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March 7, 2016

Everything you need to know about college financial woes

by Neida Mbuia Joao, Online Op/Ed Editor
It’s no secret that colleges have been having financial problems since the 2008 recession, which led to cuts in college funding. The cost of college is skyrocketing--the average cost of attendance at a four-year public university has quadrupled over the past 35 years--and more and more students are paying for school out of pocket. Today’s prospective students have been spooked with discussion of the possibly mythical, but in some ways very real “college loan but in some ways debt bubble.”

But lots of people, prospective students especially, are entirely unaware of why the tuition increase has occurred or the ways in which colleges allocate their funds. In order for students to enter the college decision process informed, they must be aware of the ways in which the institutions to whom they are entrusting thousands of dollars are making financial decisions.
 Most students leave college with thousands of dollars of debt. These particular students have chosen to advertise it on their graduation caps. Courtesy of Odyssey Online
Most students leave college with thousands of dollars of debt. These particular students have chosen to advertise it on their graduation caps.

This is how colleges finance themselves

There’s a lot of general confusion about how colleges fund and finance themselves. The difference in funding for colleges is fairly simple. Public schools get most of their money from tuition and state and local governments. Private schools rely more heavily on tuition and private charity than public schools do.

Why college tuition costs are skyrocketing

A clear reason for the rapidly rising cost of college is hard to pin down. There are a lot of answers to this complicated question, many of which contradict each other. Here are a few of them:

Limited state funding and increasing admissions

Most figures point to the amount of state funding for schools decreasing at the same time as enrollment rates have been increasing steadily. Following the onset of “the Great Recession,” states seriously cut their funding to public post-secondary schools. The money lost from these cuts couldn’t be covered by old tuition costs and resulted in even higher tuition. However, even the increased price of tuition at these 4-year public institutions failed to supplement the money lost from lowered state funding. Because of these factors, at least within the past decade, the rise in tuition costs and the economic downturn of the late ’00s have been nearly inextricable.

Personnel Costs

In recent years, many schools have been spending a lot of money on the salaries and benefits of their personnel and staff. Many would logically assume that the immediate beneficiaries of this increase in spending are professors, the people directly responsible for enriching the young minds of students attending colleges, but this is not the case. Colleges have actually been significantly decreasing the amount of full-time professors over the past forty years, with just under half of the people currently teaching classes at America’s universities being temporary “adjunct” professors (essentially the college equivalent of a substitute teacher). And the salaries of most full time professors at universities have increased only slightly, if at all.

The real reason for the increase in personnel spending is the trend of “administrative bloat.” Colleges and universities increased their amount of administrators by 60% in the 16 year period between 1993 and 2009. While a slight increase in administrative faculty over the years is sensible in response to the increase in enrollment, the increase that has occurred at many colleges is astronomical and without excuse. The amount of money that schools are spending to pay all of these additional administrators’ six-figure salaries is a contributing factor in the spike in tuition costs.

Overspending on expensive amenities

Colleges have been spending billions of dollars on amenities that they believe will draw in more students. Gourmet food, water parks, and video gaming stations are among the amenities some colleges are adding to their roster. College’s motivation for taking part in the so-called “amenities arms race” and adding these extravagant amenities isn’t wholly negative. When colleges get more students, they get more tuition money. But if all of the tuition money is being spent on building projects for amenities, then the immediate benefit is negligible.

What does all of this mean for students?

Colleges’ financial problems can have a big impact on future students and college admissions. The difference in the way colleges are funded is fairly simple but the ways that they adapt to changes in funding is more nuanced. Some, especially private four-year institutions which need to rely on tuition a lot more than their public counterparts, have turned to extending admission exclusively or mostly to students they believe can easily pay the tuition or complete their four years of schooling. This is an unfortunate consequence of colleges losing money (or overspending), and disproportionately discriminates against lower income people who might need financial aid or loans. Beyond leading to discrimination against people of lower income, college's financial problems can impact student’s quality of education. Schools having serious financial issues tend to make sweeping cuts to faculty and classes, while raising tuition to compensate for the money they’ve lost. The result is that students end up paying more money for less choices and quality of education.



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  • S on March 7, 2016 at 8:16 PM
    Great article! Really helps clarify this crazy process :)
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