5 Things to Know About Penn State’s $11.1B 2027-28 Budget

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The Penn State Board of Trustees has approved tuition increases and millions of dollars in spending cuts for the 2027-28 fiscal year as the university grapples with surging payroll expenses and lost tuition revenue due to declining enrollment.

The changes are part of the $11.1 billion university-wide operating budget — which takes effect July 2027 — that passed Friday at the Pennsylvania College of Technology in Williamsport.

The university was able to balance its $2.9 billion Education and General budget — which funds core academic programs, instruction, and research — for the third consecutive year.

Trustees Joseph “Jay” Paterno Jr. and Matthew McGloin, both alumni-elected trustees, cast the sole dissenting votes but didn’t offer public remarks explaining their decision.

The board separately awarded a 15% performance bonus to President Neeli Bendapudi, which one member said was necessary to ensure stability.

Here are five takeaways from the 2027-28 fiscal plan:

Tuition is going up again

University Park students will face a fresh round of tuition hikes, marking the seventh consecutive year that Penn State has raised tuition somewhere in its system.

The increases will generate about $59 million in new revenue, according to a university news release.

• In-state undergraduates at University Park will see a 2.5% increase, or an extra $261 per semester. That will bring the annual tuition for these students to $21,400.
• Out-of-state undergraduates at University Park will face a 4% spike, or an extra $891 per semester, pushing yearly tuition to $46,356.
• University Park graduate student tuition will rise 2% for Pennsylvania residents and 4% for out-of-state students.
• World Campus tuition will increase 2% across the board.
• All law students will see their tuition increase 2%.
• Tuition for Pennsylvania residents in the College of Medicine will increase 2%, while out-of-state students will see an increase of 4%.
• Pennsylvania resident undergraduates at commonwealth campuses will be shielded from hikes for the fifth consecutive year. However, out-of-state undergraduates and in-state graduate students will see a 1% increase, while out-of-state graduate students face a 2% increase.

Student tuition and fees remain the single largest funding source for Penn State’s operations, projected to bring in more than $1.9 billion in gross revenue under the new plan, according to Penn State Chief Financial Officer Sara Thorndike, who addressed the board’s finance committee on July 16.

“We’re very tuition-dependent,” she said. “I wish we weren’t, but it is a big part of the equation of balancing our budget. And so that’s why we have to make some of these more difficult recommendations.”

Campus closures and spending cuts bridge deficit

Penn State faces a projected $79 million in lost tuition revenue.

Thorndike explained to trustees that because Penn State works on its budget two years in advance, several factors led to the university having lower enrollment than it had forecast — including plummeting international student numbers, federal research cuts affecting graduate enrollment, and an immediate freeze on new admissions at the seven closing campuses.

Penn State announced the planned closure of its DuBois, Fayette, Mont Alto, New Kensington, Shenango, Wilkes-Barre, and York campuses in May 2025.

Thorndike outlined two major offsets to the board:

• $46 million in recurring net savings generated from closing the seven commonwealth campuses.
• $24.6 million in direct spending cuts across academic colleges, branch campuses, and central administrative units.

Heavy labor costs and the president’s bonus

The university also authorized $78 million in total new personnel spending:

• $49 million to bankroll a 3% merit-based salary increase pool for faculty, staff, police, and technical service workers, alongside a 4% stipend bump for graduate assistants.
• $6 million for standard faculty promotions.
• $23 million to absorb rising employee benefit expenses largely driven by higher healthcare costs.

The $59 million in new revenue generated by tuition increases will help offset these costs, according to a university news release.

Also at Friday’s public meeting, trustees voted unanimously to award Bendapudi a 15% performance bonus of $210,000 for the 2025-26 school year, based on her $1.4 million base salary.

Paterno defended the executive bonus by citing necessary leadership stability amid widespread industry turnover.

“In the Big Ten right now, retention of presidents is vital,” he said. “We’re fortunate that we have a president who’s been here for four years already because that’s not the norm in our conference.”

What about state funding?

The state budget that lawmakers passed earlier this month applies to the current fiscal year, which began July 1. Penn State’s general appropriation from the state remained flat at $242.1 million.

The university will see new funding from Pennsylvania’s recently enacted performance-based allocation model, however. Penn State expects to receive more than $4 million from a $10 million performance pool split between it, the University of Pittsburgh, and Temple University. The funding is awarded based on metrics like in-state enrollment, graduation rates, and workforce-aligned degrees.

While university administrators welcomed the new revenue stream, the actual payout falls far short of early proposals: Democratic Gov. Josh Shapiro originally pitched a $30 million performance pool, but legislative negotiations slashed that figure down to $10 million in the final $50.8 billion state budget for fiscal year 2026.

“I want to thank members of the General Assembly and Gov. Shapiro for their leadership and partnership in making performance-based funding a reality in Pennsylvania,” Bendapudi said in a news release. “This initial investment is an important first step that recognizes the essential role higher education plays in strengthening our commonwealth.”

University Park housing, food costs increasing

The budget includes a 2.5% increase for the standard double room, the most prevalent room at University Park, according to a news release. This change adds $119 per semester, bringing the total to $4,885.

The signature dining plan will increase by $75 per semester to $3,063. Together, the baseline housing and dining rate at University Park will total $7,948 per semester, or $15,896 per academic year.

While prices are going up, university leaders noted that the aggregate percentage increase would be the lowest at University Park since the 2018-19 academic year.

“Our goal is to keep cost increases for our students and their families as low as possible,” Thorndike said in a university news release. “These proposed rates reflect our continued commitment to responsible financial stewardship while allowing us to continue to invest in safe, welcoming on-campus living spaces and high-quality dining and support services.”

Room and board changes at the commonwealth campuses vary across the state. Campuses, including Abington, Altoona, and Harrisburg, will see a 1.5% bump, raising total room and board to $14,878 per year.

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