This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Higher College Tuition? Look at Administrative Bloat

BOSTON ( TheStreet) -- The average rate of college tuition and fees in the United States has increased 440% in the past quarter-century, with an increase of 70% in just the past decade. There has been a lot of speculation about causes, and a report released this month by the nonprofit Delta Cost Project tries to shed some light.

According to the report, Labor Intensive or Labor Expensive: Changing Staffing and Compensation Patterns in Higher Education , the exponential growth of the higher ed workforce is at least partly to blame for the rising cost of college.

The report finds that the number of non-faculty staff positions at colleges and universities rose 28% between 2000 and 2012. The bulk of these positions (accounting for 20% to 25%) have been administrative, with the biggest growth in student services. The report contends that the increasing cost of college can also be correlated to the associated benefits packages for these staff positions and declines in state funding.

"When we look at the growth in administrative staff, it's the hiring for new professional support positions -- such as business analysts, counselors, admissions staff -- rather than executive positions that's driving the increase in these types of jobs," says Donna Desrochers, principal researcher at the Delta Cost Project and an author of the report.

What is not driving up the price of college: faculty wages. The project found that over the past decade faculty wages have remained essentially flat. Not only that, but many full-time faculty positions have been replaced by part-time adjuncts, who now make up about 76% of college-level instructors in the U.S. This is especially the case at public colleges.

Surprisingly, the researchers at the Delta Cost Project couldn't detect significant savings from the widespread replacement of full-time faculty members with part-time adjuncts, even with full-time faculty and staff members per professional or managerial administrator shrinking by 40%. Private research institutions were found to be in the lead for hiring administrative staff -- at an average of 456 employees for every 1,000 students, up from 434 in 2000. Yet private research universities were also the only institutions adding full-time professors to their payroll (just at a slower pace than previously) by an average of 16 per 1,000 full-time students.

On the other side of the equation, community colleges were found to be losing full-time and part-time faculty and still adding administrative positions, albeit it at a much lower rate than other kinds of colleges -- by three positions per 1,000 students.

"Colleges have turned to part-time faculty to try and rein in costs, since these instructors are paid less and typically do not receive benefits," Desrochers says. "However, it appears that other factors, such as rising benefit costs and hiring of noninstructional staff, have undercut these savings, and compensation costs per employee continued to rise modestly over the much of the past decade."

Another thing that has risen in the higher-ed sector over the past decade is president's salaries.

In December, The New York Times reported that 42 private college presidents were paid more than $1 million in 2011 (up from 36 the year before), and that more than 180 college presidents in the country now earn more than $500,000 dollars a year -- up from 50 in 2004. Several presidents were even found to have multimillion-dollar salaries, with Robert J. Zimmer of the University of Chicago making $3.4 million annually and Joseph E. Aoun of Northeastern University making $3.1 million.

According to the The Chronicle of Higher Education, which tracked the compensation of 550 presidents at 500 private colleges with the largest endowments, the median base salary for college presidents was found to be $301,299. Meanwhile, Mother Jones reported last year that compensation packages for college presidents more than doubled in 2011 for 11 of those presidents who earn more than a million dollars annually.

Presidential compensation also takes the form of generous severance and retirement packages. Boston Globe staff writer Todd Wallack noted last November that the former president of Suffolk University, David J. Sargent, got a severance package worth about $850,000 in 2011.

Though the Delta Cost Project did not study the influence of college presidents' salaries and other forms of compensation on the cost of higher education, Desrochers does not think that would account for much of the increase in college tuition.

"Typically [presidents' salaries] represent a very small portion of overall college and university budgets," Desrochers says.

It still begs the question of whether stagnant faculty wages and the general decline of full-time faculty positions are occurring as a way to offset the increase in compensation for presidents and other upper-level positions.

"From an accounting perspective, it might seem higher salaries for presidents and senior administrators have a relatively small impact on a college budget overall," says John Curtis, director of research and public policy at the American Association of University Professors. "But when you compare those salaries with those of faculty members and other staff on campus, it does seem an indication that priorities are out of line, with significant raises for senior positions while salaries of faculty and other staff members stagnate and benefits are reduced."

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,077.89 +47.68 0.26%
S&P 500 2,090.79 +8.91 0.43%
NASDAQ 4,802.9050 +29.4330 0.62%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs