• About Us
    • Join CAPPS Email List
    • What is Private Postsecondary Education
    • About ICEPAC
  • News
    • Legislation / Advocacy
  • Events
    • CAPPS Legislative Policy Conference 2021
    • 37th Annual Conference
    • Educational Advisors ~ Event Calendar
  • Resources
    • Classifieds
    • Professional Online Training Center
    • State and Federal Resources
    • Accreditors
    • Boards
    • Associations
  • CAPPS Member Portal & Archives
    • CAPPS Membership Directory
    • Conference Archives
    • Webinar Archives
    • Workshop Archives
    • CAPPS Member Portal
      • CAPPS Legislative Watch
    • Featured Members
    • Select Allied or School Benefits – Why be a CAPPS Member?
      • School Membership Application & Renewal Form
      • Allied Membership Application & Renewal Form
  • Awards
    • CAPPS Memorial Scholarships
    • Excellence in Community Service Awards
    • CAPPS Hall of Fame STAR Awards
    • Norma Ford Financial Aid Professional of the Year
    • School of the Year
    • Allied Member of the Year
California Association of Private Postsecondary Schools                        
916-447-5500
Email
        Login
CAPPS
  • About Us
    • Join CAPPS Email List
    • What is Private Postsecondary Education
    • About ICEPAC
  • News
    • Legislation / Advocacy
  • Events
    • CAPPS Legislative Policy Conference 2021
    • 37th Annual Conference
    • Educational Advisors ~ Event Calendar
  • Resources
    • Classifieds
    • Professional Online Training Center
    • State and Federal Resources
    • Accreditors
    • Boards
    • Associations
  • CAPPS Member Portal & Archives
    • CAPPS Membership Directory
    • Conference Archives
    • Webinar Archives
    • Workshop Archives
    • CAPPS Member Portal
      • CAPPS Legislative Watch
    • Featured Members
    • Select Allied or School Benefits – Why be a CAPPS Member?
      • School Membership Application & Renewal Form
      • Allied Membership Application & Renewal Form
  • Awards
    • CAPPS Memorial Scholarships
    • Excellence in Community Service Awards
    • CAPPS Hall of Fame STAR Awards
    • Norma Ford Financial Aid Professional of the Year
    • School of the Year
    • Allied Member of the Year

News

  • Home
  • News
  • OPINION: America’s colleges and universities have a serious revenue problem – The Hechinger Report

OPINION: America’s colleges and universities have a serious revenue problem – The Hechinger Report

  • Posted by CAPPS
  • Date

The Hechinger Report

OPINION: America’s colleges and universities have a serious revenue problem

Trimming costs or enrolling more students can’t cure what higher education faces — but these other steps might

by BRIAN C. MITCHELL

February 22, 2018

Painting a grim picture for American higher education, Moody’s Investors Service recently changed the industry’s outlook from “stable” to “negative.”

This return to negative ratings reinforces a number of trends that bear close review.

The facts are clear and inescapable. The comprehensive fee – tuition, fees, room and board – will approach $70,000 a year at a number of high sticker priced colleges and universities.

Related: The looming decline of the public research university

Students and their families are voting with their feet, with 46 percent of first-time students beginning or having had some experience in community colleges.

Politicians sensitive to anecdote, polling or simply worried about the price of a higher education degree, promote policies that reinforce this optic. Recent efforts to tax wealthy endowments to skew higher education spending priorities, often towards demands for moderated tuition or increased financial aid, illustrate this point further.

Higher education has taken some steps. Efforts have been underway to trim rising costs and achieve basic efficiencies since the Great Recession. These efforts vary widely depending upon the urgency felt within an institution, its level of creativity and nimbleness, shifting demographics, and the relative strength of the net tuition revenue it receives. Trimming costs or enrolling more students, however, cannot cure what higher education faces. America’s colleges and universities have a revenue problem.

