Not-for Profit College Cost rising faster than inflation – Pt 2

In Part-1, we talked about non-profit colleges and three things that have changed in the last 30 or 40 years.  (1) The recognized effect of big time athletic programs and the fact that college coaches salaries have risen to be the highest paid public employees in most states.  (2) the development of college rating systems and their effect on the college hiring/staffing decisions with the current emphasis on academic background and the elimination of teaching staff with practical real world experience.  (3) The emphasis on being a “selective” academic institutions with its emphasis for attracting many more applicants than can be accepted.  And one of the ways this is done is by the elimination of required courses and flexibility in majors.

One thing we didn’t cover is that non-athletic costs have also gone up partly because of the attempts to attract students.  What I learned when my kids were in college, was that many of their classmates in picking a school gave weight to those that had competitive division I athletic programs.  If having a succesful athletic programs is important, then they obviously need to spend money on facilities as well as hire good coaches.  But at the same time it is important to attract other students, non-athletic scholarship students, by having “plush” facilities.  For example, when I was in college, I had a single dorm room that was pretty small, maybe about 10′ by 15′.  It had a single bed, a built-in desk, a four drawer chest of  drawers, and maybe a two or three-foot closet to hang clothes in..  The only bathroom on the large floor was a community bath at the end of the hall.  Everyone on the floor had to share the bathroom – even to brush their teeth.  None of my kids had that.  They had more space with two or three rooms and an adjacent bath room.  Today colleges are building dorms with apartment style facilities – living rooms, bedrooms, and baths etc.  These are not only more expensive to build, but have to be more expensive to maintain.   And there are other obviously upgraded facilities.

What we haven’t discussed is how the differences in costs have tended to result in students who end up with mountains of debt which they have difficulty paying.  Nor have we really addressed the assumption that everyone needs to go to a four-year college and get a BA degree.

Lets start with the assumption that everyone needs a four-year college degree.  The man who I heard talk last Friday morning heads a “for-profit” school that trains pilots and aircraft maintenance people for world commercial airlines.  The first point he made is that the airlines are short on pilots.  If they had more pilots, they could fly more flights to smaller airports.  In this day and age a community with good airline connections will attract more industry.  He also made the point that the newer airplanes have become technologically impressive and they require maintenance people who are well and extensively trained.  Everyone that graduates from his school has a well-paying job.  The starting pay for maintenance people is $20/per hour (~ $40,000 per year) which is about the same as higher paid graduates with BA’s and BS’s from more expensive colleges.  The training takes about half the time, and costs about the same as the less expensive college costs.  Not only that, but experienced maintenance people can make as much as $150,000 dollars per year.  (Which probably puts them statistically in the top 5%-7% or in the “rich” category of Americans.)

Several years ago I did some work with our local chamber of Commerce and was part of a few of us non-chamber people who talked to prospective employers considering  basing some of their manufacturing in Tulsa.  They thought one of the  most impressive thing about Tulsa was not the availability of four-year colleges, but the presence of technical education that was available through Tulsa Technology College.  Tulsa Tech is not an accredited University wich offers four-year degrees, but does tech training similar to what the school man Friday morning represented.  In fact they do some of the same types of training that his school does, but Tulsa Tech does not work just for the airline industry and they are a “not-for – profit”.

At this point, it might be useful to remind us that a “not-for-profit” is not prevented from making a “profit”, but they are approved of that status because they were formed to provide a service needed by the community they serve,  but at a minimum, they need to balance their budget.  The difference between “for profit” and not-for profit is whether they have to pay taxes on their net-income.  The other difference is that if I give money to a not-for – profit I get to deduct it from my taxable income because if counts as a charitable contribution.   For-profit universities don’t get contributions.  Public Universities have the availability of Tax dollars, but they may need both tuition and contributions to be competitive. Private colleges do not have the availability of tax dollars, so the tuitions are usually higher and contributions are probably more important.  Most private schools have endowments that are public information and frequently get reported along with the rating scores by people doing the ratings.  Net-income can make the endowments grow which are seen as positives by most people.

So money is not unimportant to most Universities, public and private because it helps their ratings, their appearance, and the management approval ratings.

One of the things that has changed in the last few years is the availability of student loans that are “government guaranteed”.  The students agree to pay them back, but by all reports, there are a lot of young people burdened by thousands of dollars in debt on leaving school.  This has apparently been a problem for a lot of them.  They are morally obligated to pay the money back, but even if they have a job it’s a difficult burden.  Not only are starting salaries not always that good, but most grads are on their own for the first time.  They are establishing homes and families and have a great number of needs for starting life on their own.  The universities on the other hand are not risking much.  The loans are guaranteed and so they have nothing to really lose.  A “selective” school can sell the students with higher tuitions because there is loan money available.  Some (private only?) schools can attract better students to their institutions by charging higher tuitions than they actually need and offering “scholarships” from the school to attract acceptance by higher rated students.  And the SAT scores of the freshman classes are published in their school ratings by people doing the published ratings.  This also probably helps them attract more applicants which makes them more selective.

There are, it seems, a few people today that have not bought into the idea that everyone needs, or should attend a University in pursuit of a four-year degree.  Not everyone may be suited to the academic life.  And people who attend college for a year or two and drop out may be burdened by debt without good job prospects.  Even 4 year graduates who don’t major in areas where job prospects are good may have even more debt without good job prospects.  We had a mayor that thought that high school students should be made aware of other less academic but skilled job carriers that they might like better and be more suited to.  But our current mayor has apparently signed on to the conventional wisdom that everyone should attend college and get a four-year degree.  Unfortunately not all high school students may understand what other options exist.  I think it would be good if they were fully informed and could make the choice themselves.  After all it’s their life and there are a lot of honorable options.  We need aircraft mechanics and they are well paid.  I don’t think I have a talent for that. But I like to fly, so I’m glad that there are people who do like that and are well-trained and well paid.  I’m also glad for a lot of other skilled workers as well.  They do and get paid for stuff that I’m not particularly good at.

If we had less emphasis on College, we might have a better balanced work force and better, cheaper colleges.  What do you think?



About tjc13

BE - Chem Engineering, Vanderbilt Univ, MBA, University of Tulsa - Worked for an energy and chemical company for many years and then started a management consulting business working for both for-profit and not-for-profit organizations.
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