Once thought an indestructible empire, the newspaper industry changed drastically with the proliferation of the Internet. Newspapers lost significant revenue to the Internet (no more classified ads!) after accumulating significant debt in physical plant construction. Revenue declined, but the debt did not. Simply put, newspapers couldn't adapt to a changing world.
In his Huffington Post column, Mark Cuban, billionaire investor and owner of the Dallas Mavericks, says four-year colleges are in the same position as the struggling newspaper industry.
Do We Need So Many New Buildings?
Step onto a college campus and the construction is everywhere. Just last week, I was on the campus of Drexel University in Philadelphia. In most places, you couldn't walk more than 200 feet without navigating major campus construction. Next door, the University of Pennsylvania had only slightly less new construction. Cuban asks, “Why?”
Why in the world are schools building new buildings? What is required in a business school classroom that is any different than the classroom for psychology or sociology or English or any other number of classes? What is worse is that schools are taking on debt to pay for this new construction.
This is all occurring while federal and state funding for higher education is declining. It will be awfully hard for colleges to lower tuition when they’re paying for these kinds of physical plant enhancements.
Focusing on Value
For so many middle class families, the days of picking a dream school and worrying about how to repay your loans later are (or should be) gone. Cuban says students need, not just a college plan, but a college value plan. How will your child get through college without crushing debt?
He never minimizes the importance of a college education, but believes we can economize on high price tag schools by taking introductory classes online or locally to minimize the cost. “It just doesn't make sense to pay top dollar for Introduction to Accounting , Pyschology 101, etc.”
Cuban argues that the days of one school for four years are over. He says, “The days of taking on big debt (to the tune of $1 TRILLION as I write this) are gone. Going to a four-year school is supposed to be the foundation from which you create a future, not the transaction that crushes everything you had hoped to do because you have more debt than you could possibly pay off in 10 years.”
Cuban indicates that administrators making more than $200,000 and new buildings do not add value to your child's education. Moreover, declines in enrollment will force schools to increase tuition, creating a debtor university that risks going out of business, like so many newspapers have already done.
There is something to Cuban’s argument when schools have tuition discount rates approaching 50 cents on the dollar (so for every dollar of tuition they charge, they collect something close to 50 cents) in order to fill seats. This is hardly a recipe for financial solvency.
Time to Compromise?
Consumer expectations, however, may be partly to blame. College administrators know that prospective students are captivated by the new indoor rock climbing wall, the sushi bar in the cafeteria, and striking botanical gardens. We cannot then turn around and complain about the high cost, and as I've said before, I think we must make our expectations of our teenagers very clear.
While college should certainly be fun, as parents, we are not paying for bad behavior. We are paying for opportunities, for connections, and for the growth that will make college an investment and not a disposable payment. While I agree with much of what Cuban has said, I think the answer lies in the compromise of our expectations and campuses’ fiscal responsibility.