The Terps failed to win a Big Ten regular season or tournament title for only the second time since joining the conference.
Frese's new contract includes a base salary of $1.4 million.
Three late goals helped the Terps beat their rivals and clinch their third Big Ten championship.
The Terps won 104-84 over Iowa after reaching their seventh championship game in a row.
The Terps scored the most points in the title game's history.
“I'm just really grateful that we got to have our hugs and say I love you and say our goodbyes,” Frese said.
Ayala's late offensive rebound off a missed free throw helped the Terps seal their win over Michigan.
It's the Terps' fifth Big Ten regular-season title in the last six years.
Some of the Gameday analysts pegged Maryland as a potential national champion.
Smith upset No. 16 Lucas Davison.