Alan J. Yeck
The Dirty, Rotten, Crooked, Broken, Student Loan System and the Immoral Bankers, Brokers, Collectors, and Corrupt Politicians Who Make Billions Off of It While the Courts Garnish Wages and Destroys Lives
The Black Hole of Incompetent Leadership in Higher Education
Universities teach business education (best practices in leadership, management, finance, accounting, organizational behavior, HR, etc., and all the processes that go with these) but they seldom apply it to their own operations. It can often be an ego-driven, personality-based free-for-all from the top down in constant turmoil hidden from outside eyes.
A 2018 report from the Organization for Economic Cooperation and Development (OECD) has the U.S. spending more on higher education than any other country in the world with the exception of Luxembourg (college is free for the citizens of the small country, so we’re still number one on higher education spending) but the results are far from what they should be.
Andreas Schleicher, OECD director for education and skills says that “The U.S. is in a class of its own… Spending per student is exorbitant, and it has virtually no relationship to the value that students could possibly get in exchange.” Averaging $30,000 per student the U.S. spends double what the other developed countries spend. The $1.6 trillion question is, why?
According to data from the Bureau of Labor Statistics comparing the Consumer Price Index (CPI) for all goods, the average annual increase in college tuition between 1980 and 2019 grew by nearly 300 percent compared to a 120 percent increase for everything else. This is only the average tuition cost increase; there are many public and private institutions that have increased much more. In one generation, we have crippled the great equalizer of education and placed millions of Americans in a modern-day debtor’s prison. The extent of the damage and destruction that is being done to our country from this system is deep, wide and if not addressed in full, will have a cataclysmic effect on the nation’s health for decades.
State Reductions in Subsidies
Over the last 30 years, public dollars spent on higher education were drastically reduced year after year, and the only way for higher education to survive was to increase tuition and pass the financial burden on to the consumer – and that model continues to this day. I’ve heard this repeated over and over by senior administration to the trustees, the faculty, the parents, so much so that they begin to believe it.
The fact is that in inflation-adjusted public dollars, much more is spent on higher education today than in the 1970s. In fact, public investment in higher education is more than ten times what it was then. Compare this to military spending in the same time period which only increased twice as much. States did significantly reduce funding during the last great recession, but we are still looking at an $80+ billion subsidy, so it still doesn’t account for the increases in the current price of post-secondary education. Studies also show that when state funding does increase, there is little reduction, if any, in tuition (Rizzo, Ehrenberg).
The Bennett Hypothesis
The Bennett Hypothesis began in 1987 when President Ronald Reagan’s Education Secretary William J. Bennett wrote in a New York Times op-ed entitled “Our Greedy Colleges” that federal government’s financial aid programs “…enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase.”
Bennett’s hypothesis has been studied and debated by scholars and economists with neither being able to clearly state cause and effect validity. Over the last 30 years, though, we’ve seen a correlation between tuition costs increasing as federal student loans increased. When Bennett was asked about his hypothesis in a 2013 New York Times interview he said he still believes financial aid contributes to tuition increases but is not the only cause.
“If the federal government gives money, tuition goes up. If the federal government doesn’t give money, it goes up. Now, I think the availability of federal funding drives it up more quickly and more surely. Federal student aid makes it easier for colleges to do what they’re going to do anyway, which is raise tuition. There’s more money available.”
Howard Bowen was the president of Grinnell College and an economist who theorized in his book “Costs of Higher Education” that higher education institutions will spend all the money they are given or can spend. If they have covered all budgeted expenses, they will find something else to spend it on. On the other hand, if colleges and universities are under financial strain, instead of finding areas to cut costs, they’ll look for ways to increase revenue — tuition being the easiest way. Bowden’s Rule, alternatively known as the “revenue theory of cost” is explained in five points:
- The dominant goals of institutions are educational excellence, prestige, and influence.
- There is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational ends.
- Each institution raises all the money it can.
- Each institution spends all it raises.
- The cumulative effect of the preceding four laws is toward ever increasing expenditure.
Tuition increases have little to do with what education is supposed to be, but rather a modern mixture of executive administration and faculty governance being marketed and sold a social media version of it. They’re raising tuition because they want the money and the more costly the institution… Well, it must be awesome (rule 1).
More Students Cost More
Because the number of people attending college today has increased, the amounts that the state and the federal governments subsidize on a per-student basis are lower than they were at the peak of appropriations in the 1990s. As demand for it increases, education requires more teachers, more support staff, more infrastructure. That is just how service industries are affected by economic growth. While there’s truth in that, it doesn’t explain why higher education costs in the U.S. are double and triple what they are in similarly developed countries.
The increases to faculty salaries and the increased cost of healthcare benefits have driven up operational costs, which could only be paid off by increasing tuition.
In the 1970s, the vast majority of faculty teaching on campus were full-time employees. Today, it is not uncommon to have more part-time adjunct (non-tenure track) faculty teaching than full-time. These faculty are paid per course they teach, and most do not receive any benefits. Full-time faculty salaries at the majority of colleges and universities have remained relatively flat throughout the last 30 years. This year, there was an average increase of 2 percent, but the inflation rate was 1.9 percent. I will note that there are professors whose salaries are in the six figures, but they are the exception and not the norm. The average salary for a teacher is less today than it was 40 years ago.
