Why Biden’s loan forgiveness program is a pain for businesses
According to US News & World Report, the average cost for a four-year private college is $38,185 per year and state colleges (for out-of-state students) are $22,698. Adding in the cost of room and board – about $15,000 – tuition at a private university can easily cost over $200,000 over a four-year period. The cost varies by state, with Massachusetts having the highest average annual tuition of $47,980 for its private, non-room and board institutions.
Why so much? It’s because of the bloat.
Mark Perry of the American Enterprise Institute shows that the cost of a college education has risen about 170% (and the cost of college textbooks has risen almost the same) since the year 2000, a rate exceeding all other consumption costs other than health care.
“If tuition increased at the (rate) of inflation over (the) past 50 years, the cost today (tuition, fees, room/board) would be less than $10,000,” he said. he tweeted a few years ago.
According to a report by Forbes, expenditures for administrative activities in universities accounted for only 26% of total education expenditures in 1980-81, while teaching expenditures accounted for 41%. But in 2017, the two categories were almost equal: administrative expenses accounted for 24% of total school expenses, while teaching expenses accounted for 29%.
Research site bestcolleges.com says college professors in the United States earned an average of $143,823 in 2021-22. And yet, teachers typically only spend about 40% of their time on teaching-related tasks, according to a report in Inside Higher Ed. And they’re enjoying the summers. A study by the American Council of Trustees and Alumni reveals that from 2010 to 2018, “non-teaching expenses – including student services (29%) and administration (19%) – grew faster than educational expenses. educational (17%)”.
Last week – and just three months before a crucial midterm election – President Joe Biden announced a student loan forgiveness program. Many on the right complain about the program’s potential shortfalls and long-term costs to taxpayers. Those on the left say it does not go far enough. But lost in all of this is the reality of who is really responsible for these costs: the colleges and universities of this country.
They may be forced, under the president’s plan, to cap overhead so their students are eligible for federal aid. They could be mandated, according to industry standards, to maintain a certain level of administrative costs related to teaching, impose more teaching time and get rid of their out of touch tenure system, where some professors are literally guaranteed a job for life, regardless of their productivity.
Colleges and universities could switch from four- to three-year programs like many other countries, saving students and families 25% on their tuition. They could switch to a 12-month course program like the rest of the real world. They could provide more options of online options and self-study at a lower cost to earn credits. They could collect more money for student tuition reimbursement and financial aid instead of building giant football stadiums, luxury dormitories with hot and cold water toilets and cafeterias that serve sushi 24 hours a day. /24 and 7/7. But they don’t. And who suffers in the end?
It’s not just people who pay school fees. Or the taxpayers footing the bill for the presidential program. It is the people who are forced to bear the extra costs created by this naïve student brandishing her useless diploma: the business world.
Most small businesses like mine avoid hiring kids right out of college. Why? Because these students, these graduates, these academics… they don’t know anything. They have little real-world work experience. Finance graduates have never done a weekly disbursement cycle, detailed investment analysis, or even know how to create advanced macros in Excel. Marketing graduates don’t know how to use a simple customer relationship management system or send out a mass email marketing campaign. Engineering students are not familiar with the actual designs of real projects. The developers have never worked with a development team. Many say their internships — if they had the chance — were far more valuable than the classroom instruction they received from disconnected professors teaching theoretical principles that simply don’t apply to the real world.
So who should provide the real education that our colleges ignore? America business.
That’s why companies like Google, Microsoft, and Amazon don’t require college degrees to get a job. That’s why a recent McKinsey study found that only one in four employers think traditional universities are “doing an adequate job of preparing graduates for the world of work.” And that’s why about a fifth of recent graduates said their college education “didn’t equip them with the skills needed for their first job,” with “about half deciding not to apply for entry-level positions.” because they felt they were not qualified”. That’s according to a new survey administered by Cengage, a publishing and education technology company.
The president’s pardon plan addresses none of that. It allows our university system to continue doing the lousy job it has been doing — and waiting for corporate America to pick up the tabs.
I can understand the need to help students get out of the huge debt they have accumulated. But what about the authors of this debt? What about universities with excessive overhead and bloated infrastructure that raise tuition fees to astronomical levels and then produce students who are not equipped to do real work? What holds them accountable? Unfortunately, not the president.
So it’s not just taxpayers who have to bear the brunt of this misguided loan forgiveness program. It is businesses – large and small – that are forced to step in and provide the necessary training and education that our colleges do not provide. Nobody mentions them. And yet, they are the ones who suffer the most.
• Gene Marks is a CPA and owner of The Marks Group, a technology and financial management consulting firm specializing in small and medium-sized businesses.