On their own: How Law and Darden traded state funding for tuition control

Leonard Sandridge remembers the moment well. It was the 1970s, and an accreditation committee was visiting the University of Virginia School of Law, widely considered among the best in the nation despite charging far less than its private peers. When the visit was over, Sandridge (Grad class of ’74), then the university’s budget director, got an unexpected scolding.

“They said, ‘Shame on you, because you have an easy way to fix this thing,’” he recalls. “‘If you were simply charging your law school students—especially the in-state students—a market rate that they would have to pay anywhere else, you would have the money you need to fix the library … to take care of the salary problems that you have.’”

Sandridge, who would later become the university’s chief operating officer, knew the suggestion was politically impossible at the time. Charging market tuition for any academic program at a public university would have been a nonstarter in Richmond.

But by the late 1990s and early 2000s, as Virginia legislators wrestled with repeated rounds of recession-driven budget cuts after the Gulf War and the dot-com crash, the idea began to look less radical—and increasingly practical.

You could write the deal on a cocktail napkin.

State appropriations had fallen sharply, dropping from 32 percent of UVA’s academic budget in the mid-1980s to 12 percent in 2002. The shift gave university leaders an argument.

“We were able to say to the state: ‘Look, we don’t expect you to make every institution do what we’re offering to do,’” Sandridge says. “‘But we think you ought to give us permission to be innovative in the way we price our products.’”

The result was one of the most unusual financial arrangements adopted by a public university in the United States, according to James Hyatt, vice chancellor and CFO emeritus at UC Berkeley, and the author of several books on higher education financial management.

In 2002, with the blessing of key state lawmakers, Sandridge and other university leaders inked a deal with the law school and the Darden School of Business, two of UVA’s most in-demand graduate programs. Under the agreement—often referred to on Grounds as “financial self-sufficiency”—the schools could set their tuition at market rates and dictate their own salaries and budgets, with the understanding that the Board of Visitors would not unreasonably withhold its approval. The schools were also allowed to keep any private donations they raised.

In return, the schools agreed to give up all state funding, cover the full cost of their operations, and pay an annual “tax” to the university equal to 10 percent of the tuition revenue they collected—a share that has since grown to 12 percent, according to current law school Dean Leslie Kendrick (Law class of ’06).

“You could write the deal on a cocktail napkin,” says John Jeffries Jr. (Law class of ’73), dean of the law school at the time. “We renounced all state funds … in return for the ability to raise our tuition to near market rates.”

Jeffries and Sandridge say the model was feasible because of UVA’s unique position in the higher education marketplace. Both the law and business schools were already considered top tier. Graduates typically secured jobs with firms that offered generous starting salaries, making student debt more manageable. And both schools had deeply engaged alumni networks capable of supporting scholarships.

Jeffries also noticed a pattern during admissions. Prospective students were sometimes choosing higher-priced private law schools where scholarship aid helped lower the sticker price over UVA’s more affordable tuition.

“So we were faced with people who went to competitor schools at a discounted tuition, not much higher than ours, but we still lost them,” he says.

Winning over skeptics

The financial self-sufficiency concept took years to gain traction, says Sandridge, who recalls holding countless meetings on the subject. It finally took root in the early 2000s, when state budget problems forced legislators to rethink Virginia’s financial relationship with its public universities.

Attorney Terence Ross (Law class of ’83), who sat on the Board of Visitors at the time, says its members were under tremendous pressure to reduce expenses. So he suggested they look at individual divisions to see where the weaknesses were, and then “make some really hard choices,” like a private corporation might.

But after undertaking that review, the board decided against cutting academic programs and instead moved to shift UVA’s “star” professional schools to a market-based funding model.

The financial self-sufficiency deal did not require legislation, but state political leaders needed to be convinced that it wouldn’t disadvantage Virginia students. Some BOV members also had concerns.

Ross says he largely gave voice to those worries. Among them: rising tuition that might squeeze out middle- and working-class Virginians, student debt that could push graduates to take jobs outside the commonwealth, and the possibility that a smaller proportion of in-state students would be admitted.

