The Durability of Universities

The American university system is remarkably durable, even though Its failings are clearly visible. Colleges and universities roll on, with the only sign of weakness a so-far modest decline in attendance. This is in spite of  mounting costs; scandals like admission bribing and cheating; equally scandalous student debt; high drop-out rates; grade inflation; etc.

In February 2018, I wrote an article about whether universities will face a “crackup” or if they have the stability to keep going as they have. I proposed that we might learn something from other institutions that persist over time, such as the European Catholic Church, especially in the medieval period (500-1500). (This was not an original idea but I haven’t seen it developed by others.)

Like universities, the Catholic Church was a complex body with many components. While it had a single head, the pope, it also had parish churches, charitable hospitals, cathedral schools, monasteries, convents, and bishoprics, all scattered widely geographically, as are our universities and their components.

Furthermore, I wrote: “Both have, or had, their own strict professional hierarchies (chancellor and provost were originally ecclesiastical terms) and scholarly languages (Latin in the Church’s case, arcane idioms in the case of the universities). There are more sinister elements, too: a professional interest in sexual behavior (celibacy then, sexual harassment now), curtailment of heretical speech (then and now), and inquisitions for those who don’t follow the rules.” [1]

The Catholic Church had prestige of a very elevated kind—it provided the route to salvation after death. And it had enormous wealth. Those two assets held it in good stead, and parallel assets characterize our university system.

Universities can’t promise salvation, but they offer long-time naming rights for donors (similar to the gifts made by worried nobles as they approached their mortal end) and, for the young people who go to school, college ranks high in the minds of their families, who are willing to spend and borrow a lot for their children’s future (on this earth, not after death). Sometimes they even make unethical or illicit payments to get their children into college. Universities have prestige.

Now let’s look at the wealth of universities, starting with annual income. State governments are paying $91 billion this year to support their universities (while there have been fluctuations, state governments have generally been a secure source of funds).  The federal government provided $28 billion in Pell grants for poorer students in academic year 2017-2018. Together, that’s $119 billion per year. Add to that the $121 billion spent on research much (no, not all) spent on universities. Thus you get something along the line of $240 billion income per year. This is beyond tuition, which is estimated at $24.7 billion (much of which has come from federal loans; right now, student loans total  $1.5 trillion).

And as for actual wealth, universities have $547 billion in endowments, and an additional $329 billion is now sitting in grandparents’ (and others’) “529″ tuition accounts, which grow tax-free. This doesn’t include universities’ actual assets in terms of land and increasingly sumptuous buildings.

Another way to view the wealth of universities is to look at how colleges spend (or avoid spending) money.

• When UNC-Chapel Hill was revealed to have offered fake classes (no class meetings and only a generously graded paper at the end), the university spent $21 million on legal fees to defend itself. It won a spectacular victory—no accreditation problems ( a brief “hold”) and no rescinding of athletic championships, even though nearly half the 3000-plus students who took the courses were athletes. My point is that a state school could spend that money (formally from “private” donations but money is fungible) without a hiccup.
• Universities are building elaborate student centers. The Tate Center at Georgia Tech cost $58 million. Louisiana State University’s recreation complex (with a “lazy river”) cost $85 million. At NC State, the renovation of the Talley Student Center cost $120 million.
• Furthermore, most endowment money is not spent. In 2005, the devastating Hurricane Katrina forced Tulane University to close for a semester and to permanently end its women’s school as an independent entity. But nothing happened to Tulane’s endowment, now $1.4 billion. A chart showing the endowment’s growth since 1986 (see its p. 5) looks like a climb up a high, craggy mountain range, starting at $200 million. There were major declines only in 2002 and 2008, and those cannot stem from Katrina.

Let’s return to the Catholic Church. Starting in 1517 there was a crack-up. Reformers like Martin Luther were able to convince some Christians that the Church was not the only route to salvation,  and the Church lost prestige. It was torn apart, although it recovered to a large extent. In other words, it survived.

However, in England, the Catholic Church did nearly disappear. That was due to the confiscation of much of its property by Henry VIII, a tremendous loss of wealth.

Can the universities maintain the wealth and prestige that have made them so stable until now? Universities’  prestige could decline as student debt grows and cheaper alternatives arise. Their  land and buildings could become a liability if there aren’t enough students to support the debt and maintenance costs, and the buildings might be hard to re-purpose. Nevertheless, wealth and prestige provide strong supports to the university system—so far.

[1]. Jane Shaw Stroup, “We Can Save the Remnant,” Law and Liberty.