CHARLESTON, W.Va. -- Dark clouds are forming over America's public universities as the Wall Street mind-set spreads across more of our institutions. A decade of excessive spending based largely on unlimited student loans is looming dangerously over a major national asset.
In January 2013, Moody's, the nation's premier credit rating organization, issued a report titled "US Higher Education Outlook Negative in 2013." Moody's evaluation was based on the hundreds of billions of dollars in institutional debt incurred by America's public universities, including exotic non-traditional financial schemes.
And Moody's evaluation did not include the trillion dollars of debt currently owed by college and university students and former students. Today, more than 35 million Americans owe an average of $28,000 in college loans and half have not earned and are not likely to earn a four-year degree.
On December 13, 2012, The New York Times published an article, "Building a Showcase Campus; Using an IOU." The Times reported, "Some call it the Edifice Complex. Others have named it the Law of More, or the Taj Mahal syndrome." A decade-long building spree to construct non-academic buildings, coffee shops, spas, dormitories, and recreational facilities -- some of them inordinately lavish to attract students -- has saddled colleges and universities with large amounts of debt.
According to inflation-adjusted data compiled for the New York Times by Moody's, institutional debt levels more than doubled from 2000 to 2011 at the more than 500 institutions rated by the agency. At the same time, according to Moody's, the amount of cash, pledged gifts, and investments that colleges maintain declined more than 40 percent relative to the amount that these institutions owe.
Then, in a Jan. 14, 2013, article in the Wall Street Journal, former U. S. senator and former president of the University of Colorado Hank Brown noted that of all our college graduates, only 31 percent were classified as proficient in reading in 2004, down from 40 percent in 1992. This decline in the basic skills of college graduates is coming at a time when the nation has been flooded with college graduates who apparently are not prepared to work in the emerging 21st century economy. In the words of a recent article in the Chronicle of Higher Education, "Is the ROI (return on investment) worth it?"
Why is the cost of going to college soaring? A splurge in building non-academic facilities and exploding administrative costs as compensation for presidents, coaches, and athletic directors has jumped by some 20 percent per year over the past decade. (The president of one public university is paid $2.1 million per year, up from $299,000 12 years ago, or a 700 percent increase in 12 years -- same institution, same person. Non-academic costs and recreation-oriented costs have also exploded.)
All this happened while state governments cut higher education budgets, knowing that easy credit would entice students and their families to borrow seemingly easy money to pay more. In addition, new generations of trustees, accustomed to The Wall Street and Washington, D. C., mind-sets have encouraged such extravagance.