First Board Meeting For Kaplan / Purdue University: Tuition Levels Set

Last week was the first meeting for the board of trustees for NewU, the working name for Kaplan University now that it has been “acquired” by Purdue University. And yes, the scare quotes are intentional given the $1 purchase price. I’ll give the group high marks for transparency by the press release.

In its inaugural regular meeting, the Board of Trustees for Purdue’s new affiliated institution, currently referred to as NewU, approved plans to offer a dramatic tuition discount for Indiana resident students and free tuition for Purdue employees.  The new Indiana resident rate, also approved by Kaplan University’s trustees, will take effect at the beginning of KU’s next academic term. [snip]

An Indiana resident student pursuing an associate or bachelor’s degree will pay the equivalent of $220, including technology fees, per quarterly credit hour, which is a discount of approximately 45 percent. The total cost to graduation for a bachelor’s degree would be $39,600, compared to a total cost to degree of $80,088 (including room and board) for Indiana residents at Purdue’s West Lafayette campus.

The reason there are two boards of trustees involved – for NewU and for Kaplan U – is that the deal still must be approved by state and federal regulators and by NewU’s accreditor HLC.

To confirm the basic math:

• Kaplan University operates on a quarter system, with ~180 credits needed for a bachelor’s degree. Their current tuition is $371 per credit for an online undergraduate degree, plus $295 technology fee per term. Assuming full-time student taking 15 credits per term, tuition and technology fee totals $70,320 for cost of a degree.
• In-state NewU students will pay $220 per credit (with technology fee bundled in) leading to $39,600 for cost of a degree.
• None of this includes textbooks or course materials.
• The “approximately 45%” discount indicates the out-of-state total cost of $72,000. I assume the difference with $70,320 is from some other fee or perhaps a slight increase in tuition levels not made public yet. Close enough.

Some other notes:

• Graduate students pay between $385 – $485 per credit depending on the specific program. In-state students will receive a 10% discount.
• Most online students do not take their program full-time, so treat the above as a starting point to understand tuition at NewU.
• While there are no direct subsidies, with Indiana taxpayer money used to fund NewU, there will be indirect subsidies as a result of the in-state and employee discounts.
• For a comparison, consider the University of Florida Online, which is on a semester system. Their out-of-state tuition and fees are $552.52 per credit and in-state tuition and fees are $129.18 per credit. Translating in rough numbers to a quarter system for comparison purposes, this is approximately $368 per credit for out-of-state and $86 per credit for in-state.
• Arizona State University Online (ASU Online) “undergraduate tuition ranges from $490 to $633 per credit hour, which includes program fees and all residency types”.
• In other words, Kaplan / NewU tuition for out-of-state is in-line with other public research university tuition levels. Their in-state discount is better than ASU Online (no discount) but not as deep as UF Online.

The real issue to watch over time, assuming approval of the deal, will be whether NewU remains primarily an out-of-state school, essentially providing revenue to Purdue University and discounted education to a small minority of in-state students1 , or whether the transition to a public university ownership and brand will lead to much higher percentages of in-state students. Mitch Daniels seems to want to have his cake and eat it, too, using the current mix of enrollment to justify the financial potential of the deal yet also promising benefits to Indiana residents.

Remember that UF Online’s biggest mistake was assuming that they could get 43% of the student body as out-of-state students lured just by the University of Florida brand rather than by subsidized in-state tuition. What they have found in reality is that 90+% of students are in-state students, looking both for brand and tuition. NewU is not starting from scratch, having roughly 32,000 students already, but this deal is unique. We do not know what the impact of changing from the Kaplan University / for-profit brand to some form of the Purdue University / public brand will be.

If NewU sees similar trends as UF Online, then we might see a much greater mix of in-state students paying $220 per credit instead of $371 per credit. That will change the revenue and operating income / loss assumptions of NewU. I’d love to see the business plan or internal working assumptions around enrollment totals and in-state/out-of-state mix going forward.