Related: Like their students, colleges are vastly increasing the amount they borrow

Fixed costs in land, labor, and debt repayment and rising costs in health care and financial aid largely determine a college’s operating budget. Labor alone might be sixty percent of a typical small college’s budget. Most colleges are heavily tuition dependent. There is little or no discretion in the operating budget. For some of them the financial aid discount rate now approaches seventy percent. Dorms will be full until the institution, desperate for revenue, closes, merges or is acquired.

“The task ahead is to imagine the possible.”

Many of these colleges rely on other sources of support. Auxiliary revenue sources like residence and dining hall fees cover some of the territory lost to declining tuition revenue. Endowment income also helps but most colleges do not have sufficient endowment revenue to make a significant difference. Comprehensive campaigns and research grants and contracts address longer-term needs but do little to fund short-term revenue problems.

The truth is that colleges rely on an older, archaic operating model where tuition increases historically matched expenses to balance an annual budget, often aided by auxiliary services revenue. For many schools, it was that simple. As new financial, cultural, demographic, consumer, and program pressures build, these “Mom and Pop” shops do not have the flexibility or capacity to meet the new demands.

Related: Golden parachutes for public college presidents burden already thin budgets

What’s the path forward?

There are a number of changes that must be made immediately to offset this growing crisis:

  • College governance is weak and ineffective and must be immediately adapted to meet new oversight demands, with the faculty playing a more important role in creating an innovative educational enterprise.
  • Colleges must understand the institution’s value proposition, if the mission is still relevant and differentiated from its peers, and where the college wishes to be in out years. Why should the college exist in the 21st century?
  • The “Mom and Pop” operations must give way to a newer, more flexible model that accounts for changes in how colleges use tuition, re-imagine underutilized real estate assets, re-configure capital campaigns to meet shorter-term needs, re-think the use of temporarily-restricted funds, and seek additional partners to produce new revenue streams.
  • Higher education institutions must set aside older enrollment strategies in favor of newer financial aid analytical models that differentiate academic programs, emphasize student life, expand when practical the traditional 18-22 year old applicant pool, and focus on outcomes through stronger career counseling networks that create a lifelong affiliation.

Related: Colleges say they could lower tuition if they could talk to each other about it

  • Stakeholders must work much more aggressively at retention and graduation strategies, using student life, including athletics, as an enrollment tool to increase student fit and the level of satisfaction.
  • Colleges must determine what facilities footprint the institution can afford. Its leadership must grow/shrink the college to create a better fit among people, programs and facilities.
  • Institutions must get out of those business arrangements that are eating up financial capacity for which there are better service providers. If the college can use its legal, accounting and student life teams to create a robust residential life program, for example, does it really need to own its housing, with its corresponding debt, that might otherwise go to academic support?
  • The campus community must think of technology as an ongoing operating lease rather than a draw against remaining levels of debt capacity.
  • Its supporters must remember that a college is both an educational enterprise and an economic engine for its region, and seek strong public private partnerships to mutual benefit.

Despite the dismal forecasts, the decentralized and complex higher education system remains a cornerstone of American ingenuity, creativity and promise. The task ahead is to imagine the possible.

Tag:revenue

  • Share:
author avatar
CAPPS

Previous post

California holds out on state reciprocity agreement for online education

Next post

States add restrictions to tuition-free college plans

You may also like

Screenshot 2021-01-21 161018
AG Becerra sues Department of Education for easing oversight of for-profit colleges
21 January, 2021
Inside Higher Ed
Biden Extends Break on Repaying Student Loans
21 January, 2021
Career Education Review
Unitek Learning Leadership Announcement for Chief Operations Officer
21 January, 2021

Search

Memorial Scholarship Information
Donate to ICEPAC
Become an Allied Member
Become a School Member
CAPPS Events

ABOUT US

  • What is Private Postsecondary Education
  • CAPPS Memorial Scholarships
  • Upcoming Conferences

MAILING ADDRESS:
California Association of
Private Postsecondary Schools
2520 Venture Oaks, Suite 170
Sacramento, CA  95833
info@cappsonline.org
www.cappsonline.org    

CappsOnlineMorpho Web Design.

2020 All Rights Reserved CappsOnline.org