Why you're paying so much for college

Tuition keeps rising as administrators and top faculty members get juicy pay and severance packages and sweet housing deals.

By Aimee Picchi Mar 12, 2013 1:30PM

Image: Graduation cap (© Stephen Wisbauer/Getty Images)The rising cost of a college education is a major stress for many families, and many wonder why tuition keeps going up.

While students are paying for new technology and other elements of a modern higher education, another factor is at play: hefty pay deals and huge severance payments given to administrators and faculty members. Among the beneficiaries is Jacob Lew, the current U.S. Secretary of the Treasury, who received a $685,000 bonus when he left New York University in 2006.

On top of that, Lew also had a real estate deal New Yorkers can only dream of: NYU had given him $1.5 million in housing loans, Bloomberg reports

It's enough to make the parents of an NYU student wonder how much of their roughly $20,500 tuition (that's per semester) is going to support pricey Manhattan real estate for the school's staff.

"It certainly gives the public a clear example of how out of touch some universities are," Jonathan Robe, a research fellow at the Center for College Affordability and Productivity, told Bloomberg. "Parents will think: 'Here I am scraping by, raiding my retirement plan to pay for college. Why are they making me do this just to enrich these executives?'"

Exit payments sometimes amount to one to three times an administrator's annual salary and bonus, Bloomberg notes. And those salaries aren't exactly peanuts to begin with. The highest-paid university presidents raked in as much as $4.9 million per year in 2009, according to the Chronicle of Higher Education

New York University defended Lew's payments and benefits, with a spokesman saying that in his case "the benefit to the university can range in the tens of millions of dollars." 

Other universities say they're pressured because of the need to hire top talent. Academic institutions must "attract and retain the best leaders we can," a University of Chicago spokesman told Bloomberg. (That school paid $2.5 million to former medical dean and hospital chief James Madara when he stepped down in 2009.)

Top institutions such as Harvard and NYU offer low-interest home loans to help their tenured faculty and staff members purchase homes. Harvard faculty members can also receive no-interest education loans. 

Among those who took advantage of Harvard's offers were Lawrence Summers, who served as the school's president from 2001 to 2006. According to Bloomberg, he owed $1 million for buying a home and $177,000 for a dependent's education, according to the university's 2009 tax return.

Many of those benefiting are top administrators rather than rank-and-file professors. Academic presidential pay jumped by 35% from 1997 to 2007, while professors saw only a 5% income gain during the same period, according to the Chronicle of Education. 

"There always seems to be more money for the executive suite even as colleges raise tuition year after year," Sen. Charles Grassley, R-Iowa, who has been critical of college compensation, told Bloomberg. "Universities have to answer for their executive perks in exchange for their tax exemption."

More on moneyNOW

Mar 12, 2013 2:07PM
And how much of the cost is in forcing students to spend half their undergraduate time and money on so-called general education classes.  These are things that should already have been taught before high school graduation, have nothing to do with a students major and can best be described as a welfare system for teachers of subjects of no market value.
Mar 12, 2013 2:09PM
The reason it is so expensive is the same reason housing is so expensive-unlimited availability of loans.  Federal loans are so easy to get that students forget how difficult they will be to pay off when they graduate with no job.   The universities make the prospective students jump through hoops with FAFSA's and scholarship applications only to inform them in the end that they have the privilege of taking out a big student loan to fund their education.  Only when universities guarantee a job at the end of four years will they be worth the tuition high costs.
Mar 12, 2013 2:22PM
Not to mention the racket colleges and universities have with their bookstores.  Recent check of my own personal textbooks for my upcoming term reveals a near 50% higher charge for my textbooks at the university store ($347.50 for two books) vs. what I would pay for them in the same condition on Amazon. (179.99 for both books)  And here's the catch: I'm a financial aid student.  Financial aid refunds - what is left after tuition is paid and is to be used for things like textbooks, school supplies, and living expenses such as shelter and food - don't get released until two weeks after class starts.  And where is the only place you can get textbooks before the class starts if you're depending on financial aid to pay for them?  The university bookstore.  If that's not racketeering, I don't know what is.
Mar 12, 2013 2:20PM

Another article that leaves out the US Federal Govts Role in this mess...the #1 reason why college coast have soared is the US Federal Govt has gotten involved in student lending. When a college knows the Feds will "loan" you $$ they charge more..plain and simple.

