Penn State’s Affordability Gap

Lack of state funding isn’t responsible for the school’s over-sized tuition

As things heat up in the Pennsylvania House over tying state funding to a mandatory tuition freeze at Pitt, Temple, Lincoln University, and Penn State, here’s four facts you need to remember:

1) Penn State charges the highest in-state tuition of the public Big10 universities;

2) Penn State ranks last, or second to last, in every federal metric of educational outcomes in the Big10;

3) Since 2019, Penn State has raised in-state tuition 15% - 24% (depending on the major);

4) It’s not the state of Pennsylvania’s fault that Penn State is running a serious budget deficit.

Let’s break this down.

The Pennsylvania House is proposing a bill that will tie a seven percent increase in state funding to a mandatory 2024-25 tuition freeze for all schools. As the bill heads to the Senate, Penn State released a statement questioning the state’s authority do this (you can read the bill here) and delayed the annual cost of living for rank-and-file University employees until state funding is approved.

Last July, the Penn State Board of Trustees voted to increase University Park tuition for in-state students by 4%-12% (depending on the major), while holding tuition at the Commonwealth Campuses steady for one year. In the last five years, Penn State has raised tuition between 15%-24% for in-state students. The University has defended the tuition increases because it says it needs the additional money to help close its budget deficit.

At $19,836 a year, Penn State has the highest in-state tuition of our Big10 public university cohorts, while Ohio State at $12,859 a year is the median. The reasonableness of a school’s tuition compared to the median of its peers is called the Affordability Gap. Penn State’s affordability gap is $6,977, or 154% of the median.

Both schools have roughly the same enrollment, offer a similar range of majors, and are in the same socioeconomic region, yet Ohio State has consistently out-performed Penn State in every federal educational outcome metric. And they’ve done it with a balanced budget.

In 2022 Penn State received $324 million in funding from the state (Audited Financial Statements (psu.edu)). Divided by 44,819 in-state students, that is $7,230 per student. In 2022, Ohio State received $403 million in finding from the state. Divided by 48,042 in-state students, that is $8,388 per student, or $1,158 more than Penn State received per student.

Both school have similar state support. In 2022, the state of Pennsylvania gave Penn State $7,230 per in-state student. The state of Ohio gave Ohio State $8,388 per in-state student, or $1,158 more than Penn State received. Penn State blames the lack of state funding for its out-sized tuition, when at best only $1,158 might be considered the state’s fault. The argument can be made that a school that consistently delivers excellent educational outcomes can charge more tuition; unfortunately Penn State is delivering almost the worst educational outcomes in the Big10.

The explanation for Penn State charging much more while delivering much less lies with its deficit. For several years, Penn State’s spending has increased quickly while enrollment has been stagnant.

So whose problem is this, really? Who has final control of the university’s budget?

The Penn State Board of Trustees has final approval of the university’s budget and major spending items. When I ran for trustee in 2022, I proposed solutions that included easy fixes, like proper management of Penn State’s endowment, and budgetary controls that would yield sufficient savings to reduce tuition by at least 5% a year.  Fiscal discipline requires continual effort to identify and act upon opportunities to operate more efficiently and effectively.

This is hard work, but its work our Big10 peers do every day and the results are affordable tuition for their in-state students. We, as a board, cannot vote yes on spending (see here, here, here, here, here, here, here, and here) without raising tuition.

That is a Penn State issue, not a state of Pennsylvania issue.  And it is an issue that we must recognize, address, and alleviate if we are to avoid pricing ourselves out of the ability to provide a quality, affordable education to Pennsylvanians.

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A note on tuition:

$19,672 is the lowest tuition rate at Penn State, assessed to lower level students.  Upper level students pay higher rates, and also face additional surcharges of up to several thousand dollars per year depending on their field of study. Ohio State also has higher rates for upper level students, though not increased at levels as high as Penn State. Each university has a Net Price Calculator, wherein prospective students enter their FAFSA information, and the university estimates the amount of university grants and scholarships they are likely to receive. Penn State Tuition - Net Price Calculator (psu.edu). Penn State and Ohio State also have Commonwealth Campuses/Branch Campuses with lower levels of tuition.  The differentials are nearly identical to the differentials at each university’s Main Campus.  Penn State’s typical sticker price is $15,388, and Ohio State’s is $8,965.

Ohio State also locks in tuition rates for incoming students, and keeps them frozen for four years.  Penn State does not.  The impact on lowering costs over four years would be dependent on how much Penn State raises tuition each year moving forward, and was not included in the analysis.

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As a member of the Penn State Board of Trustees, I will from time to time be made aware of certain confidential information.  I will also engage with Trustees and administrators in private, off-the-record conversations, with the expectation of privacy on both parties. I take these expectations seriously, as they are required in order to catalyze important discussions.

As a fiduciary, it is also important that I engage in conversations with all stakeholders of the University. Stakeholders like you.  Discussions will involve publicly available information and issues before the Board, as well as my personal thoughts, concerns, and ideas. I also will continue to solicit your thoughts, concerns, and ideas, and plan to engage in meaningful conversations with you on those topics. I hope that you will continue to share your concerns and ideas with me.

You can contact me at barry@barryfenchak.com