Becky Daul
Colleges Trying To Stay Afloat
For many Seniors and Juniors at Pewaukee High School who are getting ready to head off to college, the price tag that is hanging on a university is a big factor in choosing whether of not to go to a specific school.
The increasing debt to go to college typically gets the most focus, but colleges have been borrowing as well, almost doubling the they’ve taken on in the last decade to repair aging campuses, be able to with competitors and to get the attention of potential students.
Parents preparing for their son or daughter to start the looking at colleges definitely raise plenty of questions regarding the price to the college tour guide. The price has increasingly cause more question marks for parents who hope that a large price means a better education, but that isn’t always the case.
“There is a major problem in that the industry has an inability to grow revenue in a way they have for the last 20 years,” says John C. Nelson, the managing director of the higher education and healthcare practice at Moody’s, that examines the finances of more than 500 colleges and universities that issue bonds through public markets.
John C. Nelson has found that, “A handful of colleges have closed, merged or been bought by for-profit colleges in recent years — mostly small, tuition-dependent private colleges, which remain at most risk. Few see mass closings ahead in the future, but only 500 or so of the 4,000-plus colleges and universities in the United States seem to have stable enough finances to be truly safe.”
“Expenses are growing at such a pace that colleges don’t have the cash or the revenue to cover them for much longer,” says Jeff Denneen, Bain & Company’s leader of the higher education practice. “A growing number of colleges are in real financial trouble.”
“The rating is based on persistent operating deficits and thin cash-flow driven by a decline in enrollment and net tuition per student coupled with rising debt service payments and transition of several key members of university leadership.” Too often the price of education is brought down the the institutions cannot function and continue running when prices are brought down too much.
Michael Groener, Drew’s vice president of finance and business affairs, who arrived on campus at Drew University last fall, said the financial decline mainly from discounting the $42,000 sticker price too much typically around 50 percent. “That is pushing it about as far as we can go,” Mr. Groener says.
However, these prices are still too high for many families to afford. Forbes magazine refers to this as one of the top ten economic issues going on in our world today. Though there isn’t a clear solution in fixing this problem.
College tuition continues to increase by 8 percent every single year. “Some suggestions are: add supply to our university systems to make them more cost competitive; add supply to funding through private student loans; encourage philanthropy that supports scholarships; and support technological advances in education that lowers cost.” However, the question remains of how best to lower the prices still remains. Since universities already borrow so much money from the government, it’s not clear if the support the government send should be increased, since they carry so much debt.
In the next few years when a majority of the students are heading off to colleges with a large price tag hanging off, remember what that money is actually going towards. Though you are carrying a large amount of debt, the university you are attending, is taking on even more to make sure their students don’t have to carry original tagged price of their school.
Great post Becky. Your tie in of supply affecting the college price tag at the end was a good wrap up, and the proposal of persuading philanthropists to help out was a valid idea. With celebrities and other high rollers pulling in millions each year, you'd think it would be easy to give away a few thousand to improve national education.
ReplyDeleteI really like how you focused on how high prices affects both the universities and the students that attend. I never really realized how much it cost too keep a college running, with so much focus on the high tuition charged. I was surprised to find out that college tuition raises 8 percent every year. That seems like such a high number, and I agree, there has to be a way to have kids go for a cheaper rate. I think one thing that they could do is get more government funding to help the collges lower tuition, and allow more students to go on to college.
ReplyDeleteI agree with you. Just because there is a higher price on the colleges that are newer and have better facilities doesn't mean that it has the best education. In my opinion there shouldn't be any difference in the prices of colleges. I think that there should be be just levels of education 1-3 and they are put into a category then priced accordingly that way people know exactly what kind of eudcation there are paying for.
ReplyDeleteI agree with Katlyn, in that you focused on both sides of the costs of college. Students going to college don't really think about how much money the college actually has to spend to keep it going. Such as teachers, athletics, and other services. It is surprising to hear how much college tuition increases every year, since college is a reality for us next year.
ReplyDeleteYeah, people just like the hype of going to a nice college, but it really doesn't show that it will teach you better than another college. You could get the same education at a much cheaper price, but it may not be made out to be as nice. Either way, you are getting an education. I liked to see both views of college prices, though. You did a really good job of portraying both of them!
ReplyDeleteBy focusing on not only the payment for attending college but also why students pay, so much was very interesting. The reality is that it takes a lot of money to keep up with all the dorms, athletics, and teachers so paying all that money does have a purpose. But, even with all the benefits of what college provides for you, the price seems a bit too high, especially if it does not provide a decent level of education.
ReplyDeleteIt was really interesting to read the different quotes from different perspectives of people who really know a lot about all of this. It really helps to put it more in perspective of how the pricing is, as well as instigating thought on what the money really goes to. The differences were very interesting and insightful. College education is really important to the future of the US and world, and the price tag needs to help us all have the best future possible.
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