In 1980, colleges spent $21 billion on instruction (41 percent of total spending) and $13 billion for all other support services (26 percent of total spending). Data from the National Center for Educational Statistics shows U.S. public degree-granting institutions today spend $372 billion total with 42 percent of that amount being spent on instruction and 37 percent on support services. Spending on instruction increased by 1 percent while administrative spending increased 16 percent, meaning universities are spending about the same on administration as they do on instruction (their raison d’être).
Some of these increases can be attributed to an increasing number of rules and regulations from the Department of Education that require significantly more resources to ensure compliance. There are also more programs for students who are struggling academically with tutoring services, career counseling, and internships. The U.S. also leads the world in money spent on non-teaching staff who do not provide direct academic support such as campus safety, alumni relations, admissions, recruiters, fundraising, financial aid, athletic, diversity and inclusion, food service, and maintenance staff. There are senior executives who are being paid an outrageous, questionable amount of money but the increases have not been given to senior executives so much as those working professional support jobs. Administrative positions increased by 60 percent between 1993 and 2009, ten times the growth rate of tenured faculty in the same time period.
College sports can make a great deal of money for some schools… For a few schools… For very few schools, so the vast majority are losing money from their sports programs. These programs can only be supported through direct and indirect financing through fees, general funds, tuition… Every student is therefore paying more to support the sports programs. Schools argue that they attract more students and therefore increase overall revenue, but athletes are often given some type of scholarship ranging from a full ride to a reduction in costs (as is the case with NCAA Division III schools, which are forbidden from offering scholarships but can offer deep discounts. Go figure). The vast majority of college sports are subsidized programs, and those costs are again passed on to the student. I personally support college athletics but believe the costs associated with them need to be completely transparent to potential students.
The University Amusement Parks, Books of Gold and the Mystery of “Fees”
Last year, a higher education institution spent a record $12 billion on constructing new facilities to attract students, including the infamous lazy river where student can destress by floating around an amusement park-like water attraction. There are climbing walls, shiny new sports facilities, gourmet dining and luxury dorms. Some of these additions may be paid for by outside funds or alumni, but ultimately, the inevitable maintenance and repair fees ahead will be added into budgets, and those budgets will be passed on to the students. Universities want more students, but there is no legitimate argument for the welfare of the student taking priority over revenue. They have created a machine, and it needs a great deal of cash for those gears to keep turning.
Not seen when parents and students are looking at the costs of education are the textbooks. Compared to your basic bookstore non-fiction novel, which has actually decreased in costs, textbooks have more than doubled, increasing four times faster than inflation. This escalation goes hand-in-hand with the rest of the student loan industry. The four major publishers that control the majority of the textbook market, charge what they want because they know customers will be obliged to pay. New texts can run easily into a few to several hundred dollars, often with multiple books needed for each course.
Fees: Hidden Costs of College
In the last 20 years, fees have increased 30 percent more than the outrageous tuition increases, but rarely are they talked about. The bottom line is that fees, as in ‘tuition and fees’ are a way for institutions to amass more money without it being seen as increasing tuition. Increasing tuition normally requires trustee or state approvals, but fees can be tacked on at will – and they are. Need more money to cover employee salaries? Add an orientation fee. Short on funds for the new sports uniforms? Create a technology use fee. Paying with a credit card? Convenience fee. Drop a class – fee. Add a class – fee. And on and on and on… Because many of these fees can be hidden in dense college bulletins, in the fine print, while others are only applicable to specific programs, students often don’t see the full picture of college costs until their bills become due. Senior management at these colleges and universities have made the decision to bring their institutions and higher education down to the lowest possible ethical operations without crossing the line into true fraud, but they are damn close.
Are You Shitting Me?
Public (your tax dollars) university presidents are paid like CEOs of Fortune 500 corporations. I do not fault them for saying ‘yes’ to their exorbitant salaries but rather condemn the trustees, who are supposed to act as students’ guardians, holding their best interests in mind and actions. A full report including the top paying private institutions, can be found here. If you don’t want to look at the list, though, I can break it down for you simply. The lowest-paid president among the top-50 university presidents made more in 2018 (including base, bonuses and non-taxable income) than the highest-paid state governor.
We look to these leaders to hold dear the public trust of higher education, yet they appear to be completely out of touch with their own students’ challenges and needs. They fear the trustees, only, and have no sympathy for the debt their graduates will carry for many years after they themselves have retired with the title of president emeritus/emerita and dedicated campus office. If this is not the case, where are their voices in addressing the corrupt student loan system in which they have become key players? Their bloated salaries and positions mean more to them than those they are supposed to be taking care of. Piss. Poor. Leadership. The maniacal cost of higher education isn’t because of just one thing but a consistent mismanagement of university funds and priorities. Because education cannot oversee itself, we must demand our elected officials at the state and federal levels call out this waste and abuse and hold senior leadership accountable. Until that is done, costs will continue to rise and continue to be passed on to the students.
This is the third installment of a five-part series by Alan Yeck reflecting on the student loan system, its challenges, and the far-reaching effects it can have. For a full list of works cited, please view the last installment in the series.
We have the power to change the business of education back to a right for all. Contact your representatives and ask them to listen to these facts and national narratives.