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Why colleges should cut costs

What colleges should be doing is lowering expenses, not raising tuition. Here are a few ideas how they can accompilish that.

By Smart Spending Editor May 23, 2013 4:15PM
This post is by Mitchell D. Weiss of partner site Credit.com.

MSN Money PartnerThe student loan crisis deserves all the attention it has attracted -- and more -- especially if we’re serious about tackling this trillion-dollar tragedy in a comprehensive way. But let’s not make the mistake of focusing all our good efforts on outcomes without addressing causes as well.

Image: High school graduate (© Photos.com/Jupiterimages)I’m referring to colleges and universities so under the gun to cover their bloated cost structures without jacking up tuition and fees even further that it’s a wonder how they maintain minimum admission standards.

It’s also remarkable that as enrollment declines, demand for financial aid increases and endowment funds shrink, the higher education sector isn’t confronting the institutional redundancies that are at the heart of this problem.

For example, in my home state alone, there are a half dozen medium-size private colleges and universities. To be sure, each has unique qualities and areas of specialty, which explains why they’re able to attract 5,000 to 7,000 students each.

However, these institutions also have their own administrative frameworks -- from ordering supplies and processing payrolls to managing IT platforms capable of wirelessly streaming online courses and the latest movies. And, of course, there are the duplicative organizational hierarchies that incorporate a half dozen presidents, chief financial officers and provosts each, not to mention, copious numbers of deans and legions of faculty and administrative staff.

If this isn’t an example of an industry consolidation waiting to happen, I don’t know what is -- except that there are two big obstacles standing in the way: the college presidents and the boards they’ve recruited.

Facing Reality
Publicly held companies are accountable to their shareholders. To whom are the privately held educational nonprofits beholden? Perhaps it should be to those who write the checks: the students, their parents and the companies that offer tuition reimbursement to employee-learners.

For example, wouldn’t it make sense for the business schools to collaborate with commerce in this regard? After all, they are the check writers, either directly through their tuition-reimbursement programs or indirectly as a portion of the salaries they pay make it possible for employees to meet their financial obligations. But that dialogue between academia and commerce has yet to take place in a meaningful way.

What of the needs, preferences and economic capabilities of the schools’ consumer-learners? Their requirements are inexorably tied to their prospective employability and their preferences are not only culturally inspired, they’re also focused on practicality –- as in the flexibility that online and hybrid-learning offers to full- and part-time students. In terms of their economic capabilities, must the costly, time-consuming, soup-to-nuts degrees be the only way to go?

Why not then also consider deconstructing the graduate degrees into a series of stackable credentials? Students (supported by their tuition-reimbursing employers) would then have the option of pursuing targeted areas of study that may at some later time evolve into formal degrees. In fact, this flexibility can also lead to a broadening of the revenue base as more students take advantage of a more affordable form of higher education, driving down prices in the process.

But what about the investment that’ll be required to pull this off -- the mix of traditional, hybrid and online classroom settings, and the production and technological resources that will be required to accomplish all these changes? Where will the funding come from when pricing is under attack, revenue dollars are already spoken for and outside investors view higher education as a sector without a future?

If the business of higher education is education, then it should get out of the businesses of providing bunk beds, cookies, rock concerts and treadmills and put to better use the capital that would be derived from these divestitures.

The Campus, Reinvented
Dump the dorms. When my kids graduated college, they each chose to live near a school campus. That’s because most suburban-based institutions are, in effect, quasi-gated communities with easy access to park-like grounds, sports facilities, libraries and cafeterias.

Why not sell the buildings to entities such as real estate investment trusts that will reconfigure these structures into independent living space, and lease the underlying land to create an annuity that, along with the proceeds from the sale, may be invested in upgraded educational content and modernized delivery?

Franchise the food courts
As the delivery of educational content moves from the classroom to the living room, why not also help students become more independent in the process?

Transforming the cafeterias into grocery stores and franchised food outlets will not only teach students to care for themselves, it’ll also enhance institutional cash-flow.

