America’s universities are a strategic national asset. Reform them through modernization—not politicization—to keep the U.S. competitive.
America’s universities are globally recognized for their excellence and innovation. They power the U.S. economy, drive innovation, and educate over a million international students annually. In the 2023–2024 academic year, international students contributed over $50 billion to the U.S. economy, supporting more than 378,000 jobs nationwide. This makes higher education one of the nation's top service exports, generating a substantial trade surplus and reinforcing American global influence.
But that leadership is at risk. Rising tuition, outdated business models, and political dysfunction are threatening the long-term vitality of the system. Universities need reform. But the answer isn’t blanket funding cuts or punitive threats to their tax status. It’s targeted, smart policy that helps universities modernize their cost structures so they can serve more students at lower cost while staying globally dominant. Mitch Daniels at Purdue University proved it’s possible. Under his leadership, Purdue froze tuition for over a decade while expanding enrollment and improving outcomes—by managing costs smarter, not by sacrificing quality.
At Arizona State University, President Michael Crow has pioneered a different but complementary model: innovation at scale. Crow expanded ASU’s reach through digital learning, corporate partnerships, and inclusive admissions—all while emphasizing research, social mobility, and economic development. His approach has shown how universities can serve a broader population while maintaining relevance and impact.
Why the University Business Model Is Hard to Reform with a Sledgehammer
Universities aren’t like tech startups that can cut half their workforce overnight and keep running. About 70% of a university’s expenses are effectively locked in year-to-year: salaries for faculty and staff under contract, maintenance for sprawling facilities, and debt service on construction bonds. Slashing funding or threatening tax exemption doesn’t magically lower these costs—it just guts the engine that makes universities function.
Meanwhile, the share of tenured faculty has been declining for decades, replaced by adjuncts and temporary hires. Administrative costs have ballooned, but simply “firing the bureaucrats” is a misleading solution: universities still need financial aid officers, compliance staff, Title IX enforcement, IT support. Costs are baked in, and unless we change how universities operate, tuition will keep rising even if budgets get slashed.
And here’s the kicker: most universities run barely above breakeven. While endowments appear large at elite schools, they’re actually made up of thousands of individual donor-restricted funds—often legally earmarked for scholarships, faculty chairs, or specific programs. That means the spendable portion is much smaller than the headline number suggests. Meanwhile, thousands of public and regional universities have tiny reserves and razor-thin margins. Blanket policy aimed at “rich Ivies” risks collateral damage across the entire sector.
Why Blanket Punishment Fails—and Risks Political Blowback
Recently, political leaders have floated ideas like stripping tax exemption from elite universities, taxing endowments, or yanking federal funds from entire institutions. These measures might feel satisfying to critics, but they’re blunt instruments that risk unintended consequences. Tax exemption for universities exists because education and research are public goods that benefit society broadly.
Yes, universities deserve scrutiny. There’s been a troubling drift toward political conformity and diminished intellectual diversity. But threatening entire institutions with revocation of tax status, or cutting off research funds, punishes science, medical innovation, and students along with administrators. Reforming higher education requires a scalpel, not a hammer.
And history shows that government overreach into university governance—whether through political litmus tests, loyalty oaths, or financial chokeholds—rarely ends well for academic freedom or democratic values.
Smarter Policy Levers for Reform
So what would work? Here are three policy ideas that could actually move the needle:
1. Modernization Grants for AI & Digital Transformation: Offer competitive federal grants to universities to modernize outdated IT systems, adopt AI to streamline administrative tasks, and move to secure cloud infrastructure. Condition grants on achieving measurable cost savings that can be redirected to lower tuition or improved student services.
This mirrors the tech-forward reforms led by university presidents like Michael Crow, where digital infrastructure isn't an afterthought—it's a driver of access and scale.
2. Tie a Slice of Federal Funds to Outcomes, Not Ideology: Link a small portion of federal funding to measurable student outcomes like graduation rates, loan repayment, and employment—not to subjective political measures. This keeps academic freedom intact while rewarding universities that deliver on their educational promise.
This approach focuses on performance and equity—not partisanship—and supports institutions making real progress on completion and career readiness.
3. Tax the Commercialized Athletics, Not the Classroom
Preserve universities’ overall tax-exempt status but apply unrelated business income tax more aggressively to fully commercialized operations—like multi-million-dollar football broadcasting deals. College sports have morphed into professional-level entertainment; it’s reasonable to tax them accordingly without jeopardizing core education and research.
Fix the System—Don’t Burn It Down
America’s universities aren’t perfect. They’ve grown too bureaucratic, too expensive, and too insular in some places. But they remain unmatched globally in research, innovation, and talent development. If we destroy what makes them special in a rush for reform, we’ll lose a strategic advantage no country has yet replicated.
The goal should be to strengthen, not strangle. Modernize operations. Demand accountability. Curb excesses. But don’t kill the goose that lays the golden eggs.
Reform done right can make universities more affordable, more inclusive, and more effective—while keeping America’s higher ed system the envy of the world.
Sue Decker is CEO of Raftr, a leading Community Experience Platform trusted by colleges and universities to improve student engagement, retention, and operational efficiency. Raftr helps institutions modernize from within—connecting students to resources and each other, reducing summer melt, boosting retention, and freeing up staff time. Universities using Raftr report measurable gains in yield and engagement—critical levers for protecting tuition revenue while expanding access.
