Education Cost Inflation

For John, BLUF:  Higher Education is pricing itself out of the market of goods.  It will eventually crash, since what is not sustainable will not survive.

The Wall Street Journal has an interesting article focused on the cost of higher Education.  But, it is The Wall Street Journal and their articles are behind a "pay wall".  Except, perhaps, this article.  Just in case the link doesn't work for you, here is part of a summary someone provided in an EMail:

The following article focuses on the University of Minnesota and what the new president's "fresh eyes" found as he looked at their staffing and finances.   He did find that there was one University employee for every 3.5 students, and most new hires did little or no teaching.   The topic has been previously discussed, but this article provides a degree of granularity not previously available.

Many of the "lessons learned" at the University of Minnesota, also apply to other parts of our economy, to include business and government.   One of the lessons to be learned from the article and from the fiscal cliff "debate" currently underway is the sheer cost of doing some otherwise "good things."   When economic times are good, the cost of the "good things" is more readily accommodated.   When times are tough—and particularly when tough times last for years—the cost of "good things" can be too difficult for many to bear.

From the article:  "Across U.S. higher education, nonclassroom costs have ballooned, administrative payrolls being a prime example.  The number of employees hired by colleges and universities to manage or administer people, programs and regulations increased 50% faster than the number of instructors between 2001 and 2011, the U.S. Department of Education says.  It's part of the reason that tuition, according to the Bureau of Labor Statistics, has risen even faster than health-care costs."

And, "For students, the effect (tuition more than doubled in 10-years) is striking.  In 1975, a University of Minnesota undergraduate could cover tuition by working six hours a week year-round at a minimum-wage job, the Journal calculated.  Today, a student would have to work 32 hours at minimum wage to cover the cost."

And, "Many forces besides administrative overhead add to universities' cost pressures, among them health-care and retirement expenses.  And among the administrative spending, some is unavoidable, such as that owing to federal rules requiring greater spending to oversee research grants or accommodations for students with disabilities."

And, "Higher education now faces pressures similar to those that reshaped other segments, Minnesota's Dr. Kaler says.  "You look at American industry in general—the car industry got comfortable until the Japanese showed up, the airline industry was comfortable until it got deregulated," he says.  "Now it's higher ed's turn."

I think this last point is important.  What is not sustainable will not continue.  It is a warning to us here in Lowell.  UMass Lowell is a wonderful engine for growth, but its long term success will depend upon how well Chancellor Meehan manages the cost of education and the drag of too much administration.  One solution, of course, is more on-line courses and UMass Lowell is doing that very well, although at some point the price per credit hour will have to come down to be competitive.

And, over at The New Englander Blogger and MBA Student Greg Page comes at this same WSJ article from a different direction, looking at salaries and "competitive pay" with the private sector.  Nice job, Greg.

Regards  —  Cliff