In 2003, only two colleges charged more than $40,000 a year for tuition, fees, room, and board. Six years later more than two hundred colleges charged that amount. What happened between 2003 and 2009 was the start of the recession. By driving down endowments and giving tax-starved states a reason to cut back their support for higher education, the recession put new pressure on colleges and universities to raise their price. When our current period of slow economic growth will end is anybody’s guess, but even when it does end, colleges and universities will certainly not be rolling back their prices. These days, it is not just the economic climate in which our colleges and universities find themselves that determines what they charge and how they operate; it is their increasing corporatization. If corporatization meant only that colleges and universities were finding ways to be less wasteful, it would be a welcome turn of events. But an altogether different process is going on
The “edifice complex” did not fade until the 1990s, and there have been at least two growth paradigms since then, both of them linked to the high-wage knowledge economy. One was the “creative city,” which Richard Florida popularized, and it revolved around recruitment of creative talent. This model was much cheaper than shelling out large subsidies for sports stadiums or to corporate investors—a few bike trails, some fair-trade coffee shops, and the semblance of an art scene (to attract the all-important gay population). But it did open up a new circuit of debt-financing for the urban growth machine–student loans. After all, student debt is what underpins the supply of the educated workforce in a “creative city.”University of Chicago Works On Its Neighborhood - “It’s enlightened self-interest for us,” Mr. Greene said. “We’ve always been very competitive when it comes to providing a great intellectual community. But we found there was something missing when we looked at the quality of life for students and faculty who are used to the kinds of amenities you find in places New York, Boston and Palo Alto.”
So, finance is a key problem in higher education because without it we cannot do high end research, advance knowledge, nor teach future minds. But we also cannot carve out the areas of highly competitive activity that puts us at an advantage as UK Plc against our rivals. Should universities retain their position as a state-sponsored skunkworks, and what level of control is required for that to work?Could Dismantling the Submerged State Surrounding Student Debt Pay for Free Colleges?
Often the solutions are bound to be worse than the problems. Here’s one reason why: The administrators themselves, full of models of excellence derived from business (encouraged by government when the Republicans are in power), schools of teacher education (which should be abolished or keep to themselves), and political correctness (encouraged by government when the Democrats are in power), demand quantitative, measurable, assessable solutions to tricky and often “goes with the territory” problems. A problem with techno-democracy is that it tends to harness everything to the imperatives of technology or “the measurable.” There’s more than some irony in addressing techno-democratic excesses with techno-democratic methods.
Universities, particularly public research universities, have outstanding faculty. They usually have support staff to supplement those faculty members and to advise students and various other tasks. Universities also typically have highly respected Deans, Provosts and Presidents that are well published in their field and are not averse to asking for money from legislators and donors. What most public universities do not have, and they so desperately need at all levels, are business managers.The Future Of Higher Education: Massive Online Open Disruption
The ongoing carnage in the newspaper industry provides an object lesson of what can happen when a long-established, information-focused industry’s business model is challenged by low-price competitors online. The disruptive power of information technology may be our best hope for curing the chronic college cost disease that is driving a growing number of students into ruinous debt or out of higher education altogether. It may also be an existential threat to institutions that have long played a crucial role in American life.
Over the last decade, the UC Board of Regents has engaged in risky deals with Wall Street banks called interest rate swaps. Banks sold swaps to the university and other public institutions as insurance against rising interest rates on variable rate bonds. Under a swap agreement, borrowers such as the university paid a fixed rate to the bank in exchange for the bank paying the university a variable rate based on the markets' interest rates for borrowing.-----------------
Now these swaps have turned out to be losing bets. UC is taking huge losses because interest rates plummeted following the financial crisis of 2008 - allegedly in part because of illegal manipulation by the same banks that sold the swaps - and have stayed at record lows. Swap deals already have cost UC nearly $57 million, with $200 million more in losses anticipated. Of the $250 million UC expects to receive from Prop. 30*, some $10 million a year will go to swaps payments unless the deals are ended.
The bubble analogy does work in one respect: education costs, and student debt, are rising at what seem like unsustainable rates. But this isn’t the result of collective delusion. Instead, it stems from the peculiar economics of education, which have a lot in common with the economics of health care, another industry with a huge cost problem. (Indeed, in recent decades the cost of both college education and health care has risen sharply in most developed countries, not just the U.S.) Both industries suffer from an ailment called Baumol’s cost disease, which was diagnosed by the economist William Baumol, back in the sixties. Baumol recognized that some sectors of the economy, like manufacturing, have rising productivity—they regularly produce more with less, which leads to higher wages and rising living standards. But other sectors, like education, have a harder time increasing productivity. Ford, after all, can make more cars with fewer workers and in less time than it did in 1980. But the average student-teacher ratio in college is sixteen to one, just about what it was thirty years ago. In other words, teachers today aren’t any more productive than they were in 1980. The problem is that colleges can’t pay 1980 salaries, and the only way they can pay 2011 salaries is by raising prices. And the Baumol problem is exacerbated by the arms-race problem: colleges compete to lure students by investing in expensive things, like high-profile faculty members, fancy facilities, and a low student-to-teacher ratio.Felix Salmon at Reuters replies: Why Tuition Costs Are Rising:
On its face, this makes sense. In widget factories, wage inflation is offset by productivity growth. In universities, it isn’t. So while the cost of a widget can stay the same or go down over time even as the widget makers get paid more, the same isn’t true of tuition costs.Why Cheaper Computers Lead To Higher Tuition
In reality, however, the numbers show that wage inflation is — literally — the least of the problems when it comes to university cost inflation.
Provided, That the moneys so invested or loaned shall constitute a perpetual fund, the capital of which shall remain forever undiminished (except so far as may be provided in section 305 of this title), and the interest of which shall be inviolably appropriated, by each State which may take and claim the benefit of this subchapter, to the endowment, support, and maintenance of at least one college where the leading object shall be, without excluding other scientific and classical studies and including military tactics, to teach such branches of learning as are related to agriculture and the mechanic arts, in such manner as the legislatures of the States may respectively prescribe, in order to promote the liberal and practical education of the industrial classes in the several pursuits and professions in life.away from the big scary cities, with their pollution and crime and distractions.
Hyde Park is about to E-X-P-L-O-D-EEveryone I know who works at U Chicago lives on the north side. So yeah, no.
So what you're saying is, we need google hangout university?
Twenty billion dollars in defaulted loans sounds like a lot of money for the government to back, but that doesn’t take into account the money defaulted debtors will pay on these loans despite defaulting. Of the $20 billion in dud loans the government guarantees, it expects to recover $22 billion from debtors. If you subtract the $3 billion the feds will pay in collection costs, they still recover around 95 percent of principal from loans that default. When you default on your mortgage, you can walk away from the house, but when you default on a student loan, you can’t give your degree back. All you can do is work and pay. There’s no escape from student debt, and the government and markets both know it.posted by the man of twists and turns at 1:24 AM on November 20, 2012
Meanwhile, during most of these years, Harvard’s own endowment has annually grown by five or ten or even twenty times that figure, rendering net tuition from those thousands of students a mere financial bagatelle, having almost no impact on the university’s cash-flow or balance-sheet position. If all the students disappeared tomorrow—or were forced to pay double their current tuition—the impact would be negligible compared to the crucial fluctuations in the mortgage-derivatives market or the international cost-of-funds index.and then Harvard Replies
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