Colleges and universities are nonprofits. When extra money comes in — as, until recently, has been the pattern — they can’t pay out excess profits to shareholders. Instead, the money goes to their effective owners, the administrators who hold the reins. As the Goldwater study notes, they get their “dividends” in the form of higher pay and benefits, and “more fellow administrators who can reduce their own workload or expand their empires.”
But with higher education now facing leaner years, and with students and parents unable to keep up with increasing tuition, what should be done? In short, colleges will have to rein in costs.
When asked what single step would do the most good, I’ve often responded semi-jokingly that U.S. News and World Report should adjust its college-ranking formula to reward schools with low costs and lean administrator-to-student ratios. But that’s not really a joke. Given schools’ exquisite sensitivity to the U.S. News rankings, that step would probably have more impact than most imaginable government regulations.
Something’s going to have to give.
“Colleges and universities are nonprofits”
Not true. While many colleges are non-profits, the real growth has been
in for-profit school. University of Phoenix, IIT, The Art Institute,
Strayer,,,
https://en.wikipedia.org/wiki/List_of_for-profit_universities_and_colleges
While their growth rate is high as a percentage, those for-profit schools still make up a very small percentage of the higher education market. If they went from 1% of the market to 2%, that’s a 100% increase but still quite small in real numbers. That’s why almost any article that only expresses things in percentages without providing the real numbers is worthless. A common example is “Doing X will double your chances of having a heart attack!” where in fact it might increase the risk from 1 out of 1000 per year to 2 out of 1000 per year.