With the $1.3 trillion student debt tab weighing heavily on American youth, colleges and universities have a pressing responsibility to provide their students with a valuable education. But as more graduates struggle to find work or settle for jobs that don’t require degrees, Americans all over the country are asking themselves, “What are we paying for?”
The growing cost of higher education can be attributed to a number of factors—not the least of which is the seemingly unlimited access students have to federal student loans, incentivizing universities to raise their tuition rates indefinitely with little accountability to their students.
But what are those astronomically high tuition rates funding? Evidence suggests that American colleges and Universities have been on a long trend of dramatically increasing the size of their administrative staff, without commensurate growth in research and academic positions.
This problem known as “administrative bloat” plagues most universities in the country. A report from the Goldwater Institute found that, “between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service grew by only 18 percent.” Notably, the study also found that, “In 2007, it took 13.1 more employees to educate the same number of students than it did in 1993.” The reality is that at American universities’ faculty make up less than half of all employees.
While most institutions struggle with administrative bloat, The University of Texas System is taking meaningful steps to return tuition dollars to their intended purpose: academics. Texas A&M in particular, after hiring PricewaterhouseCoopers to help address their administrative bloat, has reduced their administrative costs to about 3.6 percent of their budget.
More American universities should follow the Texas A&M model and stop the pattern of administrative bloat. But to really get to the heart of the problem, policymakers need to reverse the negative incentive structure caused by unlimited access to federal Title IV funding. The Goldwater Report concludes, “These cases suggest that government subsidies for higher education play a central role in facilitating excessive growth in administrative bloat,” noting that universities with significantly lower access to federal subsidies have lower administrative costs. Indeed, it’s part of a growing body of evidence supporting the Bennett Hypothesis. Earlier this year, economists David Lucca, Taylor Nadauld, and Karen Shen found that for every dollar that federal Pell Grants increase, college tuition increases 55 cents. Jeffrey Dorfman, reporting on the study’s findings for Forbes, points out that:
“Students do even worse when they receive more dollars in federal subsidized student loans. In that case, college tuition goes up by 70 cents for every extra dollar of student loans. Because only 60 percent of students use student loans, colleges will capture 70 cents from all students, while only 60 percent of students gain the 30 cents left over from their student loans after the tuition increase. That means, on average across all students, colleges get 70 cents while students get 18 cents (60 percent of 30) from an increase in student loans.”
It’s likely that such federal aid policies particularly contribute to universities’ ability to grow non-teaching administrative positions. An eager young student might choose to attend Princeton University for the opportunity to be taught by their notable faculty members, such as Ben Bernanke or Robert P. George. Instead, students are increasingly paying for the Director of Campus Diversity or the Vice President of Student Engagement.
In order to restore the integrity of higher education in America, universities must offer tuition prices that reflect the value of the education attendees receive. To do this, universities should focus their expenses on retaining high quality faculty members and research, and federal policies, for their part, should turn off the open spigot of federal student aid.