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Big Education: How To Profit From Your Non-Profit Organization

Written by Alaska-Four-9

Via:

Dipping my toe into the Guest Post waters… please be kind (and try to refrain from reporting me to Scotland Yard for incorrect thinking).

One of the great mysteries of the American education system is how we get from an essentially “free” public high school system to an enormously expensive college system (taxes, I know, I know). College costs have been rising dramatically since the 1970s.

In short, everybody is to blame (but mostly the government). This topic requires a short book, but I’ll try to be brief.

I’ve worked in higher ed for over two decades. Ten of those years in Admissions and Financial Aid (two privates and a public). You wanna see some hardcore institutional racism? Check out admissions policies. But I digress. The bottom line is that colleges are businesses. We have to pay the bills. And, like any business (although technically “non-profit”) we want to get as much as we can, post-overhead.

How does a business do that? Well, you start with a slick PR campaign. Does this sound familiar?

IF YOU DON’T GO TO COLLEGE, YOU’LL STARVE AND NOBODY WILL LIKE YOU!

We’ve been quite successful in communicating that to the general public. And we’ve been aided by the government, the media, the high schools, the psychologists, TV, movies and anybody else who wants to feel important and who wants everyone to know he/she “cares about kids!”

Now we’ve got what a business wants: people not very concerned with cost ‘cause they GOTTA have it. But, since it is “very expensive,” and the government wants you to know they “care about kids!,” we have things like government grants and loan programs.The government is very good at doling out other people’s money ’cause they care so much!

You want a Resort? OK, we’ll build you a resort!

Before we get to the numbers, let’s step back and blame YOU. Yes, you, the general public.

On one hand, you moan and groan about how much it costs… then come for a visit and demand that we make the campus into a resort (or a cruise ship, your choice of metaphor)… just like that other campus you visited. Usually, competition tends to drive prices down, but in the case of education, you’re telling us, “just build it, we’ll pay! Well, we’ll just borrow more.”

You can’t wait to see the apartment-style housing, the colossal Recreation Center, the 4,786-choice dining facility, the state-of-the-art student center, etc.. At almost every college, the “student life” facilities FAR outpace the “academic life” facilities. You demand it, so we build it!

We’ll give it to you and you’ll pay (one way or the other, state schools will scream for more tax dollars to keep up the pace… so even if you have no kids in college, you’re funding the resort!). You also fund us via tax dollars for “research,” but that’s another story for another angry day.

OK, now let’s pump some numbers. Put your business caps on.

You want to go to SPARTA UNIVERSITY. The demand is enormous because of the PR. It’s a hard market to break into, so the supply is somewhat limited. ECON 101 students see where this is going? Faculty, being told by the culture that they are the only hope and colleges wanting to pretend they are the only hope, drive up wages (for 9-months work in most cases… or no work in the case of Sabbaticals… and you can’t fire us, we’ve got tenure, baby!). And remember, meanwhile we’re building resort cities to rival Vegas.

So, we’re not stupid… we know what it costs to pay for all this based on our student population. We figure out what it costs to feed, house, entertain and educate you (there is an artificial demand for “scholars” which drives up faculty salaries as well).

Let’s make up some numbers (I’m gonna low-ball for sake of simplicity).

Let’s say it costs $15000/year to do all that. Reminder, this includes inflated salaries and facility maintenance for the resort, etc., but you wanna come, you just GOTTA come, remember?

(NOTE: Many people generically use “tuition” for all college costs, but that is a specific line item. For example, if you ask Harvard what their “tuition” is, they will say $48000/yr. But the cost to attend Harvard, on campus, is actually $67000/year.  Also note, Harvard has an endowment, run by their own private investment company, which is valued at $37.6 billion… but the socialists still want you to subsidize them. It’s non-profit!!)

$15000 to “educate” Johnny for a year. So a “non-profit” should be OK with $15000, right? Hardly! The building, planning and 3-5 year plans never end!

$15K… but we publish $30K. Remember, we know it costs $15K, so we just need to get above that.

We’re from the government, and we’re here to help!

The government starts off by offering to pay $5000 for you (based on need). They also offer to subsidize another $3000 and guarantee another $2000 (unsubsidized) via loans. So, WE (your superiors) see $10000 of the $15000 already in the pipeline. YOU (who desperately need us) think you’re still $20000 in the hole.

The game is afoot!

(And this doesn’t address affirmative action funded schemes, etc.)

We may offer you “scholarships” which are really just discounts. This should clue people in. If we can give away thousands in discounts, well, you do the math. If you qualify for a private scholarship, all the better for us. So, where are we now?

  • $5000 government-funded grant
  • $3000 government-subsidized loan
  • $2000 government-guaranteed loan
  • $10000 private loan
  • $10000 Sparta Scholarship (discount)

So, there is your $30000. We walk away with $20000, which exceeds the $15000 we really need (since we’re non-profit, we “invest” that money back into salaries, facilities, etc., and the dance continues!). You think you got a scholarship and that we love you*.

But now you have $15000 in debt

BUT WHAT ABOUT THE CHILDREN! The government wrings its hands about student debt and pushes for more grant money. Nobody dares vote against the children!! So the grant goes up to $6000. Everyone pats himself on the back. Politicians get votes for being so generous with other people’s money… but what do we do?

You wanna GUARANTEE us another $1000? Golly, our costs just went up $1000!

Guarantee auto dealers $5000 a car and guess what will happen to the price of a car?

Of course, some degrees are very valuable and worthy of considering the “investment.” Chemical Engineer? You’ll be sitting in gravy in no time. Medieval Folklore and Mythology? You’ll be adding gravy to biscuits for the foreseeable future.

Again… that’s another story for another day.

[One of the reasons so many small privates struggle is that they don’t get the free marketing via TV sports and they can’t keep up with the cruise ship you want. This is the one cohort struggling in the market.]   

Private versus Public

I’ve been essentially using the private college system as my example, but the problem gets exponentially worse when you look at state-supported schools.  In that case, the auto dealer is guaranteed an additional $5000 upfront (from taxpayers). The market gets completely skewed. Small privates struggle to function in this weighted market.

Penn State still runs about $33000/yr for a PA resident despite being tax subsidized.

So, there you have it. A crude, ill-prepared introduction to how we fund our cruise ships, er, our institution of higher learning and moral superiority. If you don’t like it, it’s because you hate children and you’re prolly in the Klan (I’m required to add that).

BTW – we LOVE foreign students. They usually pay full fare! Add that to your ECON 101 mix. A constituency which is price immune? That’s only going to incentivize increases. More student visas, baby! Because we care, dammit!

For you millennials who DEMAND a video… here is a boring intro to Financial Aid I made…

*You might wonder about full-ride scholarships… that’s a loss, right? DO you think Duke or Alabama are losing money on their full-ride athletes? They make enough money from TV on the backs of those kids to fund all their programs and pay the coaches millions. Academic scholarships are more of a gamble. Smart kids do well, give more, and help with “rankings” and general PR… but that’s also another chapter in the book.

What do you think?

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