Tuition Revenue Distribution Models in Higher Education: An Exploration of Alternative Tuition Funding Methods at the University of Kentucky

State appropriations for higher education have been volatile during the past decade. While some states have seen improvements in state appropriations since the last recession, other states have seen continued declines. For public colleges and universities facing these consistent decreases in appropriations they have had to develop alternative methods for revenue generation. One of the most common changes to a university’s revenue model is by increasing their tuition and fee rates. Public colleges and universities can increase their own tuition and fees, within the boundaries of state oversight boards like the Council on Postsecondary Education (CPE). This is a big factor into the reason why some states are continuing to decrease funding for higher education. The current resident undergraduate tuition and fee ceiling for UKY, which is mandated by the CPE, is (1) no more than 6% over two years, academic years 2018-19 and 2019-20 and (2) no more than four percent in any one year. This paper looks at the way different tuition models can affect a university with varying college and department sizes. Because of studying different types of tuition funding models, I have suggested a model which might be ideal for universities. The primary goal of the suggested tuition model is to find a solution to continue to increase revenue without putting too much of a burden on any party involved: university, department, or student. By looking at the trends associated with enrollment and tuition I can assess how different tuition funding models affect various sized departments and colleges. In the coming sections, the literature review focuses on the correlations between tuition and enrollment and the use of out-of-state tuition as a revenue booster. In addition, I explored two case studies of alternative tuition funding models used by other universities. The research design details the goals and methodology of my analysis. This paper will primarily focus on data from the University of Kentucky (UKY) as a reference point for comparison to other models. In the conclusion, an analysis is completed on the possible implications of the various tuition models studied on enrollment and on the overall health of a college or department. The key findings of this study are: Decreased state appropriations does influence increased tuition. Increased tuition is not the definite cause of decreased enrollment. Cost-related tuition models do not effectively provide tuition revenue to all departments of varying sizes. Fixed-Net tuition models lower overall tuition revenue but provide the best transparency for students