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Absurdities of American higher education, financial edition

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batty

Pictured: Annual performance review between Dean Tyrell of the School of Interdisciplinary Entrepreneurial Synergies, and Assoc. Prof. Batty, 2034, post-CE.

Oberlin College, the highly-regarded liberal arts college in Ohio (it has a world famous music school, and is also the oldest co-educational institution of higher education in the US), is offering buyouts to faculty and staff, purportedly because of financial stress:

To take the buyout, employees must be at least 52 years old and must have worked at Oberlin for at least 10 years. The college will then pay their salaries for a year after they leave and waive health insurance premiums during that time. . .

One tenured professor taking the buyout at Oberlin is Roger Copeland, who has been teaching dance and theater there for 41 years. The 66-year-old professor (whose former students include Girls creator Lena Dunham) said he was surprised to get the offer as the semester came to an end.

“I was completely dumbfounded,” said Copeland, a few hours before signing the separation agreement. “I don’t think anybody suspected that the [financial] situation could be so bad.”

Copeland hadn’t plan to retire for at least another four years, but said he couldn’t pass up the deal. He says he understands why the college is doing it, and thinks it will inject the faculty with fresh blood and new ideas. “For what they pay me, they can get two people out of grad school,” he says.

About 85 people so far have accepted the buyout (16 are professors and all are tenured; the rest are administrative and professional staff), representing about 25 percent of all eligible employees, Krislov says. He expects this to save the college about $3 million per year, depending on how many positions are replaced. According to him, the goal isn’t to replace tenured professors with non-tenure-track faculty. “Our commitment to tenure and tenured professors is iron clad,” he says.

Let’s take a look at just how dire the financial situation is at Oberlin. The following figures are taken from the school’s four most recent publicly available tax filings, for fiscal years 2011 through 2014. All figures have been rounded to the nearest million:

Average total revenue: $266 million

Average total expenses: $221 million

Average revenue over expenses: 20.4%

Twenty percent! A business with comparable figures would be considered fabulously successful — and unlike a business, Oberlin doesn’t pay taxes on its excess revenue, because it’s a charity. (A charity that in 2014 paid this guy $541,000. The median price for a house in Oberlin, Ohio is $133,000).

What’s been happening to the price of attendance? In FY2014 Oberlin collected $167,000,000 in tuition and room and board, which works out to about $57,600 per student. The school redistributed $52,000,000 of that in grants, so the average real charge to students was just under $40,000.

This coming fall tuition plus room and board will be running at $66K and change, so the college will probably be charging around $47K per student in average real attendance cost. (The average real cost to students and their families will probably be around $41K after taking into account third party payments, in the form of government grants, tax credits, and private scholarships).

I’ve only got tuition info on Oberlin going back to 1988, when tuition was $11,864 ($24,093 in constant 2016 dollars). At that time average room and board at four-year private non-profit colleges was about $3600 ($7300 in 2016 dollars), so in inflation-adjusted terms the discounted cost of attendance at Oberlin is more than 50% higher than the sticker cost of attendance 25 years ago (I don’t know what the discounted cost was back then).

Oberlin’s endowment has just about doubled in real terms since 1990, from $421 million (2016$) to $832 million. That’s about $13,000 in expendable income per student per year, assuming the standard endowment distribution structure of 4.5% per year. In other words, in real inflation-adjusted terms, Oberlin’s endowment by itself is throwing off enough income to pay what would have been 55% of sticker tuition in 1988, and probably close to 100% of sticker tuition in 1975 (average sticker tuition at four-year private colleges was $10,088 (2015$), although historically Oberlin tends to run at about 50% higher than average). Now of course that sum is only 25% of sticker tuition.

This site estimates that in five years sticker COA at Oberlin will be $88K, in ten years $112K, in fifteen years $143K, and if you’re having a baby this year you’d better plan to spend $165,000 (per year) to send your special snowflake to Oberlin, although since the faculty will have been replaced by Nexus 6 models by then, the immense cost savings will surely be passed on to “consumers.” (I kid — obviously they won’t be passed on, because the college’s administration will at that point equal the total population of Rhode Island).

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