Academic Bankruptcy

America’s bloated and debt-laden universities are on the verge of a Wall Street-style financial collapse, according to Mark C. Taylor, chairman of the religion department at Columbia University:

If recent trends continue, four years at a top-tier school will cost $330,000 in 2020, $525,000 in 2028 and $785,000 in 2035.

Yet most faculty and administrators refuse to acknowledge this crisis. Consider what is taking place here in New York City. Rather than learning to live within their means, Columbia University, where I teach, and New York University are engaged in a fierce competition to expand as widely and quickly as possible. Last spring, N.Y.U. announced plans to increase its physical plant by 40 percent over the next 20 years; this summer Columbia secured approval for its $6.3 billion expansion in Upper Manhattan. N.Y.U. is also opening a new campus in Abu Dhabi this fall.

The financial arrangements for these projects remain obscure, but it is clear that they will not be completed without increasing the universities’ already significant and perhaps unsustainable levels of debt. Last year Columbia reported $1.4 billion in outstanding debt against a $5.89 billion endowment. N.Y.U. had a staggering $2.22 billion debt with a relatively modest $2.2 billion endowment — one that had shrunk by more than 11 percent over the previous fiscal year. For universities, as for banks, the question is not only the value of current and projected assets but also the availability of liquidity so they can pay off interim debt obligations during a time of financial instability.

Looks like it’s high time for a financial reality check. If it were possible to buy stock in America’s non-profit universities, I would be shorting them right now like George Soros on a Malthusian bender.

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