Convert the classrooms
Shared office space for small businesses, entrepreneurial incubators, corporate conference centers -- these are only a few of the income-producing uses for the buildings that once housed the students who are today combining in-class with on-sofa learning.

Subscription to the sports centers

As part-time faculty, I enjoy low-cost membership to my university’s sports facility, along with my full-time colleagues, alumni and students. Young people like living on or near school campuses because of the amenities. Why not invite more of them into the one that is at the heart of the infrastructural warfare that’s waged by the schools as they compete for students?

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Here’s the tricky part, though: Resisting the temptation to use this trove of cash to plug today’s operating shortfalls, which would be akin to burning the furniture to stay warm. Instead, the schools should consider these actions only after settling on a strategic plan that speaks to the disciplined use of this precious, repatriated capital.

So how does this get done in such an insular culture where self-interest often trumps much-needed innovation? All it will take are a few forward-thinking schools to get the ball rolling.

More from Credit.com

15Comments
May 24, 2013 9:33AM
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colleges dont know how to cut expenses.  These insitutions are for the most part hugely liberal to the exclusion of free thought and liberals spend until you are broke.  Bankrupting millions of our youth with worthless degrees and huge loan expenses may wake some of them up to the promise of "big governement".  Lets pray anyway.
May 24, 2013 10:06AM
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It is obvious that we need more trade schools and fewer colleges. Also, our entire school system starting in high school evolves around sports. They will not drop the 12th grade because of sports. They will not change the curriculum   because teachers would be replaced. Kid drop out when 16 because they are either lazy or just plain not interested in what is being taught. We need to listen to them and teach accordingly. Our educational system from kindergarten up is in sad shape and based on dreams not reality.
May 24, 2013 8:47AM
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Cut the sports or charge extra to play. Very few schools make money off the sports programs. Make the professional teams pay for training their future employees.
May 24, 2013 11:48AM
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Colleges are charging wayyyy too much for their product. Large loans at the end of a 4 year degree and too often a job that doesn't pay enough will put the the young person in debt for many years. Also, they will have to struggle to make ends meet.
It is nothing less than a CRIME what the colleges are doing.
Many of the degrees offered or are being sold, won't get a very good job.
A good two year associate degree will pay more than many four year degrees.
My last child graduated from a state college in Ohio in 1999 and my cost that year for tuition AND living expenses was less than $9,000. 
I paid for my college, my three children's and my wife's.
Today I will NEVER  give a cent to any college. I tell them I gave / was robed at their book store.


May 24, 2013 11:09AM
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One way to cut costs: stop having a college private police force that is separate from the police department. These private armies have state of the art riot gear and "non-lethal" weaponry. instead whenever there is a problem they can call the regular police to come out and deal with it. This was the issue at UC Davis when the Private police pepper sprayed and beat non violent protesters sitting in a circle. Because they wee not part of the regular police force they fell under a different set of rules and were not accountable for their actions
Jul 31, 2013 10:25AM
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Why is it at state universities that international students pay the same as out of state students?  This is INSANE!  Students from one state attend school over the border and this goes both ways.  However, VERY FEW undergraduate students from the US attend college TO EARN A DEGREE overseas.  Sorry parents, but most "Study Abroad" programs for your kid is actually merely "Drinking Abroad" or "Study a Broad"... as almost zero American kids earn an undergrad degree overseas.  In contrast, hundreds of thousands of kids from Europe, South America, and Asia (especially China and India) come to America yearly to earn their BS.  In doing so, they not only take a spot from an American kid whose parents pay state taxes, but they do so at the same rate as a kid from a neighbor state. 

 

Sorry, but while millions of kids from India and China have studied here (one only needs to walk the campus in Ann Arbor or Bloomington to see this). VERY FEW kids from Indiana or Michigan have ever earned a BS in India or China!   These international kids attend our state universities because:  1) They were not admitted to Harvard, Yale, Stanford, MIT, Oxford, or Cambridge, and:  2) Their nation or uber-rich parents can afford the out-of-state tuition rates in the US, and the kid merely returns to Calcutta or Guangzhou and spends the next 40 years building hydroelectric dams, interstates, and nuclear bombs based upon the science skills learned at our universities. 

