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higher ed costs and administration

blion72

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Jan 1, 2010
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several comments on here about this subject, and i see this issue a lot being on the periphery of mid-size schools. the overhead cost to actual direct educational delivery cost is significantly higher than any other business - and there are several drivers:

  • regulation from the feds and states create extra administrative burdens that tend to lead to more administrators. this may not always be needed, but few university leaders are accustomed to running tight businesses, so you get creeping headcount over this crap.
  • check the size of audit and compliance at any school and benchmark to industry. it is insane.
  • most schools now have large diversity and inclusion staffs with VP's over $200k comp. corporations that have tight budgets will not have this cost.
  • overhead in the colleges is frequently redundant to university and nobody has balls to address. so a college of engineering will have redundant staff to provost office and also sometimes university level staff.
  • many schools take tuition centrally, as opposed to forcing colleges to run local responsibility budgeting - i.e. make a profit at the college level.
  • only a few colleges/programs make money - i.e. business, engineering, some sciences, etc.
  • Discounts and scholarships can avg as high as 50%, so this cost hits the tuition line. many high ability kids from good income families pay nearly full cost while low income low ability kids get a ride - part of social justice initiative of schools. not saying whether they should do this but it is factual.
  • an efficient school can run about 25-30% overhead to revenue vs industry at around 15%.
  • Arizona State tries to run efficient and they beat the higher ed target but not the industry target.
  • athletics loss tends to burden the school budget. a few sports can actually run a positive but the entire joint tends to lose. scholies are charged to athletics, and Title IX creates a burden as many losing sports add to this burden. not wanting to get in a fight whether it is just - but this is a fact of life for schools (i.e. the avg MAC, USA, Amer, etc school is creating about a $40M loss to their schools. no idea what the burden to PSU for sports.
  • Infrastructure cost is enormous and unfunded deferred maintenance can be a huge hit coming. a mid-size school deferred maint could easily > $1B.
  • Check the senior leaders at most schools - typical President $500-$1M comp and a leadership team of 10-15 EVP/SVP/VP all over $250k per year plus benefits. in many state schools there may be a pension. once you hire a VP they will create staff also.
i could go on but this is higher ed today......and I didn't even add textbooks to the fun.
 
the classroom of the future


The condominiums of the future. That Dambly is a crafty one.


PennState.jpeg
 
several comments on here about this subject, and i see this issue a lot being on the periphery of mid-size schools. the overhead cost to actual direct educational delivery cost is significantly higher than any other business - and there are several drivers:

  • regulation from the feds and states create extra administrative burdens that tend to lead to more administrators. this may not always be needed, but few university leaders are accustomed to running tight businesses, so you get creeping headcount over this crap.
  • check the size of audit and compliance at any school and benchmark to industry. it is insane.
  • most schools now have large diversity and inclusion staffs with VP's over $200k comp. corporations that have tight budgets will not have this cost.
  • overhead in the colleges is frequently redundant to university and nobody has balls to address. so a college of engineering will have redundant staff to provost office and also sometimes university level staff.
  • many schools take tuition centrally, as opposed to forcing colleges to run local responsibility budgeting - i.e. make a profit at the college level.
  • only a few colleges/programs make money - i.e. business, engineering, some sciences, etc.
  • Discounts and scholarships can avg as high as 50%, so this cost hits the tuition line. many high ability kids from good income families pay nearly full cost while low income low ability kids get a ride - part of social justice initiative of schools. not saying whether they should do this but it is factual.
  • an efficient school can run about 25-30% overhead to revenue vs industry at around 15%.
  • Arizona State tries to run efficient and they beat the higher ed target but not the industry target.
  • athletics loss tends to burden the school budget. a few sports can actually run a positive but the entire joint tends to lose. scholies are charged to athletics, and Title IX creates a burden as many losing sports add to this burden. not wanting to get in a fight whether it is just - but this is a fact of life for schools (i.e. the avg MAC, USA, Amer, etc school is creating about a $40M loss to their schools. no idea what the burden to PSU for sports.
  • Infrastructure cost is enormous and unfunded deferred maintenance can be a huge hit coming. a mid-size school deferred maint could easily > $1B.
  • Check the senior leaders at most schools - typical President $500-$1M comp and a leadership team of 10-15 EVP/SVP/VP all over $250k per year plus benefits. in many state schools there may be a pension. once you hire a VP they will create staff also.
i could go on but this is higher ed today......and I didn't even add textbooks to the fun.

