Tuition Hikes: Why Higher Education Spends Millions on Campus Cosmetics

CBS New York
March 27, 2013

By Corey Whelan

Oh, to be born with a silver spoon. This past decade has seen the gap widen significantly between the wealthy and the working stiff. Gone, at least for most of us, are the days when hard work equaled money in the bank and of course, the collateral damage to the current financial mess is our children, who particularly feel the monetary pinch when it’s college application time. The cost of obtaining a college degree has gone up around 600 percent over the last 10 years, and economists predict that tuition will continue to rise at a higher rate than inflation will, making college an unattainable dream for some and throwing others into significant amounts of long-term debt. Lack of state funding is partially to blame for driving tuition costs skyward at public colleges, but is not the sole culprit pushing costs up to astronomical levels.

What price, luxury?

Visit just about any competitive public or private university today and you will most likely be taken on a campus tour that includes not only state-of-the-art laboratories and impressive libraries but also spa-like gyms and dorm rooms that could pass for luxury hotel suites. In an effort to lure students who can pay steep, sticker-price tuition, colleges and universities from coast to coast have borrowed heavily and collectively spent billions of dollars on extras not historically associated with the college experience. And much of these added costs are landing squarely on the shoulders of both the taxpayer and the student body. “Tuition is typically higher at beautified schools,” says educational consultant, Steven Roy Goodman, MS, JD. “Colleges are reliant upon tuition revenue and renovations increase that revenue. However, beautifications do not represent the quality of the education students ultimately receive.”

Both public and private colleges have amassed increasing amounts of debt over the past decade, much of which has been spent on both renovations of antiquated facilities but also on student perks, like on-campus movie theaters or bowling alleys. Public universities often lack the financial ability to fund capital improvements for their campuses via alumni support or philanthropic giving and have simultaneously lost much-needed state funding for renovations. Many well-endowed private colleges have seen a lessening of revenue from tuition and donations, yet they appear to have little incentive to keep costs down. Even Harvard, long considered to be the best-endowed, wealthiest university in the United States, is $6 billion in debt. “With no governmental pressure to contain costs of any kind, those costs ultimately get folded into tuition,” Goodman states, but that may change. In his most recent State of the Union address, President Obama called for greater accountability and affordability by appealing to colleges to keep costs down and urging Congress to change the Higher Education Act so as to mandate affordability and value as key elements. These markers would be used to determine which colleges receive specific types of federal aid as well as to create a “college scorecard” that students and their families could utilize to compare schools based upon their value.

What price, prestige?

While we wait for Congress to get its act together, more and more students will continue to weigh the benefits of a college education versus the cost, while keeping an eye on a job market that has not sufficiently rebounded enough to ensure them quality jobs and a way out of college-created debt. Many look to less expensive and less beautified community colleges as a lower-cost alternative, or pursue at least some college credits through online education.

“Beautification, unlike renovation, is not a capital expense,” says Dr. John Ebersole, president of online, accredited Excelsior College. “Beautifications are operating expenses, which require offsetting revenue, like tuition. The cost of that is being underwritten by the students.” One way to avoid this, says Ebersole, is through online education. Ebersole, whose career in education encompasses both brick and mortar and online institutions, believes that higher tuitions have a status-like appeal for some applicants, but sees many individuals turning to online education in an effort to reduce costs. “It’s like owning a Mercedes,” he says. “There is an association in the minds of some students between quality and price. We see that the higher the tuition, particularly at the most prestigious universities, the higher the application rate. But rock climbing walls and nicer dorms do not a better education make.”

In 2012, around 85 percent of all undergraduates received some level of financial aid, which represents a steady, annual uptick that will continue to impact negatively upon lesser-endowed universities, who often see campus beautification, despite its subsequent debt burden, as the answer. While some schools seem to be spending blindly, other schools, such as private, non-profit Johnson & Wales University in Denver, attempt to plan for it. “Johnson & Wales develops five-year financial plans along with our university strategic plans, so we can plan for investments in facilities upgrades,” said Denver Campus President Robin Krakowsky, Ed.D. “We combine strong fiscal management with long-term capital and student engagement plans, borrowing favorably through bond issues when appropriate and using zero-based budgeting. In this way we are able to keep tuition increases to around four percent annually-based on historical figures.” The school has spent $80 million on facility upgrades over the last 12 years, yet has seen a slower tuition increase than other universities.

Who gets left behind?

Historically, the student body at Johnson C. Smith University in North Carolina has been predominantly African American. The school has upgraded several of its facilities, both on campus and off. These changes have been met with mixed emotions, says adjunct professor, Dwayne K. Sutton. “I get it, the world is changing,” says Sutton. “You have to make your campus fit the ideal. But, students who aren’t considered prime candidates are getting pushed out due to affordability issues. Targeted students may have scholarship opportunities, but many who can no longer afford a college education look to trade schools, online courses or community colleges as the answer.” Johnson C. Smith University looks to pursue foreign students, particularly from South America, to fill its ranks, formerly held by American students who can no longer afford to attend.

And who wins?

With schools aggressively competing for students and tuition dollars, campuses will continue to add more bells and whistles, at least in the foreseeable future. Faculty size may or may not grow, but wine bars and hot yoga classes will continue to proliferate, and debt will continue to balloon. Ironically, these high-class surroundings will be difficult for many college students to replicate in real life, once they graduate and are faced with the gritty reality of paying back their student loans. “Compare the current landscape with the alternative,” says Goodman. “Schools need to position kids for the future, but that does not require fancy lawns or dorms. What would happen if schools didn’t spend millions just to keep up with each other? Somehow, I don’t think the sky would fall.”

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