President’s Desk Q&A: Mike Frandsen on Oberlin’s Tuition Increase

The decision to increase tuition at Oberlin College and Conservatory by 3.9 percent for the 2015-2016 academic year was finalized at the Board of Trustees’ third meeting of the academic year, which took place March 12 and 13.

Reaction to the increase—particularly among students—has been strong. I understand the response, and I hear your concerns, especially the concern that an increase could make our college less accessible, negatively impacting our socioeconomic diversity.

In my President’s Desk column last week, I promised to share more information about the tuition increase via a question-and-answer session with Mike Frandsen, vice president for finance and administration. I bring you that conversation today.

Marvin Krislov (MK)

I’ll start with a question that I’m hearing frequently: Why can’t we just freeze tuition right now?

Mike Frandsen (MF)

We rely on tuition and other student charges for 80 percent of our revenue, and if we freeze tuition, we won’t be able to cover our costs. A 3.9 percent increase is what is necessary to meet the cost obligations we’ve put in place for ourselves. Our largest costs are personnel costs, and they rise at a rate faster than inflation. The fastest-growing cost area is instruction, and instruction represents a larger portion of our total budget than it does for many of our peers.

MK

How does this year’s increase compare to those of previous years?

MF

It’s the same as last year and lower than the 10 years prior to that. You have to go back more than a decade to get to a year that had a lower increase. And, if you look at a 50-year period, only four years were lower than the increase for next year.

MK

Have you thought about alternatives to this increase?

MF

Of course we have. If we have less revenue, given that we are starting with a balanced budget, we would have to have fewer costs.

In the short run, we’d have to reduce costs in ways that might not be well thought out and that might have an impact that is negative. Over the longer term, we know that we’re going to have to find ways to reduce our costs and slow the rate of growth of tuition.

MK

What are other colleges and universities doing?

MF

I’ve looked at what our peer institutions are doing, and our increase is in the middle of the range of increases. There are some institutions that have announced tuition freezes, but those aren’t institutions of the caliber of Oberlin College. There are institutions that have 3.2 percent increases, 4.3 percent increases, 3.7 percent increases, and 3.9 percent increases. We’re in the middle of the pack for institutions like us.

MK

Why can’t we use some of the endowment to offset the tuition increase?

MF

The endowment is designed to be there for the next 100 or 200 years. The fiduciary responsibility of the Board is to preserve that endowment for future generations and to create intergenerational equity from that endowment. The trustees could make a decision to borrow against the future, but they wouldn’t be exercising their fiduciary responsibility prudently to offset the tuition increase.

MK

Please talk a little bit about what the endowment is used for because we do spend a certain portion of the endowment, namely the returns, every year.

MF

We spend 5 percent of a three-year rolling average of the value of the endowment. If that three-year rolling average is $700 million, we’re going to spend $35 million in the next year on operations, restricted and unrestricted. A lot of the endowment is restricted to certain purposes. A great deal of the endowment is restricted to support student scholarships and, in fact, does support student scholarships.

MK

What do you estimate we’ll spend this coming year from the endowment? From the endowment returns?

MF

We’ll spend approximately $38 million in fiscal year 2016 from the endowment, for all purposes.

MK

What is the use of most of that money?

MF

The biggest chunk of it is to support student financial aid.

MK

Let’s talk about financial aid. A lot of students are very concerned about how they and their families are going to afford an Oberlin education. I’m wondering what your plans are to address that concern?

MF

We remain committed to supporting students who have financial need and to the extent that our price has increased and a student’s need has increased, we remain committed to meeting that increased need.

MK

The financial aid budget next year is going to rise considerably. What is next year’s commitment to financial aid?

MF

It will rise to more than $63 million.

MK

What percentage of our students receive financial aid?

MF

A little more than 80 percent.

MK

And how does that percentage compare with some of our peer institutions?

MF

It’s high. We have a socioeconomically diverse community of students who come from different family circumstances and financial backgrounds, and we support a lot of people as a result. Other institutions that we count as peers have a student body that is more bifurcated than we do.

MK

And by bifurcated you mean socioeconomically?

MF

Yes. Other schools tend to have more concentrated populations of full-pay students and full-need students, with less representation of the range of socioeconomic backgrounds between them. In contrast, Oberlin awards aid across a much broader spectrum than many of its peers.

MK

Could we have avoided the increase by not building a new hotel or the Austin E. Knowlton Athletics Complex?

MF

No, not at all. The hotel was outdated, in need of repair at least, if not replacement. And the hotel is a revenue generator. A newer hotel, a nicer hotel, may actually help us alleviate tuition increases to a small degree in the future.

MK

And we also received a lot of philanthropic support.