Value added.
 
The graduate class I teach is a hybrid (combo online and in-person) and most of the new Masters-level degree programs being planned at the university where I work will either be hybrid or entirely online because, according to those who know these things, "that's what millennials want."

At the University of Alabama, many of my son's classes can be completed early if the student chooses to. Not entirely sure of the benefits of that other than the student can then focus on other classes that may be more demanding.
 
I think Jeff Skilling should be brought in to run higher education - this corporate management guru would really be able to trim the fat in institutions, counsel proper M&B and accounting practices, and rid institutions of the sort of administrative bloat that you so accurately highlighted. ;)

Traditionally the academy has required an enormous investment in human capital to support the education, growth, and achievement of students enrolled in higher education. Perhaps the online learning modality will ameliorate some of this in the future. But, I think you are missing completely the mission of institutions that are dedicated to helping students achieve their potential academically, athletically, socially, and spiritually, and the ROI and the economic impact that these students add to our society.
 
I think Jeff Skilling should be brought in to run higher education - this corporate management guru would really be able to trim the fat in institutions, counsel proper M&B and accounting practices, and rid institutions of the sort of administrative bloat that you so accurately highlighted. ;)

Traditionally the academy has required an enormous investment in human capital to support the education, growth, and achievement of students enrolled in higher education. Perhaps the online learning modality will ameliorate some of this in the future. But, I think you are missing completely the mission of institutions that are dedicated to helping students achieve their potential academically, athletically, socially, and spiritually, and the ROI and the economic impact that these students add to our society.

But you do realize that if the academy didn't spend as money on wasteful shit, they could spend it on good shit.
 
But, I think you are missing completely the mission of institutions that are dedicated to helping students achieve their potential academically, athletically, socially, and spiritually, and the ROI and the economic impact that these students add to our society.

Is that really their mission. I know they say it is, and at one point I'm sure it was, but I don't see any compelling evidence that is still the case.
 
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Athletics is an expense at all but about 50 schools in the country that can actual generate more revenue than what they spend. But overall, athletics is a small piece of the overall univ. budget. At most schools it is about 3-5%. Can they trim fat in athletics, sure, but that isn't the root of univ. $$ problems.

Bloated higher level admin costs are spiraling out of control.
 
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Athletics is an expense at all but about 50 schools in the country that can actual generate more revenue than what they spend. But overall, athletics is a small piece of the overall univ. budget. At most schools it is about 3-5%. Can they trim fat in athletics, sure, but that isn't the root of univ. $$ problems.

Bloated higher level admin costs are spiraling out of control.

Yeah, coupla million here, coupla million there, what's a coupla million among friends?-----Mark Dambly
 
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Athletics is an expense at all but about 50 schools in the country that can actual generate more revenue than what they spend. But overall, athletics is a small piece of the overall univ. budget. At most schools it is about 3-5%. Can they trim fat in athletics, sure, but that isn't the root of univ. $$ problems.

Bloated higher level admin costs are spiraling out of control.

The key is to be so wasteful that cutting it wouldn't make an appreciable dent anyways.
 
I guess my question is what constitutes bad capital projects? My univ just spent $150M on a new integrated sciences and engineering bldg. That is a ton of $$ for one univ bldg.
But it is what was needed to stay on the forefront of STEM research and to recruit the top students, both UG and Grad. Additionally, the state of the art labs can generate $$ by rentals to businesses for research purposes. One lab alone cost about $20M.

I guess a good case could be made that frivolous spending is some of these new residence halls, fitness centers, etc. but most univ's realize that they must do that in order to stay competitive for students. Someone did a study of what students look for in colleges, #1 was academic fit, #2 was quality of dorms, #3 was quality of fitness facilities.
 
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Is that really their mission. I know they say it is, and at one point I'm sure it was, but I don't see any compelling evidence that is still the case.