Mar 12, 2013 2:36PM
In the America of today it seems that nearly everyone who can do so has given up conscience, ethics, morals and goodness, as these people are unabashedly seeking as much advantage over the other guy as humanly possible. Conscience, ethics, morals and societal goodness have gone the way of the buggy whip in those, and gross pandering for personal wealth and its perks has taken its place.

No wonder America is not the country it once was, and is failing.

Mar 12, 2013 2:05PM
duh... why  is  college  so  expensive?   because  boys   and  girls....  just  like  anything  else  in  the   230  years of  this  country...  NOTHING  has  ever  gotten  cheaper  or  better   when  the  government gets  involved.
Mar 12, 2013 2:58PM
College costs are so high because of student loans.  What do you think the cost would be if no student loans were available. They would have to charge what people could afford, not the inflated tuition.  All college financial people always talk about loans that you qualify for and never what the cost of these loans will be. Students don't realize what impact these loans have until it is too late.  Can't buy a house can't buy a car, because their debt is too high. This is going to be a bigger problem than the housing market.
Mar 12, 2013 2:34PM
When the Gov. of Wisconsin went after cost savings(union busting ) he didn't go far enough . If you want a job after college , get yourself tenured . Then get on the board of regents, be a coach , or the president of the university system , which includes the satellites as well . Now you have a never ending source of income with never having to produce anything , the money just keeps rolling in !
Mar 12, 2013 3:04PM
Florida has Bright Futures program to pay for  tuition. All you need is a a GPA above 3.0 in HS, a score of 22 on the ACT, and around 75 community service hours. The best part about this is that it is NOT need based. Both of my kids got their tuition paid for by the program. It drives the libs nuts down here because middle and upper class white kids dominate the program. Its paid for by the lottery revenue.
Mar 12, 2013 3:29PM

Funny thing:  The guys who make the decisions about who earns what, see their pay go up more than their underlings'. 


If these people weren't so smug about their "social justice" credentials, I'd choke on this a bit less. 

Mar 12, 2013 1:55PM
Why is college expensive?  Because the federal gov has its greedy little hands on it, that's why.  Everything the federal gov touches gets more expensive - energy, health care, transportation, education, food, etc...  The bureaucracy is not self-sustaining, somebody has to pay for it.  Take gov out of the equation, let the free market work, and prices come down.
Mar 12, 2013 3:22PM
How about making the decision to choose a college you can afford? If you can afford an expnsive school, go for it. If you can afford one that costs less, then go for it!
Mar 12, 2013 3:57PM

college tuition has risen.  college school year has shortened over the last 40 years.  and the time spent in the classroom has likewise shortened.  example...my freshman college son's last day before spring break had two classes cancelled.  prof used the pretext 'y'all been workin' so hard.'  BS!  parents are paying for an education not cancellations!

Mar 12, 2013 3:50PM

I'll bet no one here can name the highest paid employee at a University/College.


Do you know who it is???????


Guess, I dare ya!!





Mar 12, 2013 3:58PM
Many developed nations offer tuition-free high-tech and quality education. The problem with, especially Colleges/Universities here in US, is their ability to hide away their expenses, so yes they can give themselves crazy high salary/bonus/benefit/pension deals.
Mar 12, 2013 4:19PM
there is no limit to one's expenses when they have access to OPM (other people's money)
Mar 12, 2013 3:22PM
What else is new in America? Me, me, me and my wallet. A self centered money hungry disgrace is the USA anymore. 
Mar 12, 2013 3:38PM
As faculty at a state university someplace other than New York,  All I can say is that I am working in the wrong state.  I make a gross income of 40K and take home less. In addition I have the gift of 2-3 months of summer "vacation" unpaid so I have to find an industry job every year for three months inorder to pay my rent.  No severence package for me if I leave and the school charges me more for parking than it does the students.  I know few faculty that get the benefits this article claims they do and my Dean pays for a lot of things for our department out of her pocket.  Check out a prior article on MSN.  In most states the highest paid state employee is the University football/basketball coach.  Perhaps parents need to question where their money goes and why.   
Mar 12, 2013 3:04PM
Why are Americans in positions of power so greedy? 
Mar 12, 2013 3:27PM
I wish NYU was only $20,500 annually. I have a son who will be attending in the Fall of 2013. It is $20,500 per semester!
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