The High Road and the Low Road: The Corporate University Meets Minnesota’s Enrollment Cliff

The University of Minnesota’s $225 million budget cuts will test its priorities—and whether student success comes first.

On September 24, the University of Minnesota announced it will cut $225 million from its budget over two years, roughly 12 to 15 percent of its operating revenue, citing shifting enrollment, unpredictable state and federal funding, and rising costs. President Rebecca Cunningham described the moment as “an inflection point in the fundamental model of higher education.” The day before, at the Star Tribune’s North Star Summit, she and St. Thomas President Rob Vischer discussed a sector that is getting harder to sell: fewer college-age students, families doubting the value of a degree, less reliable government support, and fiercer competition for the students who remain. She is right. The question is which model has failed, and what should replace it.

The model in trouble is the corporate university. Over the last few decades, colleges public and private have remade themselves in the image of business, with top-down management, strategic plans written in the language of markets, and students increasingly treated as revenue. After the 2008 recession, the business plan became explicit. As states cut support, public institutions replaced it with tuition. Nationally, net tuition’s share of public higher education revenue rose from about 36 percent in 2008 to about 47 percent a decade later, and 24 states still fund higher education below pre-recession levels. The plan was simple: charge more and enroll more. It works only so long as there are more students to enroll. In Minnesota there no longer are. Undergraduate enrollment at the state’s public colleges and universities fell by more than 55,000 students between 2010 and 2023, yet the answer remains higher prices. The U raised undergraduate tuition 3.8 percent this year, and Minnesota State approved an average 6.25 percent increase for this fall.

The corporate model has also produced goal displacement, where the means of an organization crowd out its ends. The mission of higher education is a blend of career preparation, critical thinking, and the skills of citizenship. Yet at schools in college football’s top division, the Knight Commission found that from 2005 to 2013 academic spending per student grew 8 percent while athletic spending per athlete grew 45 percent. At the U, the new obligation to share revenue with athletes led to a $100-per-semester student fee on the Twin Cities campus, expected to raise about $7 million a year. Every institution makes choices about what it funds. Those choices reveal what it values.

Now comes the enrollment cliff. University officials have projected that Minnesota’s high school graduates will peak at about 72,000 in 2025 and fall to roughly 67,000 by 2036, part of a national decline expected to last through 2041. The worry is that colleges will respond as corporations do when sales fall: by lowering the price of entry to maintain volume. The loosening has already begun. Over 90 percent of four-year colleges no longer require entrance exams, and research suggests test-optional policies have worked partly as recruiting tools that swell application counts. Minnesota’s own access programs, such as Direct Admissions and the North Star Promise, are worthwhile and open real doors. But admission is only half the job. The other half is making sure students are prepared to succeed and then helping them graduate.

Lower standards generally mean lower retention. Federal data show that 96 percent of first-year students return at the most selective public universities, compared with 59 percent at open-admissions schools. AEI’s Diplomas and Dropouts study found completion rates climb with selectivity, and a 2018 AEI and Third Way report identified academic preparation as a key predictor of finishing. In Minnesota, 2014 six-year graduation rates ran from 57 to 34 percent at the state universities, against 78 percent at the U’s Twin Cities campus.

This is the low road, and it is a bait and switch. The college says, in effect, we will let you in, we will take your tuition and your loans, and we will not be too troubled if you lack the skills or resources to finish. It even has a Ponzi-like quality, as each new class replaces the revenue lost when the last one drops out. AEI research by Preston Cooper found that the worst-performing fifth of colleges graduate just 16 percent of their students and have a typical loan repayment rate of 41 percent. That is the corporate logic of students as revenue carried to its end.

The high road runs the other way, and the U itself proves it works. In the 1990s it had the lowest graduation rate in the Big Ten. It raised admissions standards and rebuilt its first-year programs, and its Twin Cities six-year graduation rate rose from 47 percent in 1998 to 85 percent for students entering in 2019. Low-income students in that class, those with Pell Grants or subsidized loans, graduated at 82 percent. Price is not the main lever; David Deming and Christopher Walters found that at public colleges, per-student spending, not tuition, drives completion.

That lesson should guide the cuts ahead. If Minnesota’s colleges respond to the cliff by protecting athletics and administration while lowering standards to keep seats filled, they will shrink into worse versions of themselves. If they protect teaching and advising, admit students they believe can succeed, and recommit to educating workers and citizens, they will emerge smaller but stronger. Colleges should be measured not by how many students walk in the door, but by how many walk out with a degree.