You beat me to it. Why exactly is it the purpose of a university to develop kids socially and spiritually sports-wise and everything else? How about just, you know, educating them? Universities are having mission creep, partly because, as someone else said, they have to compete for students so they offer more and more. The model has gone awry, especially nowadays when far more kids go to college than necessary and meanwhile good jobs that don't require a college degree are going unfilled.
 
You beat me to it. Why exactly is it the purpose of a university to develop kids socially and spiritually sports-wise and everything else? How about just, you know, educating them? Universities are having mission creep, partly because, as someone else said, they have to compete for students so they offer more and more. The model has gone awry, especially nowadays when far more kids go to college than necessary and meanwhile good jobs that don't require a college degree are going unfilled.


Lol.
 
Let’s be real here. Barron and company don’t give a shit about cost reductions. Neither do the trustees. Instead of pouring money into scholarships for students it goes into failing branch campuses and “capital projects.” Barry is mostly spot on here.

In the past many years, outside of Barry, only one alumni trustee candidate ran on a cost savings platform. She, Pratima Gatehouse, was defeated by a huge margin because she evidently didn’t say “409” quite enough. The appointed trustees, and the alumni ones for that matter, are there wasting oxygen.
 
Can anybody point to another transaction where the seller tells the buyer the price depends on how much money he has ?
Many government contracts work this way. It depends upon the form of contract. But if the government agency is dependent upon an appropriation for a project, the price could become the amount of funding that agency has to put into the award. Again some contracts are decided by price with the award going to the low bidder, but sometimes the price is fixed by the appropriation with other criteria used to make the award.

There are probably other examples of price based on what you have to spend that occur in the healthcare setting between insurance companies, patients, and providers, but those details are harder analyze and describe. Anyway to answer your question, there are other examples because not every transaction occurs in a free market.
 
Not a tangent I want to get all “dissertation” about......
But if somehow Universities are telling themselves that “developing kids socially, spiritually.... whatever”, is something they do that adds value?
That’s f^cking hilarious, and sad.

Any “modeling” that Higher Education Administrators might claim to do on those fronts would be solidly in the NEGATIVE direction.
I would assert that THON adds value to the students who participate. It’s independent from the educational efforts of the university, but frankly I’d hire many of the students who organize and run this event. It demonstrates good leadership capabilities, generalizing of course because I don’t know them personally. There are probably other less well known organizations, civic events, and intellectual endeavors that students might participate in that helps in their development and prepares them for life after college. Even a semester abroad is a valuable developmental experience. I think these kids are much better prepared to contribute to society than the kids that go to some cheaper college devoid of such opportunities only to use their free time to play video games.
 
I think Jeff Skilling should be brought in to run higher education - this corporate management guru would really be able to trim the fat in institutions, counsel proper M&B and accounting practices, and rid institutions of the sort of administrative bloat that you so accurately highlighted. ;)

Traditionally the academy has required an enormous investment in human capital to support the education, growth, and achievement of students enrolled in higher education. Perhaps the online learning modality will ameliorate some of this in the future. But, I think you are missing completely the mission of institutions that are dedicated to helping students achieve their potential academically, athletically, socially, and spiritually, and the ROI and the economic impact that these students add to our society.


One of the more arrogant white collar criminals I have known. And there have been all too many cabndidates for that award imo.
 
I think Jeff Skilling should be brought in to run higher education - this corporate management guru would really be able to trim the fat in institutions, counsel proper M&B and accounting practices, and rid institutions of the sort of administrative bloat that you so accurately highlighted. ;)

Traditionally the academy has required an enormous investment in human capital to support the education, growth, and achievement of students enrolled in higher education. Perhaps the online learning modality will ameliorate some of this in the future. But, I think you are missing completely the mission of institutions that are dedicated to helping students achieve their potential academically, athletically, socially, and spiritually, and the ROI and the economic impact that these students add to our society.
Yes, but historically -10 years ago - the cost of said education was considerably less expensive. I assume that educators had the same mission then. No matter how you view it, tuition at most universities is out of control
 
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Many government contracts work this way. It depends upon the form of contract. But if the government agency is dependent upon an appropriation for a project, the price could become the amount of funding that agency has to put into the award. Again some contracts are decided by price with the award going to the low bidder, but sometimes the price is fixed by the appropriation with other criteria used to make the award.