Sandridge served as a key player in those negotiations.

“It took several years for people to believe that we could manage those two schools without them running off and acting irresponsibly,” he says. “We had to convince our board that it was a good thing to do.”

The schools agreed to several conditions. Both offered discounted tuition for Virginia residents—initially $5,000 less than the out-of-state rate. The differential remains $5,000 at Darden but has since narrowed to $3,000 at the law school, according to the university.

The law school also expanded its public service loan forgiveness program to include graduates who worked in private practice in Virginia and earned below a certain salary threshold. That program now covers any graduate making less than $100,000 a year, Kendrick says.

Meanwhile, alumni stepped forward with philanthropic support, allowing the schools to fund more scholarships, Jeffries says.

A national shift, with a twist

UVA isn’t the only university that’s been forced to get creative.

Public colleges in many states shifted to new revenue models, launching large-scale capital campaigns for the first time and steadily raising tuition and fees to make up the shortfall in state support, Hyatt says. Many also turned to recruiting more out-of-state students who were charged higher tuition rates.

UVA President John Casteen III (Col class of ’65, Grad’66, class of ’70) prioritized private fundraising, growing the university’s endowment from $488 million in 1990 to $5.1 billion in 2007. University leaders also worked with legislators on restructuring bills in 2005 and 2006 that gave Virginia’s higher education institutions greater autonomy over tuition and finances.

It took several years for people to believe that we could manage those two schools without them running off and acting irresponsibly.

The financial self-sufficiency model at Darden and the law school was another key tool—and a precursor to the broader restructuring deal. But what made it so unique?

Hyatt says it wasn’t simply that the schools could charge near-market tuition; other top public programs did that. The difference was that the graduate programs agreed to forgo state funding—and even return a portion of tuition revenue to the university.

Kendrick says it still works that way today.

“Top public law schools now charge tuition that’s very similar to private schools regardless of what the university funding model is,” she says. “What’s different here is that … we are giving money back to the central university.”

The payoff—and the price

Twenty-four years into the arrangement, tuition and fees for the two programs have risen by more than $50,000, now ranging from $77,900 for in-state law students to $84,838 for out-of-state students at Darden. For comparison, tuition and fees have risen by less than $38,000 at the medical school and less than $20,000 at the Graduate School of Arts & Sciences.

Still, demand has remained strong, Kendrick says, as have job prospects. For 2025 law graduates, the median starting salary was $225,000, and 99 percent were employed 10 months after graduation, according to an employment summary reported to the American Bar Association.

At Darden, the most recent graduates reported a median starting salary of $175,000 plus a $30,000 signing bonus, with 90 percent accepting full-time jobs within three months of graduation, according to the school’s 2024-25 employment report.

Darden Interim Dean Mike Lenox (Engr class of ’93, class of ’94) says the business school has thrived under financial self-sufficiency, in part because administrators can reliably project revenue and plan accordingly. As a result, he says, the school has consistently ranked among the top 10 MBA programs, raised more than $630 million since 2019 and awarded nearly $30 million in scholarships last year.

“We’re among the best in the world—and that’s a historic high point,” Lenox says.

The law school has seen similar gains, according to Kendrick.

But Ross, who remains a supporter of the model, says there were some unanticipated consequences.

“The biggest problem was not seeing the extent to which [the schools] would push up the tuitions,” he says. “It was never contemplated, because we never had these gigantic increases.”

Lenox argues that tuition escalation is a general phenomenon in higher education, separate from the financial self-sufficiency model.

“Almost all top business schools, public or private, are now at similar tuition levels,” he says.

In terms of the proportion of Virginia students enrolled, Darden’s share has fluctuated over the past 24 years but remained relatively stable at 27 percent as of last fall, according to UVA’s Office of Institutional Research & Analytics. At the law school, however, the in-state share has dropped from 44 percent to 22 percent over the same period.

That tracks with a slower decline across UVA’s graduate programs. Overall, in-state graduate enrollment fell from 44 percent in fall 2002 to 38 percent last semester, university data shows.