The last few years have seen unprecedented hard times for the nation’s free spending colleges and universities. Particularly during the worst of the recent recession, many institutions were left with little choice but to borrow money to stay afloat, and many resorted to layoffs and budget cuts as endowments shrunk.
Yet, even amid such frightening financial conditions, some universities just couldn’t stop spending and expanding. Columbia University and NYU notoriously made plans to to expand their campuses in one of the world’s most expensive cities at a total cost of about $6 billion. As I wrote at the time, it’s hard to justify these massive expansions of physical space in the internet age:
If universities truly want to bring affordable education to as many students as possible, they should be pouring every spare dollar into developing online education. Creating a premier, interactive, credentialed, online educational platform would be a far better investment for any university that wants to be a leader in the higher-ed landscape of the future. And it would cost a lot less than $6 billion.
This week, news emerged that the University of Chicago, another of our nation’s elite and highly debt-leveraged academic institutions, is set to borrow $400 million over the coming fiscal year.
Robert Zimmer, hired as president of the University of Chicago in 2006, inherited an ambitious program to improve campus life while bolstering highly regarded academic programmes. The institution stuck to the plan even as it suffered a 21.5% loss on endowment investments in 2009. Its debt has grown in the past four years to $3.6 billion from $2.4 billion.
“We well understand that borrowing for some of these investments entails risk,” Zimmer, whose $3.36 million compensation made him the highest-paid private college president in 2011, said in a statement in August after local reporters obtained a copy of the proposed financing plan. “We cannot, however, scale back our academic and programmatic ambitions in a way that risks our future excellence as a university.”
You’ve heard of “too big to fail”–as applied to our nation’s major financial institutions. I think our nation’s big-spending universities have adopted similar motto, borrowed from the lyrics of hip-hop artist MC Hammer, whose hit song “Too legit to quit,” perfectly describes the spending habits of elite universities engaged in a never ending battle to spend themselves onto the top of the US News & World Report annual college rankings.
All to create dorms and student activity centers that resemble five-star resorts and high tech amusement parks.
These college leaders who never grow tired of spending could learn a lesson or two from the life of MC Hammer. After becoming a huge star, Hammer blew through a $33 million fortune and famously went bankrupt. Looks like the University of Chicago is well on its way to the same end.
Nathan Harden is editor of The College Fix and author of the book SEX & GOD AT YALE: Porn, Political Correctness, and a Good Education Gone Bad.
Follow Nathan on Twitter @NathanHarden