There are probably other examples of price based on what you have to spend that occur in the healthcare setting between insurance companies, patients, and providers, but those details are harder analyze and describe. Anyway to answer your question, there are other examples because not every transaction occurs in a free market.
Those are contract bids, though. The government is the buyer. That is backwards from what happens with universities.
 
They don't want to cut the cost. There's no incentive to cut cost in most major schools.

The reason for that is there isn't enough push back on costs by the consumers of the university services (students and parents). The federal government guarantees student loans so even if the student or his parents can't really afford to go to school, lenders are happy to lend the money because it is close to risk free. Many unsophisticated students and parents accept economically disadvantageous bad loans. Then if the loan can't be repaid, neither the school or the lender feels any real pain.

The system should be set up so that both the school and the lender feel pain when a loan can't be repaid. Then the school would be more careful about which students it admits and lenders would be more careful about making loans. If lenders and schools were more careful, there would be less money sloshing around and an incentive to cut costs. I support grants or real low cost loans to very high achieving students, but don't support large loans made to average or below average students.

One partial solution to the problem is to make student loans dischargeable in bankruptcy -- with common sense restrictions against people technically in debt (young doctors) who have a high earning capacity and a real ability to repay the loan. However, those poor young people making $13 an hour in their mid-thirties and making no progress on their student loans would get a reprieve from their functional slavery, and schools and lenders would be forced to think twice about making loans when each could be forced to accept part of the loss if the loan isn't repaid.
 
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The reason for that is there isn't enough push back on costs by the consumers of the university services (students and parents). The federal government guarantees student loans so even if the student or his parents can't really afford to go to school, lenders are happy to lend the money because it is close to risk free. Many unsophisticated students and parents accept economically disadvantageous bad loans. Then if the loan can't be repaid, neither the school or the lender feels any real pain.

The system should be set up so that both the school and the lender feel pain when a loan can't be repaid. Then the school would be more careful about which students it admits and lenders would be more careful about making loans. If lenders and schools were more careful, there would be less money sloshing around and an incentive to cut costs. I support grants or real low cost loans to very high achieving students, but don't support large loans made to average or below average students.

One partial solution to the problem is to make student loans dischargeable in bankruptcy -- with common sense restrictions against people technically in debt (young doctors) who have a high earning capacity and a real ability to repay the loan. However, those poor young people making $13 an hour in their mid-thirties and making no progress on their student loans would get a reprieve from their functional slavery, and schools and lenders would be forced to think twice about making loans when each could be forced to accept part of the loss if the loan isn't repaid.
Part of why Penn State accepts so many international students is that they pay full freight in cash.
 
The reason for that is there isn't enough push back on costs by the consumers of the university services (students and parents). The federal government guarantees student loans so even if the student or his parents can't really afford to go to school, lenders are happy to lend the money because it is close to risk free. Many unsophisticated students and parents accept economically disadvantageous bad loans. Then if the loan can't be repaid, neither the school or the lender feels any real pain.

The system should be set up so that both the school and the lender feel pain when a loan can't be repaid. Then the school would be more careful about which students it admits and lenders would be more careful about making loans. If lenders and schools were more careful, there would be less money sloshing around and an incentive to cut costs. I support grants or real low cost loans to very high achieving students, but don't support large loans made to average or below average students.

One partial solution to the problem is to make student loans dischargeable in bankruptcy -- with common sense restrictions against people technically in debt (young doctors) who have a high earning capacity and a real ability to repay the loan. However, those poor young people making $13 an hour in their mid-thirties and making no progress on their student loans would get a reprieve from their functional slavery, and schools and lenders would be forced to think twice about making loans when each could be forced to accept part of the loss if the loan isn't repaid.

I'm very receptive to your suggestion to put schools on the hook for a significant percentage of loans taken out by students to attend. I see a snag, perhaps a large one, Say a state school is injudicious in its extension of credit and the losses it incurs threaten its ability to stay open. What happens? State bailout?

I can think of other approaches, but they all have adverse public policy consequences so they're non-starters.
 
