Colleges Spend Lavishly on Trade Associations and Administrators

When I see the salaries colleges pay their lobbyists, trade association administrators and top college and university administrators, I’m amazed that so many people still donate to colleges. And I’m also amazed by the people who think so-called nonprofits operate without a profit motive. With many nonprofits, it’s just that the profits go to those who run the enterprise as opposed to the shareholders.

What precipitated this response was a story in today’s edition of Inside Higher Ed about the compensation heads of higher ed trade associations are pulling down.

You have to remind yourself that many of the colleges that are indirectly funding this lavish compensation structure are struggling financially themselves. Some are even on the steady, downhill path to their own demise (likely in the next five to 10 years). It’s not that they can afford it. Yet they pay their chiefs extremely well, even as the deferred maintenance on their home fronts continues to mount and enrollment and net tuition revenue continue to fall.

Who funds this extravagance? Students. Parents. Donors. And you and me–the U.S. taxpayers, via massive government subsidies, including tax benefits that go to institutions (including the wealthy ones) and their donors (including the wealthy ones) and that diminish the public coffers and increase the burden on those who do pay taxes.

The fact that we tax people who make minimum wage or who have to work multiple jobs to make ends meet to finance subsidies that flow to wealthy institutions like Harvard, Yale, Washington & Lee and others is a testament to the job higher ed’s lobbyists are doing, I suppose.

This is just one of the reasons I don’t donate to colleges anymore. I’d much rather support the students directly and cut out the middle man (those who are laughing all the way to the bank).

Is the Collegiate Football Craze Cooling Off?

The University of Michigan (Big Blue) just announced a 40% reduction in student football ticket prices for 2015. Apparently, demand has softened considerably.

Attendance for many programs is down the past several years. Empty seats that were previously unheard of at such powerhouses as Florida, Michigan and others are now common.

Is it simply that the institutions overplayed their hand with price increases? Or is there a fundamental shift in fan loyalty? Might fans be finding something better to do?

I suspect others will follow Michigan’s lead. Whether it’s enough to fill the seats, only time till tell.

UNC Boosters Outraged That Athletes Took Real Classes

Bob in New Jersey shared this link to an essay by Andy Borowitz of The New Yorker about the outrage felt by boosters at UNC when they learned some athletes actually took real classes, which, of course, were distractions of incalculable proportions. It’s a fitting postscript to my last post. I hope you laugh as hard as I did.

Thanks, Bob.

Academic Fraud No Longer Seems Outrageous

By now you’ve probably seen one of the headlines about the academic fraud that occurred at UNC (University of North Carolina) over an 18-year period. If not, here is one of the many articles that were posted yesterday.

We can’t pass this off as the bad behavior of a lower-tiered school. In fact, UNC’s name routinely appears near the top of rankings of public universities. It’s well regarded, has robust demand and enjoys strong pricing power (even with out-of-staters who pay nonresident tuition).

But, of course, this isn’t just a UNC problem. Continue reading

Why College Costs So Much

There are no mysteries when it comes to understanding the cost of a college degree. All you have to do is spend some time with the budget of any college or university. Sure, there are differences from one institution to another. But the similarities far outweigh the differences. The similarities are found not only in the categories of costs but also in the poor way they are managed.

So what are the cost drivers? For simplicity sake, I’ll limit my comments to four-year residential nonprofit colleges and universities.

There are two principal cost drivers: personnel and capital. Continue reading

Millennial College Students Seem Comfortable with Risk

Recent volatility in the stock market is a reminder that people handle risks differently. Some people wouldn’t dream of investing in equities and subjecting their capital to potential principal loss. Others are high flyers, routinely putting markers down on stocks with high potential on the upside as well as the downside. Others run scared at the first sign of trouble. Others stay the course, grounded in a long-term perspective (or inertia is some cases).

Beyond our individual investment philosophies and strategies, there are many decisions in life that test our appetite for risk. Indeed, most potential courses of action entail some level of risk. Sometimes we try our best to assess those risks objectively (as objectively as possible, that is, given our seemingly inescapable biases and preconceptions), and sometimes we rationalize them away. It occurred to me that my concern with student debt is fundamentally a concern about our risk assessment.

I’m constantly surprised at the amount of risk millennials are willing to accept when it comes to incurring student debt. Continue reading


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