The NYT posted today the sixth and final chapter of an investigation into the rising costs of college. Today the focus is on the financial “geniuses” running American schools who have built fancy dormitories and high-tech facilities, saddling students with paying off the debt from the construction.
A decade-long spending binge to build academic buildings, dormitories and recreational facilities — some of them inordinately lavish to attract students — has left colleges and universities saddled with large amounts of debt. Oftentimes, students are stuck picking up the bill.
Overall debt levels more than doubled from 2000 to 2011 at the more than 500 institutions rated by Moody’s, according to inflation-adjusted data compiled for The New York Times by the credit rating agency. In the same time, the amount of cash, pledged gifts and investments that colleges maintain declined more than 40 percent relative to the amount they owe. [ . . . ]
But some colleges and universities have also borrowed heavily, spending money on vast expansions and amenities aimed at luring better students: student unions with movie theaters and wine bars; workout facilities with climbing walls and “lazy rivers”; and dormitories with single rooms and private baths. Spending on instruction has grown at a much slower pace, studies have shown. Students end up covering some, if not most, of the debt payments in the form of higher tuition, room and board and special assessments, while in some instances state taxpayers pick up the costs.
Debt has ballooned at colleges across the board — public and private, elite and obscure. While Harvard is the wealthiest university in the country, it also has $6 billion in debt, the most of any private college, the data compiled by Moody’s shows. [...]
The pile of debt — $205 billion outstanding in 2011 at the colleges rated by Moody’s — comes at a time of increasing uncertainty in academia. After years of robust growth, enrollment is flat or declining at many institutions, particularly in the Northeast and Midwest. With outstanding student debt exceeding $1 trillion, students and their parents are questioning the cost and value of college. And online courses threaten to upend the traditional collegiate experience and payment model.
As Nathan Harden writes in the most recent issue of the American Interest, instead of looking ahead to the future of education, American universities, including the most elite, have been spending more and more money and going further and further into debt trying to attract a bare handful of new students on whose necks they can hang the heavy bill. These universities are stuck with a business model that isn’t going to work much longer:
In 2007 Princeton completed construction on a new $136 million luxury dormitory for its students—all part of an effort to expand its undergraduate enrollment. Last year Yale finalized plans to build new residential dormitories at a combined cost of $600 million. The expansion will increase the size of Yale’s undergraduate population by about 1,000. The project is so expensive that Yale could actually buy a three-bedroom home in New Haven for every new student it is bringing in and still save $100 million. In New York City, Columbia stirred up controversy by seizing entire blocks of Harlem by force of eminent domain for a project with a $6.3 billion price tag. Not to be outdone, Columbia’s downtown neighbor, NYU, announced plans to buy up six million square feet of debt-leveraged space in one of the most expensive real estate markets in the world, at an estimated cost of $6 billion. The University of Pennsylvania has for years been expanding all over West Philadelphia like an amoeba gone real-estate insane. What these universities are doing is pure folly, akin to building a compact disc factory in the late 1990s. They are investing in a model that is on its way to obsolescence. If these universities understood the changes that lie ahead, they would be selling off real estate, not buying it—unless they prefer being landlords to being educators.
All the brilliant financial geniuses managing these colleges are among the most liberal group in the country, the educated experts who are sure they know better how to run everything else in the country—the ignorant masses should just get out of their way and trust in their wisdom.
But suppose they don’t even know how to run their own colleges? Suppose that, after 200 years of progress, the Busted Boomer generation has actually run the American higher ed system into the ground?