## Friday, January 23, 2015

### The Profits of College Classes

By Professor Doom

Many times I’ve commented on the immense profit that college courses generate. I’ve naturally calculated things very crudely in a three step process. First, revenue for a class is tuition for a student, multiplied by the number of students. Next, cost is whatever is paid to the teacher. Third and last, subtract cost from revenue, and you have profit.

I totally grant this is a simplistic approach, but I claim that the per-class overhead costs, especially at a large school, double-especially for an online school, are minimal compared to tuition revenue. For-profit schools make massive, massive profits, so I know my calculations can’t be far off when it comes to realizing the awesome profits that classes (more accurately, tuition…even more accurately, the student loans) generate.

Anyway, I’m hardly alone in realizing that admin, as is so often the case, is full of crap when they say there’s just no way to make money in “small” classes with “only” a couple dozen students in them.

Someone else also decided to do that math and see the truth of the matter:

--“General Education” refers to those classes that basically all students have to take, usually taught by minimally paid adjuncts, grad students, or instructors. As I’ve shown before, these courses have been reduced to high school level material or lower, and so don’t require all that much ability.

Now, I’ve done the math for schools I’ve taught at, but this time around the calculations are done at Clemson:

1 section of English 345 (fiction writing): 19 student cap
1 section of English 312 (advanced composition): 19 student cap
Total number of students: 94 = 63 in-state, 31 out-of-state
In-state credit hour revenue: 63 x 3 = 189 x \$402/hr = \$75,978
Out-of-state credit hour revenue: 31 x 3 = 93 x \$1020/hr = \$94,860
Total: \$170,388/semester[6]
My salary at Clemson was just over \$25,000/year[7].
On a yearly basis, I was responsible for over \$340,000 of revenue.

So, much like I’ve found elsewhere, we’re seeing a 900% or better return on expenses. That’s a very hefty profit…in this case it’s on classes with 19 students. When you consider there are plenty of college classes with 200, 400, even 1,000 students, it’s close to infuriating when administration says it’s time to raise tuition some more, and raise the class size some more, and lower teacher pay some more, or else the institution, already overflowing with students, just can’t make ends meet.

Where does the money go? Not to English departments or general education, certainly…

Where indeed, does that money go? I want to point out that, once again, we’re talking about a state supported institution…in the face of these kinds of profits, just how much “support” is necessary, anyway? And how is it not enough?

Yes, this is the fault of neglectful legislatures and bloated, corporatist administration and all kinds of other things. Tenured faculty are not to blame for the state of the world, even as I believe that they are uniquely empowered to challenge the status quo.

Heh, the author here comes to the same conclusions I do, namely that the horribly bloated and overpaid administrative staff are key to what’s going on in higher education. On the other hand he’s wrong in thinking tenured faculty can do anything about it. As I’ve shown in my blog many times, tenure means nothing. Even if tenure did magically mean something, administrators are already awarding tenure to themselves…and they have the numbers to overwhelm tenured legitimate faculty. No, at this point what’s needed is a full on reset, or an overnight removal of basically everyone in higher education that has nothing to do with teaching or research (i.e., pretty much all administration).

We also need to get rid of the student loan scam…and none of these solutions are on the table, even though the student loan scam was known as such at least 20 years ago. Anyway, back to what the author has to say…

“We all should be banding together to protest,…”

Hehehe, no. Administration has a chokehold on what’s going on right now…protesters, complainers, and whistleblowers are removed in short order, sometimes brutally. There will be no banding together.  What I like about Inside Higher Education, where I’m quoting from, is they allow posts from readers, so that if something is horribly wrong about the article, someone who knows better can make a correction. Mainstream media doesn’t allow such posts, and that’s a problem. If/when (more realistically, “when”) they provide complete crap you have no choice but to take it at face value, because no reader can make corrections.

Anyway, the readers have much to say here, but not in the way of corrections:

“Additionally, at most colleges, there's also a series of fees that are dedicated to different areas.
For example, at Clemson students pay a \$40 "activity" fee, and a \$12 "software license" fee, and a \$53 "campus rec" fee, \$118 "information technology" fee. That technology fee brings in over \$2 million a semester, all by itself…”

While many news pieces focus on tuition increases, it’s worth pointing out there are MANY other fees involved (one online course I know of has a \$400 technology fee just for that course…and the student provides his own computer and internet access!). One thing missing in the list is parking fees. Again, one school charges \$20 a month if you want to park within a mile of the building where your classes are.

As a former business person, the idea of apportionment being "revenue" or "sales" and the resulting government/public service cost somehow netting a "profit" or "loss" really upsets my sensibilities.

As is quite common, people outside the industry are surprised at just how nutty the approach to institutional revenue is.

Maybe we need to call for an independent audit of the university. I mean, where is the money *actually* going?

Yeah, good luck with getting that audit done in an honest way. It’ll be easier to audit the Fed. Luckily, you don’t really need an audit to figure out where the money goes, just look at the huge size of the administrative/support/non-teaching staff, and their ridiculous salaries.

The underlying assumptions here are that all such classes have instructional costs of just over \$3000 and that there are no institutional grants or scholarships granted.

This is a point many administrators make, as most public institutions don’t really collect all the tuition from the student, for every student. For example, I received a \$500 scholarship for one semester (that covered the whole semester and my books, to give some idea of how cheap higher education used to be before all the \$100,000 a year administrators, one per class at the minimum, moved in).

But…scholarship money still counts as money. For an institution to grant money to the student, it has to first get that money from somewhere. I’ve been involved in awarding a few scholarships: before the scholarship is awarded, first the money for the scholarship is raised. So, no, this is misdirection. Scholarship money first has to be collected before it is awarded.

Even if the school has many blanket discounts (child of alumni, employee discount, or whatever), then if the school isn’t making money on these classes, that’s a sign of horrible mismanagement by administration. Many places give employee discounts…but no sane businessman offers discounts to the point that the business loses money on the sale (at least not generally).

The short list includes: the building, the renovated class room, the digital technology, video, audio, and projection system, electricity, heating and AC, internet, networking, desks, chairs, the staff the maintains the facility, the staff that schedules classes, the staff the deals with the state, accreditation, and taxes, the legal staff, and a slew of others that “support” the classes.

There really are many overhead costs being ignored, but I point out: state schools are supported by taxpayer money. If the support doesn’t go to the students or faculty, and it clearly doesn’t, then is must be going to infrastructure. I also want to point out, for profit schools seem to get by just fine without all that stuff. And, I want to point out that there are accredited schools that charge basically no tuition, don’t have massive endowments or state support, and STILL don’t need huge class sizes to be operational.

No, the real overhead comes from administration. See, every class needs a teacher, that’s pretty obvious. For some reason, in higher education today, teachers are the minority, in many cases outnumbered by 2:1 on campus by administrators. Think that through, and you’ll realize that means every single classroom has, in addition to the minimally paid teacher with the actual knowledge teaching the course, at least one full time, and highly paid, administrator doing, what? I don’t know. Nobody knows. I grant that we need a few, at the beginning and end of the semester, but it’s really nuts how many there are now, full time, doing….nobody knows what.

Seriously, anyone counting the money in higher education knows that tuition has been driven so high, and teacher pay so low, that only wild mismanagement can explain institutions asking their instructors to cover classes sizes over 30 today.