College tuition rises much faster than general inflation, a fact that has been well known for some time. Lately, however, sky high tuition has colleges on the horns of a dilemma. Limited in ways to grow revenue such as offering new programs or recruiting more foreign students while approaching a “demographic cliff” in the population of college-age people, all but the most elite colleges need to cut costs and lower tuition to remain viable.
Administrative bloat is a term used to refer to steep growth in administrative staff relative to college faculty and students. For several decades, colleges have experienced a substantial upswing in non-instructional spending on administrative services. Non-instructional spending outpaced instructional spending in the years 2010 to 2018, according to the Council of Trustees and Alumni. During that period, spending on student services rose a 29% and administrative costs increased 19%, while instructional spending only rose 17%. Some colleges have more administrators and staff per student than they have faculty. Senior executives of colleges assert that this growth reflects real needs on a modern campus that have been imposed by external forces.
Sizing the Problem
Administrative spending comprised 26% of total spending by American colleges in 1980-81, while instructional spending comprised 41%. Three decades later, the two categories were much closer in size: administrative spending made up 24% of school’s total expenditures, while instructional spending made up 29%.
The ratio between faculty and administrators has shrunk. Between 1976 and 2018, full-time administrators and professionals employed by those colleges increased by 164% and 452%, respectively. Meanwhile, the number of full-time faculty increased by only 92%.
During the 1980-1981 academic year, public and private colleges spent $20.7 billion in total on instruction and $13 billion on academic support, student services, and college support services combined, according to data from the National Center for Educational Statistics. By the 2018-19 academic year, total instructional costs had risen to $148 billion while the same grouping of administrative expenses had risen to $122.3 billion.
Evidence of the impact of the rise of administrative costs are noted below:
- More administrators than professors:The growing number of non-teaching roles, such as assistant deans, diversity officers, marketing staff, or compliance officers, accounts for growth in administrators.
- Rising salaries and layers of bureaucracy:This is due to high compensation for top administrators and the creation of multiple management layers that have no instructional purpose. As posited by sociologist Max Weber — “All organizations tend toward bureaucracy” including colleges with money to spend.
- Costs passed on to students:As administrative costs rose, tuition rose with it.
Reasons for Rising Administrative Costs
There have been a few legitimate reasons for colleges hiring so many administrators. These include a sharp rise in government regulations, the need to adopt new technology, and students seeking a more congenial campus lifestyle. Yet the most important factor driving administrative costs is external. It is the generosity of Federal student loan programswith easy terms and low interest that enable students with financial need to pay high tuition costs. In short, administrative bloat has been driven by the fact that colleges have received more money from the Federal government than they could spend productively on instruction alone.
Top college administrators earn compensation on par with their private sector counterparts, yet the vast majority of colleges are either state-funded or are nonprofit entities. Although they’re accountable to trustees, they aren’t held closely to account by shareholders seeking a return on their investment, as is the case with private sector companies. Their expertise is in education, not in running an organization to turn a profit.
The crux of the problem is that colleges don’t use surpluses (profits) as wisely as do business organizations. According to Robert Martin in Forbes Magazine, “Unlike colleges, businesses are very attuned to the problem of overhead, and they have a clear financial interest in periodically restructuring their organizations to eliminate excess bureaucracy — they must preserve profitability.”
Administrative spending detracts from the fundamental mission of a college – educating students to prepare them for the world beyond. Todd Zywicki of George Mason University, the author of “The Political Economy of Administrative Bloat in American Higher Education.”, states that “The two big college cost drivers are bureaucrats and buildings — obviously neither of those are directly adding to the classroom experience. Ironically, colleges actually look at the classroom as a place where they can conserve money.”
Policy Solutions
As the largest external source of financial assistance for colleges, the Federal government should be concerned about the massive growth in non-faculty positions at schools because it is the principal driver of ever-higher tuition. Unfortunately, Congress has ignored the potential of cost containment programs as a way to make colleges more affordable.
The Federal government has focused its efforts on increasing the amount of aid to students in the form of grants, work-study, and, especially, loans. While this has expanded access to college, it has, ironically, encouraged colleges to raise costs and, indirectly, tuition. Thus, very little of the aid provided to students has actually served to reduce the price of a degree. Most of the rest — 60% of student aid according to the New York Federal Reserve, has been absorbed by colleges and spent on administrative bloat.
The Federal government should shift its focus from increasing financial aid to using its significant leverage to encourage colleges to reduce administrative costs and cut tuition. In order to do so, the Federal government should have the authority to negotiate the price of tuition with any college that accepts students who have received student aid from the government. Schools could opt-out, but they would not be allowed to enroll students who wish to pay part of their tuition with Federal aid. Schools found in violation of this policy could be subject to fines in an amount equal to the aid provided by the government.
Shrinking the administrative apparatus will also require strong leadership from college executives and trustees along with a recognition that an overgrown administration undermines the core mission of college. Ironically, it will take administrative courage to rein in administrative excess.
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