Control the Administrative Expenses to Lower Education Cost

AAEA has assessed and shared the results to the American public on finding the driving factors behind student loans crises in the US.  There are three variables which have positive correlation with the skyrocketed of higher education cost as well as student loans increases.  These three factors are administrative/overhead cost, spending on public services and full professors’ salaries. The American Association of University Professors (AAUP) on its recent report has confirmed part if not all of these findings.  Though, the objective of AAUP’s and our studies are geared toward answering a slightly different question, the results pointed out on the growth of administrator’s spending may have caused college education cost to increase uncontrollably.  Our studies went deeper than that of AAUP’s and we found that in addition to the administrator’s salaries, full professors’ salaries have positive correlation on student loans, but not for Associate or Assistant’s Professors salaries.   

These findings have many implications such as:

  1. Past regulators and governing bodies have less successful efforts to identify the problems for many years which led to the student loans crises in the US.
  2. Both internal and external audit function (as addressed in Generally Accepted Auditing Standards) and other compliance efforts need to be established to prevent such problems to reoccur in the future. This requires each business unit/department/program to develop its owned Standard Operating Procedures (SOP) which is rarely if ever found and practiced by majority US colleges.  Without these guiding principles almost nothing can be done appropriately.
  3. School Board members’ responsibility need to be extended not just to rubber stamped any requests from the school’s administrators, but to conduct its own studies to justify any request on increasing tuition or staff and administrative salary.  The Board needs to have its own capable staff members to carry out such tasks.  The members of the board need to deeply understand the business and economics of education.
  4. Sound budgeting can be implemented at the Department level using cost center approach as discussed in managerial (cost) accounting.
  5. The college education cost increases and students loans rises have triggered the state lawmakers to find ways to solve the problems.  Recent example can be found in Tennessee.

Please let us know what do you guys think?

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