Purdue University President Mitch Daniels joins Yahoo Finance's Kristin Myers and Aarthi Swaminathan to discuss Purdue's move to keep tuition rates flat for a 10th straight year.

Video Transcript

KRISTIN MYERS: For the 10th year, Purdue University has frozen its tuition at a time when most colleges and universities have raised their prices. I want to jump straight into this conversation now with Mitch Daniels, Purdue University president and former governor of Indiana. Yahoo Finance's Aarthi Swaminathan also joins us for today's conversation.

So Mitch, I was reading in an interview that you said that this freeze wasn't so much about how you did it, but what you did not do in order to make this freeze happen. You said that you didn't ask for more money from the state, you didn't shift from full-time faculty to part-time professors, and that you didn't increase the number of international or out-of-state students, which a lot of universities do. I'm wondering then, why? If Purdue University can really be a model for how you can keep tuition rates the same as it was a decade ago and still have a great education, why aren't other colleges and universities doing this? Is it greed, do you think?

MITCH DANIELS: I would never say that, and I wouldn't attempt to speak for any of them. We've never prescribed what we're doing for anyone else. Each university and college, thank goodness, is different in our diverse higher ed system, and so they should make their own decisions.

It did-- this has always, I think, fit our situation at Purdue. We're a land grant school. We were created 150 years ago to open the doors of higher education, be accessible to the then rising middle class. And this is still the heart of our mission. So that's why we embarked on this process and why we think it fits us.

I do often answer the question as you just described, because people quite naturally suspect that maybe there's some gimmickry or trickery. There really isn't. Our point of view is if we can grow our faculty and pay them well to match the growth of our student body, if we can invest in the future of the university as makes sense, then why would we raise tuition?

KRISTIN MYERS: I know that you say that what you guys are doing at Purdue is not necessarily prescriptive for other colleges and universities. Every, you know, institution is different. But I'm wondering if you think that there is anything there in what you guys are doing at Purdue that can be applied at other schools.

MITCH DANIELS: I do. And I think I see it happening belatedly in higher ed. The rate of increase has continued, but it has decelerated somewhat. The-- I will just say that what we embarked on, never imagining that we could extend it a full decade as we've been able to do now, we thought was simply a right thing to do-- send a signal that we understood that many families were really getting strapped to afford the cost of higher ed and were beginning to question its value. Were they getting their money's worth?

And it has worked out very well for us. One way we've been able to do it is that the school has grown. We've attracted more students of even higher quality, by the way. And as your business viewers will attest, a rising top line makes everything easier.

AARTHI SWAMINATHAN: President Daniels, thank you for joining us. So we talk a lot about student loans, but obviously the underlying cause is the cost of education, which is why we're having this conversation. But you were able to spend-- $50 million is the estimate I saw from the Chronicle of Higher Education and keep the tuition fees. But in light of all of this, I'm curious, how much do you think the responsibility of controlling college costs lies in people like you, college presidents? Or is it something that the industry needs to step up and respond to?

MITCH DANIELS: The principle responsibility surely lies with those who are entrusted temporarily with leadership, as I am or as our trustees are. That's where the-- let's say the buck stops and starts here. Now, we all know that there are matters of policy which have made a difficult situation worse, a flood of third-party subsidies. It's been demonstrated over and over now, has propelled cost upward. It's been far too easy for schools to raise tuition, knowing that the federal government, sometimes state governments will step in and insulate the-- the consumer, that is, the student and family, against many of those costs. But no, I don't think the basic responsibility can be shirked. And as we sometimes say at Purdue, the best way to protect young people and their families against the ruinous costs and debt is don't charge so much in the first place.

AARTHI SWAMINATHAN: And recent preliminary data from the clearinghouse said that there was possibly like a drop in high school seniors going to college immediately after they graduate. I know that you guys don't have that enrollment problem right now, but how are you thinking of that issue medium term and addressing it, aside from the tuition offer?

MITCH DANIELS: Yes, it's a very central question. We take nothing for granted. We have experienced rising applications and rising enrollment. And once again, this year applications are either at or are almost to last year's record. But we know that's not the case across the whole sector, and it might one day not be the case for us.

We do expect to provide more and more of our courseware either entirely online or hybrid fashions. We're already offering the students the possibility of a first year done virtually and maybe only the remainder on campus. We think tomorrow's students and families will want much more flexible offerings that both allow more convenience in their lifestyles, but also a moderation of costs. And if we don't find ways to do that, some other schools will take our students from us.

KRISTIN MYERS: President Daniels, I know that as we're talking about enrollment, enrollment of minority students has increased, but that their percentage as part of the student body population as a whole has remained fairly flat, around 10%. I'm wondering, as you guys are making so much progress in so many other areas, why you think as much progress has been made in this one area, and what do you think the role is of colleges and universities in increasing minority enrollment on their campuses?

MITCH DANIELS: It has to be a very central goal for us all. And I will tell you, in our case-- and I'm sure this is true everywhere-- it's not for lack of trying or lack of investments in this area. One very tough fact of life is that the pool of minority students who are college eligible, who are college ready coming out of high school is just not big enough. And everybody is competing for that pool. We compete as hard as we can.

I'll just mention one thing we've done in our exasperation and how tough this problem is. We've started high schools. We now have three inner city high schools, Purdue Polytechnic High Schools, that we sponsor. The first of those is in its fourth year. So we're very fixed on this May when the first graduating class of the first school will come out. And we believe we are going to dramatically enhance the number of-- this is Indianapolis-- the number of minority and inner city kids who make it to-- I think we'll double it just from that one initiative in its first year. But you have to take extraordinary steps like that to make real progress in this very urgent problem.

KRISTIN MYERS: I want to quickly ask you why you think that is, that the amount of students that are college ready isn't enough. Is it a proble-- where does this problem start?

MITCH DANIELS: In the home, honestly. You know, too many of our students don't have the blessing of intact families, families where education is a constant priority. And it's not their-- it's not their fault. But the-- I don't want to exonerate the school systems of the country, many of which are not doing all they could, but they have a very, very tough job. They cannot control the backgrounds and the living conditions of the students who come through their doors, many students moving from school to school in a single year. These are very tough problems.

You know, what the problem isn't is money. We've spent unbelievable amounts of money, far more per student than any country in the world. And you know, selectively maybe more investments could help, but that's not the problem. Regrettably, it starts sooner and closer to home.

KRISTIN MYERS: All right. Well, President Daniels, unfortunately that's all the time we have with you here. Mitch Daniels, Purdue University president and Yahoo Finance's Aarthi Swaminathan. Thank you both so much for joining us for this conversation.