Part of why Penn State accepts so many international students is that they pay full freight in cash.

Do international students pay more to attend PSU than out-of-state? If not, I don't see any preference regardless of the underlying financing.
 
Do international students pay more to attend PSU than out-of-state? If not, I don't see any preference regardless of the underlying financing.
It's the same, it's just that they'd rather take as many international students as possible since the out of state tuition is too high for a lot of US students. They don't generally qualify (or need) any aid so that's a huge boon for PSU.
 
They dont.



There has been occasional chatter the last few years wrt instituting a seperate (Higher) level of tuition for Foreign.
But, as of now, Out of State is all the same - no matter how far out of state.
Anything for another buck. But given the cars these kids drive around town, they could afford it.
 
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I see a snag, perhaps a large one, Say a state school is injudicious in its extension of credit and the losses it incurs threaten its ability to stay open. What happens? State bailout?

Good point. For a private school, in most instances no bailout -- their tuition is generally very high. For public schools, I could see bailouts being necessary in some circumstances. However, the bailout would be accompanied by powerful strings attached which would be painful enough that most universities would strenuously attempt to not have to come to the State with hat in hand. I think what I have proposed is an improvement over the current situation.
 
It's the same, it's just that they'd rather take as many international students as possible since the out of state tuition is too high for a lot of US students. They don't generally qualify (or need) any aid so that's a huge boon for PSU.

Another strategy: lower admissions standards for out-of-state students. I know of two local zipcodes in which that is working very well.
 
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Anything for another buck. But given the cars these kids drive around town, they could afford it.
I know a Chinese-American woman whose son scored a 35 on the ACT and got a full ride at Ohio State. Instead of accepting the full ride at OSU, I believe she is close to paying full freight at Cornell. For the Chinese, there is a lot of status attached to which college you attend.

When we discussed college costs, he said that if given the choice, he would have very happily gone to OSU, if his mother had shared the savings with him. The student possibly going to OSU was not even a significant consideration in her mind when compared, in her mind, with the prestige of going to Cornell because cost was only a very small factor to her.
 
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Good point. For a private school, in most instances no bailout -- their tuition is generally very high. For public schools, I could see bailouts being necessary in some circumstances. However, the bailout would be accompanied by powerful strings attached which would be painful enough that most universities would strenuously attempt to not have to come to the State with hat in hand. I think what I have proposed is an improvement over the current situation.

I like the idea, but you might be underestimating the degree of cognitive dissonance present in most university leaders.
 
I like the idea, but you might be underestimating the degree of cognitive dissonance present in most university leaders.

This is something we agree on. My 17-year-old son has got close to a full ride (merit based -- not a loan) at a highly rated smaller public school in Ohio, and I visited an OSU presentation for accepted honors students at their school of business, and it was so bad that I immediately took OSU out of consideration for second place although it was giving my son respectable money (merit based -- not loan) too. I say this sadly as an OSU grad.
 
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They dont.



There has been occasional chatter the last few years wrt instituting a seperate (Higher) level of tuition for Foreign.
But, as of now, Out of State is all the same - no matter how far out of state.

you are correct that they are just another type of "out of state" student. I have seen some schools squeezing more out of the international students by giving a smaller % on financial aid vs an American OOS students. not sure if PSU operates this way, but some of the Illinois direction schools do this.
 
They don't want to cut the cost. There's no incentive to cut cost in most major schools.

their market is not growing due to demographics. what is going on now is a competitive stress for the low to middle tier universities. they can fail. the small privates could see some bankruptcies. the big state flagships (i.e. PSU, tOSU, Indy, etc) and elite privates will survive. most have large funds that can be in part tapped for emergencies and capital projects. doubt if the state govt is going to let their flagship go down. the market should clear out the bottom feeders.

if you take a look at net cost of attendance per student (top line tuition and fees - discounts, scholies, etc + textbooks), there is a big separation between the market makers (like Harvard) and say Western Kentucky. you would be surprised how the lower schools have actually not kept up with inflation while the elites are escalating at multiples of inflation. the low end schools are starting to lose money as their net tuition is below costs. it is an ugly business for some.
 
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