Colleges waste millions on bloated bureaucracies

We are wasting too much money on college administration costs.

That’s my takeway from a July 2017 report, How much is too much, by the American Council of Trustees and Alumni. That report, which I found via the College Fix, documents how American colleges are spending outsize sums on administration costs. Outsize, that is, even considering that the report defines “administrative costs” by assessing what the National Center for Education Statistics defines as “institutional support” costs. The NCES excludes student activities, career services, food, housing, parking, and financial aid staff from its “institutional support” bracket. Instead, it defines those costs as including “general administrative services, executive direction and planning, legal and fiscal operations, and public relations/development.”

That aside, it’s only when the report lists its data in an administrative instructional cost ratio basis that we see the scale of the challenge. Consider the situation at higher education public institutions.

While larger enrollment institutions benefit from economies of scale and thus a lower ratio, small enrollment baccalaureate programs are blowing a 39:61 ratio, and medium enrollment programs are spending 33:67.

Yet if that seems bad, and it should, the results from private colleges are far worse.

After all, at the average small enrollment private college, administration accounts for a whopping 64:36 ratio! Yes, you read that right, the average small enrollment private college spends nearly twice as much on administration as it does on educators. At large enrollment institutions, which would include colleges like NYU and USC, the administrative costs are way up there at 40:60. And while things are better at PhD level programs, administration still gobbles up a lot of cash.

The obvious problem?

Money spent on administration is money that isn’t being spent on education.

So what should be done?

Well, the report notes that paring back the ever-growing list of federal regulations would help remove colleges from the need to engage in expensive compliance work. But the main lesson, it says, is one of data: college presidents need to be far more attuned to where their budgets are actually going. I agree with that assertion, but also believe that college executive boards also have an important role to play here in better scrutinizing compensation costs.

We also need parents and students to demand better value for money. Unfortunately, as epitomized by the safe-space movement, many students see their colleges as adult kindergartens not educational institutions.

Still, to truly foster positive change, the Trump administration could announce that it will begin limiting pell grants to students attending colleges with lower ratios. An incentive for reform would be for the administration to limit grants to those students attending public colleges with a ratio 9 points below the enrollment relevant average, and to students attending private colleges with a ratio 18 points below the enrollment relevant average.

Regardless, there’s no excuse for the current waste.