The Business of College
by Daniel Luzer
According to a recent survey of college business officials, administrators remain surprisingly upbeat about the financial state of their institutions, despite declining state funding and dramatically increasing costs. Why are they still so positive? In part it’s because they seem to have found new ways of making money.
This is great, provided one isn’t a college student, because most of the new funding essentially amounts to making students pay more money for lower quality. According to an article by Kevin Kiley at Inside Higher Ed:
In responding to the survey, business administrators expressed a clear concern about pricing, with about 70 percent of survey respondents saying that increasing net tuition revenue — the actual amount they derive per enrolled student after factoring in institutional financial aid — was an important strategy for raising revenue in the near term (more than chose any other strategy). On top of that, online education, collaboration with other campuses, streamlining administrative positions or reorganizing administrative units, and eliminating underperforming programs were, in aggregate across all types of institutions, the strategies in which CFOs were most likely to report that their institutions were engaging.
“More cost-effective delivery, more online learning, increased sensitivity to pricing,” explained one financial consultant who worked with colleges. Well, more sensitivity to the price colleges pay for services. They don’t appear to be terribly concerned with the price students pay to attend college.
Apparently about 60 percent of survey respondents were confident their “business model” was sustainable. Interestingly, a recent study by Bain & Company indicated that about 60 percent of colleges either already had an unsustainable financial model or were “at risk of slipping into an unsustainable condition.”
They can’t both be right.