Over the last 30 years, college costs have increased by
213% compared to a 113% increase in the CPI over the same time. College cost
increases have been twice the CPI for the last 20 years and the previous ten
years.
There have been many articles written about the ill
financial health of America’s universities. The higher education financial
problem is not new news; the coronavirus pandemic has accelerated the issues
because we are seeing students that are not willing to pay the price when they
do not get the “college experience.” First, let’s briefly review some of the
reasons for the escalating costs.
The ratio of administrators and staff to teachers/faculty
has increased dramatically. All universities I looked at have at least three
times as many administrators and staff as faculty. Fifty years ago, most
universities had fewer administrators and staff than faculty. The university’s
business is to teach students. Administrators and staff do not contribute to
the main business of the university, but instead, they facilitate it. The
question is: are that many more people required to facilitate the business than
in the past? To answer that, we need to look at the structure of the
organization. First, universities tend to be very hierarchical organizations.
Every manager needs one or two people working for them. Very few of the
organizations are approaching a span of control of 5 to 7 subordinates for each
supervisor. Please do not think that this is a call for a flat organization.
This only points out that many universities have many levels of management and
often duplication at each level.
Second, let’s look at the duplication of functions across
the university. Each college has staff positions duplicated at the university
level. For example, each college has a human resource function, accounting
function, student advising function, marketing, communications, event planning,
and online education function. One example that is easy to identify at the
college level and university level is the online education department. At the
college level, this department has a manager, two assistants, a production
manager, a project manager, two instructional specialists, and six others with
the title of an adjunct instructor for a total of 13 people. The university
instructional services for online has 34 people. Several colleges at the
university duplicate the online education department. At the very least, we
have redundancy at the managerial level and probable underemployment at other
tiers. This example is just the online education department. Any support
function will reveal similar personnel excesses.
One of the explanations given is that the business school
is different from engineering and other colleges; and therefore, it needs to
maintain control of the online education support function. I have news for
people that believe that this is a valid argument. Support for online education
is not specialized, and your department/college is not unique. Working in
industry, I had heard this argument repeatedly when we were trying to combine
support functions to get an efficiency of scale. I never observed a case where
it was true. Some support functions need duplication at remote sites, but not
when all were in the same location. A valid argument for having single support
departments is that the supervision of support functions (e.g., human
resources, accounting) needs to have expertise in the supervisory role to
manage the service properly.
Another reason for the increasing costs is the university
building programs. One major Midwest university went from $50 million in debt
to over $700 million in debt in less than ten years. A debt level of $1 billion
is not unusual because of continued building programs. One university recently
announced a $100 million new agricultural college building, with only half of
it funded. They hope to raise the remaining $50 million before it is completed
in 2023. One explanation of the problem is here: https://www.theatlantic.com/education/archive/2017/10/why-colleges-are-borrowing-billions/542352/.
Notice that this article is three years old, and the trend has not slowed. If
anything, it has accelerated. Even when the construction is fully funded, it
can increase the university’s debt. Often, gifts are recognized now, but the
university receives money in the future. If you donate in your will, the
university will receive the funds from your estate when you die. The university
often commits this planned gift to a current project and borrows the money
increasing its debt.
The primary source of the university’s income is from the
students in the form of tuition and fees. Fees are frequently more than
tuition. Most universities do not discuss the fees when talking with
prospective students and their parents. If you go to a university website, you may
have to dig to find what these fees are and what they support. As an example, I
went to the University of Oklahoma to see what their in-state undergraduate
tuition is for a business school student. The following table gives the costs
for a single semester.
|
Item
|
Cost/semester
|
|
Tuition
|
$2,394
|
|
Mandatory
Hourly Fee
|
$2,010.75
|
|
Technology
and Program Fee – Business School - $151/hour @ 15 hours
|
$2,265
|
|
Academic
Excellence Fee - $90/hour @ 15 hours
|
$1,350
|
|
Total
per semester
|
$8,019.75
|
Tuition and fees yearly cost $16,039.50, which does not
include a place to live and food. Living on campus will add approximately
$15,000 per year. A four-year business school education will cost
approximately$124,000. The cost at most state schools will be comparable, and
in some cases, substantially higher.
Is it any wonder that universities are very concerned about
student retention and how to attract more students. What they have not been
concerned with is lowering costs. The old adage is true, “when you are in a
hole, the first thing to do is stop digging.” Universities have not stopped
digging and are going to experience a revolution against the current university
costs and curriculum.
