The Costs of Higher Ed
How the Federal Government Makes College More Expensive

A new report commissioned by Vanderbilt University and conducted by a leading consulting firm offers a first-of-its-kind estimate of just how much money U.S. colleges devote to complying with federal regulations. Inside Higher Education reports:

The nation’s colleges and universities collectively spend an estimated $27 billion each year trying to comply with federal requirements.

Or so says the latest Vanderbilt University report aimed at highlighting the burden of federal regulation on institutions of higher education. […]

The study, which was completed by Boston Consulting Group, found that the 13 colleges and universities varied in how much of their budgets were consumed by compliance activities. Compliance with all federal requirements accounted for between 3 and 11 percent of the institutions’ operating expenditures, excluding any expenses associated with running a hospital. […]

[Vanderbilt CFO Brett] Sweet said that one of the most significant findings was that small and medium-sized colleges are disproportionately impacted by federal regulations, with compliance eating up a much larger share of their expenditures than their wealthier peers.

The study was part of a long-running effort by Vanderbilt President Nicholas Zeppos to push back against what he has described as unnecessary regulations that make college more expensive. “My higher education colleagues and I strongly believe that smart, efficient regulations provide important protections for students, families and taxpayers and hold institutions accountable for the federal dollars they receive. At the same time, we have an imperative to do everything in our power to keep costs down for students and their families”, he said in a university press release. While some higher education experts have been critical of Zeppos’ efforts, University of North Carolina President Thomas Ross was supportive, saying after the report’s release that “many regulations are useful and effective” but “others are unrelated to the mission of higher education.”

The study found that accreditation was among the most onerous regulatory burdens not related to research. The median college surveyed spent 1.3 percent of its non-research budget applying for federally-mandated accreditation—a requirement that is itself anti-competitive, and likely raises college costs by preventing alternative higher education institutions from entering the market. The study also found that research faculty must devote about an eighth of their time to federal regulatory compliance, time that could presumably otherwise be spent on teaching.

The steady stream of ominous student debt statistics makes clear that the existing higher education model is overdue for a shakeup. This will require creative, out-of-the-box thinking about how to set up a system that delivers knowledge and skills to young people at fraction of the cost of the existing four-year university. But an important step will be to rein in the regulations coming from the Department of Education. The federal government has helped consolidate a sclerotic system by pumping in billions in financial aid and enforcing rigid accreditation requirements, all while imposing additional, onerous regulatory burdens that raise costs. That needs to change.

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