Chyden Finance: profit from hypocrisy

Two weeks ago, I commented on today’s youth, “What happens when these shallow, self-involved little creeps hit the workplace? Managers are forced to stop behaving like bullwhip-toting toads, that is what happens. Corporate managers are getting a cold, hard lesson in the fact that employees are capital resources and not not office supplies and raw materials.”

Steve Foerster alerts us to a CNN report on “a recent grad of Monroe College in the Bronx [who] is suing her school because she graduated with a Bachelor’s degree in IT and hasn’t found a job yet.”

Steve, drawing on his experience in university student services, continues, “I was amazed how many students seemed to think that all they had to do was drop by Career Services and we’d go to the backyard and pick a job off the job tree and come back and hand it to them. Alas, it’s not so easy.”

Within the context of Steve’s analysis, his comments are spot-on, and I do not dispute his conclusions… within that context. Students enroll, study, and graduate. If they interview well, earned high grades, and show initiative, they can expect to succeed. Suing one’s alma mater is about as clever as suing a venture capitalist for not funding your start-up.

Seen from a different angle, one might sympathize with the young lady featured in the CNN article.

Granted, this seems to be a casebook example of a stereotypically sanctimonious American, egged on by an ambulance-chasing shyster, who refuses to accept personal responsibility and blames everyone else for the vagaries of life in a dynamic modern globalized economy. However, even the most self-involved little snowflake or ray of sunshine needs some kind of stimulus, before the shrill whining of betrayed entitlement can commence.

The facts of this case suggest that there are no winners here.

If trade schools, colleges, and universities offered programs only a) in useful subjects and b) to students who are prepared for rigorous post-secondary education, then it would not be possible for a graduate to hang a lawsuit on an unsuccessful job search during one of the deepest recessions in modern history.

Many, many, many schools in the USA and in other English-speaking countries fail on both counts. They a) offer laughable degree programs to b) semi-literate students whose lives would be much more fulfilling pursuing trades than being also-rans in corporate bureaucracies.

In this particular case, the student paid something like USD 70,000 in tuition to Monroe College in New York for a Bachelor of Business Administration degree in Information Technology, whatever that is.

In all fairness, a Bachelor of Business Administration degree in Information Technology is not the most ridiculous thing out there. Some schools offer degrees in stand-up comedy, or ice skating, or surfing, or sexual science, or PlayStation, or UFOology, or The Beatles, or… You get the idea. (Granted, most of the examples here are British and none is American. These are the results of ten minutes of searching on Yahoo!. US universities have their share us pointless degrees.)

When university degrees are available to anyone who can sign a student loan application, and sold with thinly veiled promises of immediate employment in one’s field of study upon graduation by smooth-talking admissions representatives to the naive and the gullible, expectations are bound to be frustrated.

But first, let’s do a little arithmetic.

In the USA, adjunct undergraduate instructors receive approx. USD 2,500-5,000 per class taught. Figure that instructor payroll represents about 33% of a school’s total costs.

This means that each class taught should generate approx. USD 7,500-15,000, in order to cover instructors and operating costs.

Figure on 20-30 students per class, and this works out to be USD 250-750 per student. (I arrive at this by dividing 7,500/30 = 250 and 15,000/20 = 750.) Throw in a 50% profit margin, and you arrive at a tuition bill per student, per class of USD 500-1,500.

A typical four-year undergraduate degree consists of five courses per semester (5), at two semesters per year (2) for four years (4). 5 x 2 x 4 = 40 courses per degree, assuming that the student passes all classes and does not have to repeat any.

40 courses/program x USD 500-1,500 per course = USD 20,000-60,000 per program

The USD 5,000 figure for instructor compensation above is generous. My experience is closer to USD 1,500-3,000 per course teaching as an adjunct.

In other words, a plain-vanilla, four-year undergraduate degree should cost each student a maximum of USD 40,000, including a 50% profit margin.

US colleges and universities charge twice this amount, because US federal government guidelines for student loans are based on the most expensive and least efficient operators’ costs. If the average costs at Harvard or Yale are USD 1,750 per student per class (instead of the USD 250-750 indicated above), and publishers charge USD 100-250 for textbooks that the instructors require, then the US federal government will guarantee student loans for all eligible schools up to something approaching a total of USD 80,000 per student. Cover students who fail 1/3 of the time (i.e., must repeat half of their classes), as is the case in the USA today, and the total bill can run as high as USD 120,000 per student.

What does Harvard’s woefully inefficient cost structure have to do with Monroe College? When it comes to government, the operating assumption is that one size fits all. A school either is accredited, or it is not accredited. There is no such thing as ‘partially accredited’ or ‘fully accredited’. Accredited schools are eligible for federal student loan guarantees. Unaccredited schools are not eligible for federal student loan guarantees. You’re in or you’re out; there is no in-between.

Whenever the federal student loan guarantee limit increases, a seemingly miraculous thing transpires: schools increase their tuition and fees by almost precisely the same amount.

In other words, tuition in the USA is not a function of instructional costs, but a function of federal government student loan guarantees.

Naturally, college and university administrators will tell a different story, but listen closely, and you will note that all they are telling you is that costs rise to the levels of budgets. No school lowers tuition as its administrators find more efficient ways to achieve educational goals, like online education that obviates the need for classrooms or open texts that can be downloaded for free.

It is inevitable that school administrators will cook up unwholesome degree programs with all that money flowing out of the pens of unsuspecting students onto the signature lines of student loan application forms. Instead of designing programs in response to market demand, administrators design programs in response to the whims of semi-literate individuals who have been raised in predominantly English-speaking countries on the myth that everyone deserves a university degree, school should be fun, and math is hard.

So, while I agree with Steve Foerster’s assessment, I applaud the young lady featured in the CNN article for calling shenanigans (that’s ‘bullshit’ for our younger readers) on schools that hire slick admissions representatives to talk the unwary into signing up for upwards of USD 100,000 in debt that cannot be discharged through bankruptcy for degrees of dubious merit.

Steve closes with, “One final thought. After this, would you hire her?”

As long as she is the only one, probably not (or anyone else with the same or a similar name, just to be on the safe side). However, if others followed her example, college and university administrators would have a very strong incentive to reassess their program offerings and to be as actively involved with job placement as they are with admissions recruitment.

Or, they’d just start having their applicants sign a waiver as part of the admissions process. Nothing ever really changes, does it?

Update your résumé and invest accordingly.

CWE