 

The obvious solution is to charge international students a LOT more than out of state rates – so perhaps instead of $10,000 a year for in-state tuition and $25,000 a year for out-of-state and internatioanl tuition, charge international students $50,000 to $100,000 a year for tuition instead… most will still come here as this is a drop in the bucket to a government to get their nuclear bombs built, and also to the super rich Chinese parent who promised their princess an overseas school experience.  This windfall could be used as a subsidy to dramatically cut in-state tuition rates, and the normal out-of-state rates could remain untouched, but still far less than international rates.  Based upon these numbers, a large state school with 40,000 students...and 75% being in-state, 12.5% being out-of-state, and 12.5% being international... if the school charged the international students $50,000 a year for tuition, and all else remained equal, the in-state tuition could drop by 40% to $6,000 a year. (Frankly, the out-of-state costs could likely come down also if all of the states started following the same formula.)  In the short run the international applications would likely drop, but if ALL of the state colleges adopted this at about the same time, this would not have a lasting impact on international applications... as these students would STLL not get into MIT or Cambridge... and this is still a cheap way to get the knowledge to build nuclear bombs or hydroelectric dams.

 

The next step would be to look at ways to give US grad students preferential treatment for teaching positions also... as it is AMAZING how many international students get these paid positions when they can barely speak English.  But I digress....  LOL

May 24, 2013 12:04PM
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All of the points above make a lot of sense...too much sense, maybe.    Maybe the time is past for typical 4-year degrees?  

This, in particular, makes a lot of sense...::consider deconstructing the graduate degrees into a series of stackable credentials:::Students (supported by their tuition-reimbursing employers) would then have the option of pursuing targeted areas of study that may at some later time evolve into formal degrees. ::: 

Makes more sense than culinary chefs, beautiful campuses and setting up dorms like high end hotel rooms or apartments.  Let's get back to the purpose of higher education---education!

And sports?  Don't know what to do about those...they are deeply ingrained and the source of many scholarships and income to sponsoring colleges.  They will have to be carefully looked at.

Jul 31, 2013 10:57AM
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We need to understand that colleges and universities are businesses and need to be treated as such.  They should be required to present data as to future employment statistics for their graduates.  The objective of a college education, unless you are independently rich, should be to get a job.  There needs to be a connection between a college education and what is needed in the workforce.  Colleges and Universities are treated as separate entities, whether you are ready for the workforce isn't their objective.    
May 24, 2013 12:47PM
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Never put a teacher in charge of the checkbook - they are as selfish as any unionized group, and will do whatever it takes to increase their wages and decrease their workload.

May 23, 2013 11:36PM
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  Tom, you could benefit from an English course and your response to this article is actually, entirely a non sequitur.  Nontheless I will counter the points made within your posting. 

 

  Social Security was created by FDR in 1935 in response to the fact that a significant number of people did not/do not plan/save anough for their retirement.  Yes, a low level of income due to various causes such as some of those that you cited contribute to the challenge of saving for one's future.   However, often is the situation wherein a worker's expenses rise (often due to wants vs needs) in relation to his/her income rising which results in unsubstantial savings for later years.  -Essentially, people are generally not very responsible with their money.

 

  Next, Obamacare focuses on ensuring that you and I have insurance provided by our employer vs my having to subsidize insurance for you because your employer doesn't provide it and instead you rely on public assistance such as medicaid.

 

  Lastly, if employers such as Walmart continue to decrease employees' work hours in an effort to keep them from qualifying for Obamacare and receiving medical care when needed, your prayer may be answered.    

 

 

May 23, 2013 8:52PM
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We're destroying the country and its youth.   You hear these talkin heads on here and in gooberment that says.......got to save for retirement.......people not saving for retirement.  Well, you know its kinda hard when your taxes are raises, you pay car insurance, you pay student loans payments, and now you got Odumbocare.  You want to know why people arent saving there ya go idiots in D.C.  I pray i dont live to long i know there's a better place waiting for me on the other side than this sh..t hole!
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