While most University of Minnesota students are facing a tuition hike this fall, Mike Johnston is getting a break.
As an MBA student in Duluth, he'll see his tuition bill drop by nearly 25 percent.
Johnston, 26, is enrolled in one of the only U programs actually slashing tuition this year.
Starting this fall, the cost of a master's degree in business administration will drop from $38,040 to $28,800 on the Duluth campus.
The news, he said, "made my day."
The price cut, which applies only to MBA students at the UMD business school, was approved by the Board of Regents in June at the same time it raised prices slightly for almost everyone else at the university's five campuses.
The idea of cutting tuition, especially by this amount, is "almost unheard of" at public universities, said Rajiv Vaidyanathan, a marketing professor at UMD's Labovitz School of Business and Economics.
But in this case, he said, it was a simple matter of supply and demand.
Since 2010, enrollment has been dropping steadily in the Duluth-based MBA courses, from 72 students to just 32 last fall. One reason, he said, is growing competition from cheaper online programs. So he started a campaign to persuade the business school to change strategy.
"I said, 'I really think we need to lower our tuition significantly,' " said Vaidyanathan, who ran the MBA program for 13 years. "We are a premium program. But we still can't be completely out of line with the market."
It took several years to persuade the university's top executives to give it a try. "There was a lot of trepidation" at first, he said. But he argued that the gamble would pay off in more students.
The decision to shave 25 percent off the price tag was, he admitted, a bit arbitrary. "I wanted it to be a significant drop," he said, "because, frankly, these opportunities to drop tuition come along very very infrequently."
In the end, the cost per credit (for a 32-credit MBA) dropped from $1,189 to $900 on the UMD campus, and from $1,352 to $1,000 in Rochester, where the business school has a satellite program.
Johnston, who's been working on his MBA since 2012, said he chose UMD knowing that it's more expensive than the competition. But with 12 more credits to go, he was thrilled to hear about the discount.
"It's going to save me over $4,000 just in tuition," said Johnston, who works as a cost analyst for an energy company in Duluth.
Lori Meyer, an MBA student in Rochester, called the news "a nice surprise."
"It's probably going to save me just under $8,000," said Meyer, 46, a senior financial analyst at the Mayo Clinic.
Like many MBA students, both Meyer and Johnston said their employers cover part of their tuition. And both see the degree as a career steppingstone. ("It will open up a lot more doors," said Johnston.) So the tuition cut wasn't a make-it-or-break-it deal.
But in recent years, many employers have cut back or limited their tuition reimbursement plans, said Vaidyanathan, which means that price is still a big factor for many students. "I really do see our move as saying, 'Hey folks, we can help with that,' " he said.
MBA numbers dropping
Nationally, enrollment in MBA programs has dropped by more than 25 percent in the past several years, according to a survey by the Association to Advance Collegiate Schools of Business, which accredits top business schools.
That slide, and the proliferation of online MBA programs, has put "downward pressure" on tuition, said Dan LeClair, the chief operating officer of the association. But he knows of no other schools that have cut their prices as dramatically as UMD, and doubts this will start a trend.
"Because providing a quality education is not getting less expensive," he said.
At the U, though, officials say it was worth trying.
"It is unusual," said Julie Tonneson, the U's associate vice president for budget and finance. But the administration decided to support it, she said, because "they had some good analysis and rationale behind it." Plus, it's such a small program. The discount does not apply to the much larger Carlson School of Management in Minneapolis, where tuition is rising 2.5 percent for new MBA students.
Vaidyanathan is convinced that the tuition cut will pay for itself.
"The way I justified this to the university is that I'm hoping for a significant increase in enrollment," he said. "Because we do have capacity in our program." Between the Duluth and Rochester campuses, he said, they could add dozens more students "without asking for another dime in faculty resources."
He suspects other graduate programs, with a similar size and challenge, will be watching closely. "My gut tells me that this will be successful."
Maura Lerner • 612-673-7384