Last week, I read a Calli McMurray article in the Chronicle of Higher Education that reported about the financial issues at the University of Arizona disclosed by its president, Robert Robbins.
President Robbins described two major problem areas – the athletics department and financial aid. Evidently, during the Covid pandemic, the university lent the athletic department $55 million and has not been repaid its loan “fast enough.” Additionally, undergraduate students with a high school GPA above 3.75 pay nothing to attend the university.
Ms. McMurray writes that some of the University of Arizona’s problems appear to be similar to the demographic changes, pandemic challenges, and new building construction costs like those recently disclosed by the University of West Virginia. She quotes a UofA associate professor of Middle Eastern studies who blames the administration for the university’s lack of financial stability.
At a recent faculty senate meeting, President Robbins said the university’s tuition-guarantee program allowing students to pay their first semester rate for all eight semesters should stop immediately. Hiring freezes are on the table. Additionally, the university spends $20 million per year to fund academic programs and research related to its strategic plan. That ends now too.
What Level of Financial Aid is the University of Arizona Funding?
I decided to look at data provided by the University of Arizona to the Department of Education’s NCES group, specifically the data published in College Navigator.
Following my top-down review of College Navigator data for the University of Arizona, I noted that UofA has a student population of 49,403 and 38,751 are undergraduates. In-state undergraduate tuition is $13,275 and out-of-state undergraduate tuition is $39,577. In-state cost of attendance (COA) is $31,625 and out-of-state COA is $57,927.
Financial aid information for full-time beginning undergraduate students is very insightful. There were 5,897 first-time, full-time freshmen awarded aid. That represents 98% of the freshman class. Pell grant recipients totaled 1,452 or 24% of the freshman class. The average Pell grant was $5,117.
An unbelievable 5,744 freshmen (96%) received institutional grants averaging $14,232 per student. That amount exceeds the in-state undergraduate tuition of $13,275. Based on President Robbins’ comments, that implies that nearly all freshmen at UofA have a high school GPA greater than 3.75.
I reviewed the University of Arizona’s financial aid information on their website. While the aid varies between in-state and out-of-state, it appears that not only can you earn the generous award as a freshman, you need only earn a 3.0 GPA each year plus at least 24 credits completed to renew the award each year until you graduate.
The renewal requirements likely explain the 86% of all undergraduates receiving a grant averaging $13,329 per year. Students with Pell grants averaged 28% overall and students receiving loans averaged 24% overall. When 96% of the freshmen class receive an average grant exceeding in-state tuition, you make college more affordable.
Net Price at University of Arizona
As you may remember from some of my previous posts about net price at public institutions, net price is the total cost of attendance for an in-state student less the total grants received. The average net price at UofA in 2021-2022 was $17,075. Based on the room and board and other fees, the net price approximates all costs other than in-state tuition.
Because net price for state-funded institutions is based on the in-state student’s cost of attendance, that number is not as meaningful without knowing the percentage of out-of-state students. Looking at the College Navigator Fall 2022 Enrollment data, it appears that 48% of undergraduates are out-of-state and 5% are foreign students.
In the Chronicle article, President Robbins stated that “it costs around $20,000 a year to educate each student, but in-state students pay an average of $5,000. Students with a GPA above 3.75 pay nothing.
It’s impossible to know what costs are included in President Robbins’ “$20,000 a year to educate each student” statement. If we assume that number represents tuition and fees only (no room and board costs are included), than the state of Arizona is subsidizing approximately 100% of the in-state tuition and out-of-state students are contributing 200% of the cost if they are full-pay.
Deducting the average institutional grant from the out-of-state student’s tuition means that they are still contributing positive cash flow to the university. Clearly, there are too many in-state students who are receiving generous institutional grants based on their GPA.
Competitive Issues
I understand that there is a rivalry between the University of Arizona and Arizona State University. I decided to look at ASU’s College Navigator data before recommending changes in UofA’s financial aid practices.
ASU’s main campus in Tempe, Arizona (Phoenix) enrolls 80,065 overall students with undergraduates representing 65,492. In-state undergraduate tuition is $11,618 and out-of-state undergraduate tuition is $30,592. In-state COA is $31,127 and out-of-state COA is $50,101. In-state COA is very close to UofA’s’, but out-of-state COA is $7,800 less than UofA.
ASU’s institutional grants are awarded to 85% of the freshmen class with an average grant of $10,429. If ASU is UofA’s biggest competitor for in-state students, it appears that UofA may be granting larger institutional grants for in-state and out-of-state students than is necessary.
Out-of-state students at ASU represent 36% of undergrads and foreign students represent 7% of undergrads. Even though ASU’s out-of-state tuition is lower than UofA, it appears that UofA is doing a better job of recruiting out-of-state students. Perhaps it’s that generous grant policy for students with a 3.75 GPA in high school that’s attracting students to Tucson instead of Tempe.
What Should the University of Arizona Do?
If I were the president of the University of Arizona, I would implement a major review of the institutional grant policies for in-state and out-of-state undergraduates. ASU charges less than UofA and enrolls more students. At the same time, its net price for in-state undergraduates is approximately the same as UofA and its net price for out-of-state undergraduates is less.
Depending on survey data about why in-state undergraduates choose UofA over ASU, I might consider reducing the average institutional grant for an in-state student. I would need to know more information about why out-of-state students enroll at UofA versus ASU before I made any recommendations on changing the average institutional grant for out-of-state students.
It’s clear to me that President Robbins wasn’t paying enough attention to the institutional grant policies at UofA. He may be well advised to bring in an outside enrollment management consultant to evaluate current practices before making wholesale changes. While I was surprised to read his admission of naivete, I think there are opportunities to reduce the cash flow gap. If I were a board member, I’d want to know who the enrollment management leader reports to. Accountability is important. Given the UofA tuition guarantee, it may take three more years to fix this low net price problem.
