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Students & Parents | Costs

News: College Spending Trends Are Out Of Control, Families Paying The Price

PARENTOLOGY   |  August 17, 2021 by Larry Duncan

The American Council of Trustees and Alumni (ACTA) has released a comprehensive report on college spending trends and their findings are not promising. According to the report, spending at four-year colleges and universities is out of control, and a large chunk of the cost is being passed onto students and their families through ever-rising tuition hikes. In addition, the data seems to indicate that all of this spending is doing little to help students graduate. 

The ACTA was founded in 1995 with the mission to uphold academic freedom and ensure accountability at America’s colleges and universities. It is an independent, nonprofit organization that works with alumni, donors, trustees, and education leaders across the United States to ensure that the next generation receives an intellectually rich, high-quality education at an affordable price.

The report, entitled The Cost of Excess: Why Colleges Must Control Runaway Spending, collects data from over 1500 private and public four-year institutions across the country. To arrive at their findings, the ACTA looked at nine years (2010 – 2018) of publicly available data collected by the U.S. Department of Education’s National Center for Education Statistics (NCES). For the purpose of the report, the ACTA recognizes three categories of spending: 

  • instructional spending – covering general academic instruction and expenses that support an institution’s primary mission, such as libraries and museums;
  • administrative spending – covering what academic institutions report as institutional support to the NCES, and includes expenses for general administrative services, management, legal and fiscal operations;
  • and student services spending – covering services that support students’ emotional and physical well-being, including athletics, career services, diversity programs, and financial aid staff.

Where Is the Money Going?

While it seems intuitive that a student’s education is a college or university’s core mission, this is not played out in the way that these institutions spend money. According to the report, administrative spending and student services spending grew at a faster rate than instructional spending. From 2010 to 2018, spending on student services grew 29% and spending on administration increased by 19%. Both of these categories surpassed the growth in spending on instruction which grew only 17%. 

The report highlights that it is also important to look at how this money is spent. While the 19% and 17% growth in spending attributed to administrative and instructional sending can seem relatively close at first glance, the money was spent in nearly diametrically opposed ways. 

From 2012 to 2018, the number of full-time professors increased by 5% while the number of other full-time instructors rose by 20%. The ACTA’s report points out that this lines up with the widely acknowledged phenomenon known as the “adjunctification” of colleges and universities. “Adjunctification” is defined in the report as “where part-time, often less-credentialed (and often less-experienced) contingent positions replace full-time tenured or tenure-track instructors.” This practice is often characterized as a cost-cutting practice by institutions of higher learning.

However, this same practice does not seem to be being applied to administrative spending. In fact, the exact opposite practice seems to be in place. Over the same period of time, administrative professionals increased at a rate that far outclassed full-time professors with business and financial operations staff increased by a whopping  25%. In contrast, the number of student-facing administrative support staff actually fell 10%. Instead of prioritizing less expensive general support staff as in instructional spending, colleges and universities seem to be cutting the lower-level staffers to hire more expensive, more specialized administrators.

Who’s Paying?

Everyone knows that college is getting more expensive with each passing year. The average cost of in-state tuition and fees at a four-year public college or university has nearly tripled over the past 30 years. ACTA’s report draws a direct correlation between increased spending at institutions of higher learning and real money out of students’ and families’ pockets.

“Families, taxpayers, or both, will be left holding the bag if colleges and universities do not take control of skyrocketing spending,” Armand Alacaby Vice President of Trustee & Government Affairs at ACTA told Parentology. “The student loan crisis is an economic crisis in the making, and college leaders must step up to avoid this ever-increasing price tag from turning into a catastrophic failure along the lines of the housing crisis a decade ago.”

While the ACTA admits that merit and need-based grants make calculating out-of-pocket cost based on tuition a little tricky, their research indicates that a $1 increase in in-state public school tuition equates to an $0.84 increase in net price, while at private schools a $1 increase is associated with a $0.42 increase in net price. ACTA found that in the aggregate, instructional, administrative, and student services spending all had a statistically significant correlation with the following year’s tuition — as spending increased so did tuition. 

Is the Increased Spending Paying Off? 

In a word, the ACTA says, no. 

While the past decade has seen steady growth in spending in all categories, there have been only modest gains in graduation rates over the same period. Perhaps even more telling is that at public institutions there was no correlation between spending on student services and graduation rates despite the 25% increase and private institutions had a statistically significant but inconsequential return on student services spending in terms of graduation rates from a 32% increase.

While it has seen the least increase in spending over the period, the report showed that instructional spending packed the biggest statistical punch in terms of its effect on graduation rates. The report found that “ an increase in instructional spending at public institutions is twice as effective as increases in administrative spending at boosting graduation rates, while an increase in instructional spending at private institutions is over five times as effective as an increase in administrative spending and nearly three times as effective as an increase in student services spending.” However, even instructional spending has its limits. Based on the report’s analysis, it would cost the average public institution an additional $10.2 million in instructional spending to graduate an additional 72 students.

What Can We Do?

The ACTA offers a number of recommendations in their report on how to get college and university spending and by extension the cost of tuition under control.

  1. First colleges and universities need to make controlling costs a top priority. Passing the cost of unchecked spending onto ever-rising tuition costs is not sustainable. The ACTA recommends institutions institute innovative means to mitigate costs while philanthropists and other investors insist on containment and reduction of spending as an indispensable part of any college or universities long-term plan.
  2. Policymakers and the public need to pressure institutions of higher education to hold the line on tuition. “The public first needs a clearer picture of the reasons why college is as expensive as it is,” Mr. Alacbay told Parentology. “Families should visit our website, HowCollegesSpendMoney.com, to see data on their own schools’ spending trends, and insist that colleges be exactingly transparent with how they spend their resources.  Moreover, schools need to commit to freezing tuition similar to what Purdue University has done for a decade now — colleges have too poor a track record using budget cuts in one area to justify spending sprees in another.  The cycle needs to stop.”
  3. Stakeholders should use available data to make smart spending decisions that benefit students. Governing boards should take special care to scrutinize the rate at which non-instructional expenditures (such as administration and student services) grow when compared to spending on instruction. Mr. Alacby points out that “a sprawling campus bureaucracy is in part the result of colleges and universities seeking to become all things to students instead of focusing on their core mission of education.” ACTA recommends that governing boards take into account an institution’s administrative-to-instructional cost ratio when evaluating spending proposals.

Ultimately, ACTA believes we need to fundamentally change the culture of spending at colleges and universities if we are going to address the issue of rising tuition costs and student debt. “Well-intentioned proposals such as debt forgiveness and free college are like using sandbags to fight off a cresting river during a hurricane.,” Mr. Alacbay told Parentology. “They are temporary solutions that assume that things will ultimately settle down on their own.  But the rising cost of college shows no signs of abating. Systemic change in the way that colleges approach spending—putting students’ education first—is the only way to make higher education more affordable and accessible to all.”

This article originally appeared here.

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