Rising Student Debt Pushes Colleges to Trim Operating Costs ; U.S. Public Universities Turn to Privatization and Staff Cuts to Save Money

By Martin, Andrew | International Herald Tribune, May 16, 2012 | Go to article overview

Rising Student Debt Pushes Colleges to Trim Operating Costs ; U.S. Public Universities Turn to Privatization and Staff Cuts to Save Money


Martin, Andrew, International Herald Tribune


As student debt rises, colleges like Ohio State are looking for other ways to pay for education, like stepping up private fund- raising, privatizing services, cutting staff and eliminating departments.

In a wood-paneled office lined with books, sports memorabilia and framed posters (including one of John Belushi in the movie "Animal House"), E. Gordon Gee, the president of Ohio State University, keeps a framed quotation that reads, "If you don't like change, you're going to like irrelevance even less."

Mr. Gee, who is often identified with a big salary and spendthrift ways, says he has taken the quotation to heart, and he is now trying to persuade Ohio State's huge bureaucracy, and the broader world of academia, to do the same.

At a time of diminished state financing for higher education and uncertain dollars from the U.S. government, Mr. Gee says that public colleges and universities in the United States need to devise a new business model to pay for the costs of education, beyond sticking students with higher tuition and greater debt.

"The notion that universities can do business the very same way has to stop," said Mr. Gee, who is also the chairman of a commission studying college attainment, including the effects of student debt.

College presidents across the United States are confronting the same realization, trying to manage their institutions with fewer state dollars without sacrificing quality or all-important academic rankings. Tuition increases had been a relatively easy fix, but now - - with the balance of student debt topping $1 trillion and an increasing number of borrowers struggling to pay -- some administrators acknowledge that they cannot keep putting the financial onus on students and their families.

Increasingly, they are looking for other ways to pay for education, stepping up private fund-raising, privatizing services, cutting staff, eliminating departments -- even saving millions of dollars by standardizing things like expense forms.

And Wall Street is watching.

The credit ratings agency Moody's Investors Service, in a report this year, said it had a favorable outlook for America's most elite private colleges and large state institutions, those with the "strongest market positions" that had multiple ways to generate revenue. Ohio State, for instance, received a stable outlook from Moody's last autumn, though the report cautioned about the school's debt and reliance on its medical center for revenue.

But Moody's issued a negative outlook for a majority of colleges and universities that are heavily dependent on tuition and state revenue.

"Tuition levels are at a tipping point," Moody's wrote, adding, "We anticipate an ongoing bifurcation of student demand favoring the highest quality and most affordable higher education options."

Colleges can be top-heavy with administrators and woefully inefficient, critics say, and some have only recently taken a harder look at ways to streamline their operations.

"Schools are very good at adding new things, new programs," said Sherideen S. Stoll, vice president for finance and administration at Bowling Green State University in Ohio. "We are not so good at looking at things we have been doing for 20 or 30 years and saying, 'Should we be offering those academic programs?"'

At Bowling Green, 62 percent of graduates have debt that averages $31,515, the highest among Ohio public universities that publish the data. In addition to raising tuition, which has been limited by state-mandated caps, the university has laid off employees, encouraged early retirements, required unpaid furloughs and limited pay increases, Ms. Stoll said. The belt-tightening has not yet reached the point that academic quality has suffered, she said, but Bowling Green may not be able to offer as much in the future.

"We've done everything and anything to try to operate much more efficiently," she said.

The problems are not confined to public colleges. …

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