Colleges on 'spending spree' when student loan debt is higher than ever: WSJ analysis
U.S. universities have been spending money they don't have and exacerbating the $1.6 trillion federal student debt crisis
{{#rendered}} {{/rendered}}Even though students across the U.S. are saddled with tens of thousands of dollars in student debt, universities in the U.S. have been spending money that don't have on new buildings, amenities and sports programs while making students foot the bill, according to an analysis conducted by the Wall Street Journal.
The U.S. is suffering from a $1.6 trillion federal student debt crisis and universities have paid for their "spending spree" by raising tuition prices and in turn, putting students in more debt, according to a WSJ analysis which looked at the financial statements, adjusted for inflation, of the 50 flagship universities, which are typically the oldest public school in each state since 2002.
The Journal found that the median flagship university's spending rose 38% and the median flagship received more than double the revenue from undergraduate and graduate tuition between 2002 and 2022. The typical flagship university analyzed by the paper showed increased enrollment in the past twenty years, while spending per student rose by a median 15% in the same time period.
{{#rendered}} {{/rendered}}SUPREME COURT TO HEAR GOP STATE CHALLENGE TO PANDEMIC-RELATED BIDEN STUDENT LOAN DEBT RELIEF PLAN
Supporters of student debt forgiveness demonstrate outside the US Supreme Court on June 30, 2023, in Washington, DC. (Photo by OLIVIER DOULIERY/AFP via Getty Images)
While public universities often point to a cut in state funding as reason to hike tuition, which three fourths of states did, the Journal found that they raised prices higher than was necessary. For every $1 lost in state support at the universities in the past 20 years, they increased tuition and fee revenue by nearly $2.40.
In part, higher education institutions have spent more in an effort to improve their national rankings in the U.S. News & World Report, which has seen a fall from grace as universities opt out of the list, and to attract wealthy students with lavish amenities.
{{#rendered}} {{/rendered}}Spending for athletic departments saw a 27% jump from 12 years ago, according to the WSJ's analysis of flagships with available data and then adjusted for inflation. Spending on athletic coach salaries rose nearly half between 2010 and 2022, according to the paper's analysis of the Knight-Newhouse College Athletics Database.
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On June 30, 2023 in Washington, D.C., the Supreme Court struck down the Biden administration’s student debt forgiveness program in Biden v. Nebraska in a 6-3 decision. (Photo by Anna Moneymaker/Getty Images)
The uptick in spending is attributed to a multitude of factors including the lack of accountability required by colleges since they don't have to track their expenses in a uniform way, allowing them to use their own discretion when categorizing spending. Schools are also competing for top students, with the average student paying more because of higher fees and prices as well as more high-paying out-of-state peers.
{{#rendered}} {{/rendered}}For example, the University of Oklahoma, which saw the biggest per-student tuition hike up 155%, spent $14.3 million on a monastery in Arezzo, Italy to house a new study-abroad program. The renovated 32,000-square-foot Italian structure was equipped with a landscaped garden, faculty apartment and classrooms with painted frescoes.
The University of Kentucky, whose students paid an average $18,693 to attend classes in the 2021-22 school year, upgraded its campus at the cost of $805,000 a day for more than a decade, despite the fact that Kentucky is one of the poorest states in the union.
{{#rendered}} {{/rendered}}A Penn State Board of Trustees member criticized higher tuition as a "knee-jerk" reaction to flat state funding. (Photo by Paul Morigi/Getty Images for We The 45 Million)
Pennsylvania State University, which is one of the most expensive public universities in the country, it is now in a budget crisis because its spending wasn't previously based on need or changes in enrollment. When the Penn State Board of Trustees voted to increase tuition at Penn State’s University Park campus because state funding stayed flat, Trustee Barry Fenchak criticized the "knee-jerk reaction."
"I think the knee-jerk reaction was, ‘OK, we’ve got to raise tuition,’ and I think perhaps the knee-jerk reaction should have been, ‘We need to get to work on the things we should’ve been doing for the last 10 years and light a bit of a fire underneath our behinds'" to address budget concerns, he said at the meeting.
As Americans struggle to pay off student loans, the Biden administration proposed a $10,000 student loan forgiveness program that was expected to cost American taxpayers an estimated $300 billion. In June, the Supreme Court ruled that the executive branch lacked the legal authorization to provide billions in federal loan forgiveness for borrowers without clear authorization from Congress.
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