Last month, Standard & Poor’s released another negative outlook for non-profit higher ed institutions. The central issue, as one might expect, was the tension between increasing costs for colleges and a focus on affordability for students. While some of the blame for rising costs lies with unnecessarily complex regulatory requirements—and the cost of compliance with the NCAA, on Title IX, and with accreditors is nothing to laugh at—much of the blame falls on the schools themselves, which have failed to cut costs despite a similarly dire outlook from Standard & Poor’s a year ago.
The report notes “that colleges or universities that are unable to distinguish themselves in the market through their reputation or offerings will have to compete for students purely on price.” As many schools face an enrollment crunch, the time has never been riper for cost cuts. Those who don’t find ways to limit spending may soon find themselves heading toward bankruptcy.
Unfortunately, the schools at risk are not showing signs that they intend to cut costs in any significant way. Like the grasshopper in Aesop’s fable, these schools have spent too long basking in the summer sun of federal subsidy (in the form of student financial aid) and then riding a recession-driven enrollment boom. It can be difficult to realize how recklessly one is spending when the tuition-revenue is still flowing in.
Now, as public funding shows little sign of returning to pre-recession levels and American families feel the lingering effects of the recession on disposable wealth, enrollments are ebbing. It’s time to face the cold winds of winter and find ways to keep costs in check.
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