Budget controls, consolidations can improve college affordability

Many people believe America's higher education model is broken. They point, with justification, to the high cost of tuition, the resulting large loan balances students graduate with and the unsuccessful placements and outcomes of graduates. Yet it does not have to be this way. We could improve higher education dramatically if institutions would focus more on their underlying cost structure and increase their focus on outcomes.

According to the College Board, the average annual published tuition and fees at four-year public and private not-for-profit institutions are $27,020 and $37,650, respectively. For students who choose to live on campus, room and board costs add about $11,620 and $13,120 annually to the overall college bill for public and private schools, respectively.

When you add it all up, a student who chooses to live on-campus at a school is looking at an average annual bill of $30,000-$40,000 per year. The upshot is that many students are faced with the prospect of taking out loans, which puts them at a disadvantage for the rest of their lives when they graduate with a heavy debt balance.

This situation is exacerbated if the student can't achieve their desired outcome upon graduation. According to US News and World Report, the average debt balance of a student upon graduation is a hefty $30,000.

Despite these high tuition rates, margins at most institutions have been suffering as a result of embedded costs. One potential solution is to prioritize overhead cost reductions. However, reducing costs is made difficult by necessities like the high level of required regulatory compliance, faculty and administrative salaries, student services and athletic programs and the maintenance of deteriorating facilities. Good headway has been made by many schools in this area; however, much more could be achieved if schools challenge themselves to further reduce embedded entitlements and discretionary spending.

Further, schools must take a long, hard look at the physical footprint of their operations. The impacts of the pandemic have proved that physical buildings are not as important as once thought and the move to online and hybrid classes has been preferred by many higher education students. As such, schools should look to eliminate facilities wherever possible.

The efforts in these areas at the institution where I am employed, National Louis University (NLU), has enabled us to lower our annual tuition and fees for incoming freshman to $11,500, a rate that we believe is one of the lowest, if not the lowest, in the state of Illinois for a four-year college.

Another often ignored solution to solving these issues in higher education is consolidation, which would allow for the elimination of duplicative overhead and likely result in both price reductions and service improvements.

There is clearly an overabundance of higher education institutions (with more than 100 institutions in the Chicago area alone) and all are carrying the burden of overhead that could be shared or eliminated. With any savings achieved, services could be enhanced as more money would be available to address student needs.

Also, the number and quality of offerings could be improved as the strengths of each institution could be melded together. These cost savings should be passed on to students in the form of lower tuition and, most importantly, more attention and resources could be devoted to supporting degree completion and employment through career services.

In 2018, I saw the benefits of consolidation firsthand when NLU acquired Kendall College. The combination was time consuming and full challenges, as accreditation standards needed to be met, and transparency for employees, students and the outside public was critical. However, the result enabled our institutions to lower tuition, provide better service, lower the overall facility footprint and cost and institute a renewed focus on outcomes.

While institutions and companies may be hesitant to embrace the concept of a combination for fear of losing their independence, it is another way to improve our model of higher education.

While a tough job market will continue to be a challenge for today's graduates, universities can take certain smart, fiscal measures now that will lower overall operating costs and lower the price of tuition for students, making good on the American promise of equal access to education for all.

• Marty Mickey is vice president of finance at National Louis University. He also serves on the board of directors for the Central Association of College and University Business Officers and is a member of the American Institute of Certified Public Accountants.