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Purdue's reputation for affordability results in substantial growth for the school

STEVE INSKEEP, HOST:

President Biden's student loan forgiveness triggered debate about an underlying problem. People borrow so much to attend college in part because colleges raised prices over the past half-century. We hear this morning from a university that advertises its effort to hold the cost down. For a decade, Purdue University in Indiana has held in-state tuition just below $10,000 - 9,992, to be exact. The tuition freeze was championed by university president Mitch Daniels. He's a former Republican governor of Indiana who says that before his arrival, Purdue had raised its price for 36 consecutive years.

MITCH DANIELS: And so I simply raised the question, could we try a one-year timeout? That's all I imagined at the beginning. Obviously, 10 years later, we've been able to continue that. But I would never have dreamed that in 2013.

INSKEEP: Was there something special about the $10,000 mark that you didn't want to go even a dollar over?

DANIELS: I confess that there was. At one point, a preexisting $10 fee - a prearranged $10 fee for our rec center was added and temporarily put us over $10,000. I know this was a little silly, but I did get the board of trustees to eliminate it. And we went back where we started.

INSKEEP: When you see a product on a store shelf, he says, 9.99 looks more appealing than 10 bucks. And 9,992 sounded better than 10,000. Out of state and international students pay a lot more. Although, those prices are also steady. Daniels insists he took no one big step to balance the books. He asked alumni for more contributions and made an annual effort to manage expenses.

DANIELS: And then the other essential thing to say is that a virtuous cycle, as people call it, the setting in which a reputation for affordability has led to very substantial growth. We're 30% bigger than we were when this started. And the revenues that have come from that without a price increase are the biggest single factor in allowing us to avoid one.

INSKEEP: Have you had to increase class sizes then?

DANIELS: No. We've grown the faculty. We haven't - by the way, before you ask, we have not shifted to lower cost faculty. We've paid our faculty and staff above the peer group average every single year. It's value we're pursuing.

INSKEEP: And he asserts that Purdue has kept a college education in reach for more people.

DANIELS: If we had grown our tuition and fees at the Big 10 average or the national average, our students' families would have sent us over $1 billion cumulatively more than they did the last 10 years.

INSKEEP: Well, let's think about that for a moment. Somebody in your position might say, we left $1 billion on the table.

DANIELS: I'm happy to say we left $1 billion on the table, let's say at the kitchen table of the families who entrusted their young people to this institution. Incidentally, Steve - and these phenomena are related - more than 99% of our graduates pay back their student loan. It reflects the fact that they had to borrow less money, but also the fact that they left with a sense of personal responsibility that says you ought to live up to your obligations.

INSKEEP: Do you have sympathy for students at other universities who, perhaps, paid higher tuition, borrowed more and are in a different situation?

DANIELS: I have sympathy. That doesn't mean that I think it was appropriate ethically, constitutionally or as a matter of sound public policy to cancel debts that they freely took on. It could have been other answers to that.

INSKEEP: Oh, other answers. What do you mean?

DANIELS: Well, what would have worked better all along is a system in which universities like ours were at least at partial risk for defaults of their graduates. I've always thought of this as a breach of warranty situation in which the diploma that we confer ought to connote a productivity that will allow the person to pay back anything they freely borrowed.

INSKEEP: I've heard people remark in recent days after Biden's announcement that they wished universities were on the hook instead of taxpayers. It sounds like you're saying, as a university president, if anybody had come to you with that proposal, you would have welcomed it.

DANIELS: I've actually advocated it for a very long time. I think we should stand, at least partially, behind the service that we're providing. In fact, we have. We inaugurated at Purdue income share agreements in which the student is not at risk. If life doesn't work out and they can't pay back or can't pay the stated percentage of income that was anticipated, the risk remains on the school or those who help the school provide those funds.

INSKEEP: I want to make sure that people understand. You're saying the loan payback is not a fixed amount on a fixed schedule. It is judged on the person's income what they would pay back.

DANIELS: That's because it's not a loan. Think of it as an equity investment as opposed to debt.

INSKEEP: Income share agreements like the ones Daniels describes have triggered criticism. The federal Department of Education says, in fact, they do count as loans. Here's how they work. Private investors finance students' educations in exchange for a percentage of their future incomes. Some Purdue students told the Indianapolis Star they did not understand the agreements they signed and didn't realize how much more they had to pay the investors later. Purdue itself has paused the program, saying it's changing vendors. But it supports legislation to establish national standards for the practice.

DANIELS: And by the way, I think it would have led to much more moderation in tuition. Schools knowing that they were at risk for at least something would have been more careful about what they charged and probably a little more attentive to making sure they were teaching things that would enable a graduate to be successful and pay back the money they'd received.

INSKEEP: What do you say to other universities that have taken another path and have sharply increased tuition in recent years?

DANIELS: We have never in 10 years made any comment or criticism of any other school. I just think you can say fairly that as a sector that has raised prices at the fastest rate of any category in the economy, including health care, collectively, our performance has not been admirable.

INSKEEP: Well, Mitch Daniels, it's a pleasure talking with you. Thank you so much.

DANIELS: Any time, Steve. Thank you.

INSKEEP: He's a former Indiana governor and the president of Purdue University, retiring at the end of this year.

(SOUNDBITE OF NEW CENTURY CLASSICS' "POST-CARDS") Transcript provided by NPR, Copyright NPR.