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Business Officer Magazine
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Business Briefs

Short news articles based on research surveys and peers’ business experiences that can benefit institutions

Rising Student Loan Defaults

8.8%

Share of federal student loan borrowers who defaulted on their repayments in FY09.

7 of every 100

The number of students who defaulted on federal loan payments in FY08.

320+

The number (in thousands) of borrowers who entered default in FY09.

+34%

Percent change in the number of students entering default from FY08 to FY09.

Source: U.S. Department of Education Office of Federal Student Aid Web site.

RESEARCH
Report Details Shifts in Cost, Enrollment, and Revenue

Disparities in higher education finance and enrollment are explored in detail in the recently released "Trends in College Spending, 1999-2009" report from the Delta Project on Postsecondary Education Costs, Productivity, and Accountability. The study notes that over the past decade, community colleges have enrolled an increasing share of undergraduate students, but these schools have experienced the lowest share of revenue and the highest reductions in education-related expenditures of any institution type. In contrast, spending at four-year public and private nonprofit colleges has risen.

With current economic conditions, it is very likely that these gaps between enrollment and spending will grow even larger. The report also suggests that higher education institutions have become increasingly stratified by revenue and spending, and that tuition and fee revenue accounts for a larger share of overall education and general funding.

More Students, Less Spending

The Delta Project cost report illustrates recent trends in enrollment by sector and compares these trends with changes in education-related expenditures. From 1999 to 2009, total enrollments in community colleges rose by more than 1.6 million students; however, the colleges' spending on education-related services (such as academic instruction) per full-time equivalent (FTE) student remained virtually unchanged in inflation-adjusted dollars. Four-year private nonprofit research universities saw their enrollments increase by fewer than 200,000 students, but spending per FTE jumped nearly $8,000. Spending by public research and masters' level institutions rose by less than $2,000 per FTE.

As for total dollars spent per FTE, in 2009 community colleges enrolled 6.5 million students-more than one third of all students in U.S. higher education institutions-yet spent only about $10,000 per FTE student annually. This amount is less than that of any other institution type. In contrast, private nonprofit research universities enrolled about 1 million students and spent $35,000 per FTE, the highest of any sector. Public research and masters' institutions combined to educate another one third of higher education students, but spent less than $20,000 per FTE.

The report authors conclude that these trends reflect an increasing stratification in higher education, as institutions that educate the most students have the least amount of resources to do so. These trends also reflect the negative effects of the 2001 and 2008 economic recessions, which forced many states to reduce their expenditures for public higher education at the same time more students were enrolling for job retraining and other purposes.

Tuition Compared With Appropriations and Spending

The Delta Project report also compares changes in spending with shifts in tuition prices, state and local government appropriations, and education-related spending, with data again showing great disparities by sector. At community colleges, state and local appropriations declined an average of $488 per student between 2008 and 2009. Increases in tuition and fee charges, however, generated new net revenue of only $113 per student. And institutional spending on education-related expenditures per FTE declined overall by $254 in this one-year period.

At four-year public research universities, average net tuition and fee revenue increased by $369 per student, while state and local appropriations per student fell $751. Regardless, these institutions increased education-related spending by $92 per student, which suggests that they were drawing on other sources (such as fundraising) to support students. Private research universities increased their spending on education-related functions by a considerably larger amount than they increased tuition and fee revenue ($907 in spending per student compared to $293 in tuition revenue per student), likely taken from other sources.

Overall, these data suggest that all sectors of higher education became much more dependent on tuition, fees, and other nongovernmental revenue sources to support their students and campus operations.

RESOURCE LINK Read the Delta Project college spending trends report.

SUBMITTED BY Kenneth Redd, director, research and policy analysis, 202.861.2527 

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HUMAN RESOURCES
WAHE Conference Focuses on Transformational Change

Change management is a lot like crisis management," noted Norean Sharpe, in her keynote address at the fourth annual conference of Women Administrators in Higher Education (WAHE), held in Washington, D.C, in mid-September. Sharpe, undergraduate dean, McDonough School of Business at Georgetown University, went on to say, "We don't always plan on change-or even expect it. But we need to prepare for it and let it lead us to new approaches."

