Daniels Is Proving Just How Bad Colleges (and People) Are at Controlling Costs

Mitch Daniels took over the presidency of Purdue University in 2013. They have yet to have a tuition increase on his watch. That, quite frankly, is remarkable in the world of higher ed and, perhaps, even unimaginable in a world in which annual tuition increases are a given. For more details, I refer you to this Inside Higher Ed story.

I’m particularly fond of the Daniels story because he’s proving me right. And everyone likes to be proved right.

Since becoming intimately familiar with the world of higher ed, when preparing for and then occupying the presidency of a college, I’ve contended that annual increases in the cost of a college education were not inevitable, as many claim, but were, in part, the product of gross mismanagement, namely, the pathetic inability of college trustees, administrators, and faculty to control their costs. Stated differently, higher ed is smothering in waste, inefficiencies, and extravagant spending.

They get away with it because students and their parents are willing to pay the ever-rising prices, in tuition, fees, and room and board, and are willing to go into debt to finance these purchases. Moreover, thanks in part to the cartel called the accreditation system, the competition isn’t there to constrain price increases, as it is in many other industries. But that doesn’t make it right or without consequences.

One of the consequences is student-loan debt, which is now in the neighborhood of $4 trillion. Not that most college trustees, administrators, and faculty care. They don’t. If they did, Daniels would have more company in his campaign against out-of-control spending. And Purdue wouldn’t be alone in holding the line on tuition increases for seven straight years.

Colleges and universities mismanage resources on so many levels. But, of course, they’re not alone. Their bad habits are shared by other nonprofits and governmental agencies — organizations that are not accountable to investors. But it’s not that all for-profit organizations excel in this regard. They don’t. Many of them do a poor job of controlling expenses, too. But, overall, they do a far superior job than their nonprofit relatives.

It will be harder for other colleges and universities to peddle their excuses now that Daniels and Purdue have shined the spotlight on them. Yet I don’t expect much to change for most institutions. They’ll continue to increase prices every year.

There’s only one thing that will bring about change, and that’s competition and consumer awareness. If and when students stop enrolling because there are better values to be had elsewhere, then and only then will boards of trustees hire administrators with the skills and guts to act in the best interests of the students.

But there’s a bigger lesson to be learned here, Vera, for what we see in the world of higher ed and organizations generally, we also see play out in the world of household finances.

You see, many individuals do a very poor job of managing their expenses, too. Hence, household debt is sky-high. Individuals carry incredible levels of mortgage, auto, education, and credit card debt, oftentimes at ridiculously high interest rates.

The debt is like an anchor. It limits people’s freedom and frequently is the source of considerable stress and anxiety. Meanwhile, drug addiction is up, usage of anti-anxiety and antidepressants is at record levels, and life expectancy is down. I certainly wouldn’t contend these conditions are solely the product of debt-induced stress, but it seems obvious they must have something to do with our societal values and the choices we make.

There are better ways of living, but they all start with controlling your expenses and not living beyond your means. And understanding that happiness can’t be bought. Not even on credit.

They also start with being clear about one’s priorities. In Daniels’ case, he was committed to providing an affordable education to Purdue’s students. In the case of an individual, you have to be clear what your objectives are.

Is it to have as much stuff as possible? To keep up with your neighbors? To project your success to the outside world? To drive a luxury car? To wear the latest fashions?

Or is it to be free and happy? To be debt free? To not be hostage to your current level of income? To have options?

Depending on your objectives, you’ll make very different decisions. And they’ll have very different implications for your life.

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