MF

Yes, we’re building with other people’s money in effect, which is fabulous. And the same is true for the Knowlton complex. We’re very fortunate to have some generous benefactors who helped us replace another outdated facility.

MK

Who makes the decisions about things like tuition increases and budget? Are there students involved in these discussions?

MF

Ultimately it’s the decision of the Board of Trustees, based on the recommendation of the president, and the recommendation that the president gets from my office. I think student voices have been indirect in the process, and there is probably an opportunity for more direct input from students.

MK

We do have three class trustees who participate in Board discussions.

MF

Yes, but they are recent graduates, not current students, so that’s kind of what I think of as indirect input. The class trustees certainly help our sense of what students want and need. For example, we’re responding to student concerns about health and wellness by increasing the resources we’re allocating to student health services and counseling services. There’s certainly impact, but it’s not through a formalized process.

MK

Is this a topic that’s come up in the strategic planning process?

MF

Absolutely. That’s an area where we do have student voices directly involved. We have nine students who are participating in the working groups. I have great students who are engaged with the resources & sustainability group. This is an issue that the strategic planning process is grappling with: the choices and tradeoffs and challenges. The students are really understanding, appreciating, and helping us find pathways forward.

MK

If a student or anyone else has an idea for a way that Oberlin could either save money or make money, what would be the best way of presenting that idea?

MF

It certainly can start with my office. One of the students in my working group, Umazi, has some ideas about ways we can make money through sustainability efforts that she brought to me and that I’ve referred to Meghan Riesterer, assistant vice president of energy management and sustainability, as the best person to help guide and implement them. I think I can be a good connector of a student’s idea to where it can have some impact.

MK

Thank you, Mike. Your turn.

MF

What do you think Oberlin should do to address the financial challenges we face now and will continue to face in the coming years?

MK

I think we need to look for solutions both on the revenue side and on the cost side. On the revenue side, we’ve certainly been focused a lot on fundraising and on the comprehensive campaign. Scholarship dollars are the top priority, and we’re continuing to raise money for that. Efforts such as the crowdsourcing programs that are targeting scholarships are very important. Things like the senior gift and the reunion gifts, so many of them are going to scholarships. It’s something that we talk about everywhere.

I also think we need to figure out if we can generate revenue during the summers and in ways other than just running our traditional programs, and we’re looking at that. I think the new hotel will help us, both in the summer and during the year. There’s a lot of opportunity to try to make Oberlin a place where conferences and convenings take place on topics such as environmental sustainability and the arts and so forth.

On the cost side, I think we need to look at how to use our money most efficiently and effectively. We’re looking at opportunities to work with other schools in ways that we might be able to share and save on administrative costs. But we also may have to make some tough choices, and that’s part of the strategic planning process. It’s important that we maintain both the quality of the academic program as well as the diverse and accessible education that we offer students.

MF

That kind of leads into my next question, which is, if we need to cut costs, what’s safe? I hear you say we’ll protect the quality of the academic program and our commitments to diversity and inclusion. So those things sound like they’re safe, but what else is safe?

MK

We have core values and principles, and those are things we are working on right now, defining as part of the strategic planning process. We value our faculty, we value our staff, and we certainly value our students. The people of this community are the greatest assets we have. We want to continue supporting them, but we may need to do it more effectively. I really think that’s something we need to have an honest discussion about and work on together, and I’m sure there are ideas out there that may help us think about either saving money or making money in a way that will help.

I just returned from two conferences, one focused on Ohio institutions, and the other a more national conference, and this topic is the topic. Everybody’s talking about it. There’s some sense that the government may do a little more in some areas; we all hope there will be more support for Pell grants. But whether it’s state money or federal money, there’s probably not going to be a large infusion. I think continuing to fundraise and to think about new ways we can generate revenue are important, as well as ways in which we can prioritize in our budget.

MF

I’ve had the same experience. When I talk to my professional colleagues, this is the topic for all of us.

MK

I think it’s a very difficult discussion, and I think everybody who cares about higher education and our mission is worried about it.

MF

How is the strategic planning process addressing these concerns?

MK

We are trying to define our core principles and strategic directions at the moment, and we have invited community input via the update posted yesterday. The strategic plan is going to be the starting point for a lot of important discussions, but then there will need to be significant implementation work afterward, and that’s something everyone can contribute to.

MF

Is there one thing you’d like the Oberlin community—faculty, staff, students, alumni—to know you’re thinking about with regard to these financial concerns?

MK

I think the most important thing to realize is that there are no easy choices and no easy answers. We are approaching the tasks with deep thought and a sense of humility, in terms of trying to provide the best answers. And we will certainly maintain our values and our commitments, but we may have to work harder to do so.