The theme of the one-day conference, "Transitions: Staying Afloat in a Sea of Change," was echoed in varying degrees in concurrent sessions and plenaries. In the discussion, "Bringing Transformative Change to Your Campus," panelists described a number of trends that create gaps that higher education administration and faculty must bridge, including:

  • Preparing students for different skills demanded by the workplace. Vickie Choitz, senior policy analyst, workforce development, for the Center for Law and Social Policy, said, "One of the areas where we project increased job opportunities is in advanced manufacturing, which requires licensing, certifications, and other specifics. We're working with states on career pathways, especially for adult learners. We want to establish ladders to better jobs by encouraging the student to earn one credential, go out and establish work experience in that area, and then come back for the next level of certification."
  • Reducing the variance in access and graduation rates between whites and minorities. "Gaps in graduation rates are not inevitable," said Mamie Lynch, higher education research and policy analyst, the Education Trust. "Institutional data is so important; you can identify students who are on the verge of flunking out and take steps to turn things around." Lynch described such action taken by the University of Georgia, where the degree completion rate for minority and nontraditional students increased from 32.3 percent to 50.7 percent from 2002 to 2007. University leaders learned that increasing the amount of tutoring and advising helped students stay on track to earn their class credits. Putting students in learning communities also had a positive impact.

SUBMITTED BY Carole Schweitzer, senior editor, Business Officer, 202.861.2566 

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SPOTLIGHT: COMPREHENSIVE AND DOCTORAL INSTITUTIONS
Moving Risk Management to a Priority Post

A university environment includes some unique elements that affect risk management planning. On-campus housing, the presence of many young adults, research laboratories, and transportation are special challenges. Clearly, security and preparedness have evolved as the number and variety of vulnerabilities and hazards facing universities have increased.

At Florida Atlantic University (FAU), Boca Raton, with its 29,000 students on seven campuses and sites, we decided to respond to these increased pressures by adding a certified risk manager to the department of financial services team in 2009. We needed to ensure FAU's compliance with state and federal rules and regulations. We also envisioned the risk manager as a high-level professional bearing the main responsibilities for identifying, addressing, and preparing for risks to the university.

Since we added the position, we have seen several benefits, including a wider recognition and appreciation on campus of the importance of risk management, and significant cost savings.

Assess Complicated Risks

Our location creates quite a challenging environment. We need to consider the annual threat of hurricanes and other natural disasters, in addition to the implications of ongoing research conducted in the Florida Everglades, Atlantic Ocean, and beyond. We factor these issues into an overall plan for campus emergency and safety.

Our risk manager assists in determining specific goals, objectives, and programs to ensure effective and efficient university operations. The manager facilitates interactions with all members of the university community in matters of training, inspections, emergency planning and response, and problem solving. The position is also responsible for all compliance related to applicable regulations.

Bringing the risk expert on board worked quite smoothly, since we'd planned this for a long time and knew we wanted the position placed within our department. Explaining the need for the position and communicating advance plans made all the difference.

See Opportunities for Savings

A primary benefit of our on-campus risk expert was the targeted review of programs and projects leading to cost savings for the university. This grew out of the manager's responsibility for developing, planning, and administering a comprehensive insurance and loss-prevention program. This includes purchasing and claims handling for insurance policies for (1) worker's compensation, (2) general liability, and (3) automobile liability coverage.

Specific returns include:

  • Recovering $7,103 from third parties who had caused damage to FAU property.
  • Obtaining a refund of $59,900 for ocean marine insurance on the sale of a large research vessel.
  • Collecting unreported claims for mechanical breakdowns, equaling $233,736.
  • Achieving reductions in insurance premiums of $477,722, by implementing a master builders' risk-insurance program.
  • Securing $32,462 from the state fund for property losses.
  • Renegotiating a prior settled claim for an added $19,000.
  • Reducing international student insurance costs by approximately $45,000.

Allow Enough Autonomy

We recognize that the role of the university risk manager requires an individual with significant independent judgment in decision making, the skills to analyze complex issues, and the ability to solve nonroutine problems. While universities face tough budget issues, a commitment to designate and support a risk management expert can produce concrete payoff. The return on investment has led to decreased costs, increased ability to identify and manage risks, and more effective responses to crisis events.

SUBMITTED BY Dennis Crudele, senior vice president of financial affairs, Florida Atlantic University, Boca Raton

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