures by looking at a recent Chronicle of Higher Education piece:

On average, Big Ten Universities charge $54 Million per year LESS in tuition, than what they spend educating those students.

Penn State charged $364 Million MORE in tuition, than what the spent educating students.

What does that all boil down to, with respect to Penn State’s tuition charges?

If Penn State simply “hit the average” for Big Ten Universities, Penn State could reduce tuition by over $400 Million dollars per year. Penn State charged $1.8 Billion in tuition for the year, which means a $400 Million reduction would reduce each student’s tuition bill by 22% in one fell swoop.

Simply bring Penn State in-line with its Big Ten peers, and student tuition bills are cut by 20%. Tomorrow.

Unfortunately, no one seems to care.

I can’t help but think that a far more compelling priority for allocating Penn State’s tuition revenue surplus would by investing dramatically in the bolstering of professors, academic programs, and faculty. In a world where most undergraduates are taught by contract-based instructors often earning stipend-equivalent compensation per class, Penn State could commit itself to promising that every student would be taught primarily by tenured or tenure-track professors. This could probably be done even while reducing tuition and fees by at least 5-10 percent if not more. Unfortunately, I doubt there’s the vision for this or perceived value something like this, in a world where learning has been reduced to a narrow sense of its economic utility rather than being holistically understood as a transcendent good for both professors and students.

There’s another reason that investment in a world class faculty is unlikely, however, and that’s because it is Penn State’s administration, rather than either the trustees or the faculty, who run the institution. And administrators have a natural interest in protecting their own priorities, which are often at odds with the core educational purpose of the university. Administrators offer hundreds of millions of dollars worth of programs and services, nearly all ancillary to the core purpose of Penn State and nearly indistinguishable from similar programs and services at any other university. This is a third rail conversation, because if the aim is to reduce expenses to Penn State families, one has to navigate lots of political fault lines—and those administrators who are paid all those funds will go to work to ensure that critics who pose a real threat to the status quo fall victim to those fault lines.

The only concrete action I think Penn State alumni and friends can take to help force positive reform is to temporarily commit to stop creating endowments and scholarships. When an alum makes a gift of $1 million to endow scholarships, assume that gift will produce $50,000 annually in available scholarship funds. Let’s assume these funds are distributed to a dozen financially worthy students. In this scenario, a $1 million gift is necessary to improve accessibility for just 12 students—and only by ~$2,100 per semester for those students. Contrast this with Fenchak’s proposal to reduce administrative expenses to bring overall tuition revenue at or below tuition expenses—assuming Penn State’s current $9,908 semester tuition, this would reduce every student’s tuition by $2,180 per semester.

Take a major step to improve affordability for 12 students or take a major step to improve affordability for all 73,476 students?

Penn State administrators promote the establishment of scholarships as a way to make a Penn State education more accessible to more students. There is an important place for scholarships. But looking at the overall numbers, it’s tough not to see a cynical game at play: administrators trading on the affection and affection of donors for the purposes of only slightly defraying hard costs to a numerical handful of students, when, if only they stop putting themselves first, they can do much more to solve a systemic problem of affordability and accessibility.