Here's 1 Big Reason College Costs So Much
The Chronicle of Higher Education's most recent Executive Compensation at Private Colleges survey is an interesting read, especially when you consider the disconnect between these college presidents' salaries and the average amount of debt -- $29,400 -- that now sits on the shoulders of the average bachelor's degree recipient.
More than 40 presidents out of 550 were awarded a compensation package that totaled more than $1 million in 2011, which included base pay, benefits, deferred compensation (as well as vested deferred compensation from prior years), and other perks such as debt forgiveness and housing stipends.
High salaries = value?
Many of the top 20 highest-paid presidents work at prestigious private schools like Yale University, Columbia University, and Amherst College, institutions of higher learning that often wind up on various "best colleges and universities" lists. But, does that really mean these presidents are worth the vast sums they're being paid? In other words, are these schools being run with the best interests of the entire institution -- particularly the student population -- in mind?
For example, top-earner Robert Zimmer of the University of Chicago was compensated to the tune of $3,358,723 in 2011, yet his school is ranked No. 5 by U.S. News & World Report's National University Rankings -- in a tie with Stanford University, the president of which is No. 38 for pay. On Forbes' most recent list, Stanford ranks No. 1, based upon factors such as post-graduate success and student satisfaction.
The ability to earn a good living sounds like a swell metric on which to gauge an educational institution, doesn't it? PayScale uses "return on investment" to rank colleges, and the University of Chicago ranks only 116 out of 599 -- not horrible, but not stellar, either. Princeton, on the other hand, clocks in at an admirable 16 out of 599, although its own president comes in at slot No. 51 for compensation -- at a mere $935,326 annually.
If presidents are not being paid to increase the likelihood of student outcomes, why are they being paid so much? Because colleges' Boards of Trustees think they deserve it, apparently. This has led some to opine that the tax-exempt status of colleges like the University of Chicago might be enriching college executives, rather than the students they are meant to serve.
Presidents' pay packages arguably constitute a small portion of the average private university's budget at a median level of $5,466 in salary for every $1 million in expenses. Still, every dollar counts, and high compensation hurts colleges in other ways -- such as squelching donations when prospective donors know that presidential pay at a particular school is in the top 10.
A study by law professors Brian D. Galle of Boston College and David I. Walker of Boston University note that donors draw their purse strings tightly closed when they see that the head of their favorite college is one of the top 10 best-compensated among its peers. The authors point out that, at No. 11, there is no penalty from donors, even though the pay package may be comparable.
Strange, perhaps, but it does highlight the notion that even the wealthy seem to find steep compensation schedules for university presidents distasteful, and refuse to add to the coffers of a school that bestows such largesse upon its leader. This reduction in generosity was evident even though said institutions ramped up their fundraising budgets following the president's induction into the top 10 best-paid list.
Putting that money to better use
Adding together, the high pay, lost donations, and increased spending chasing those reduced monetary gifts, it seems as if these universities and colleges are wasting a good deal of money. Could these considerable sums be put to better use -- say, by reducing tuition and fees for students, or putting the cash toward financial aid?
In theory, yes, but it's unlikely that the colleges with the top 10 highest-paid presidents will reign in compensation for any reason. For those shopping around for the best education bang for their buck, however, delving into the compensation packages of a particular college's leader -- and its relationship to student ROI -- might be well worth it before you a decision.
Looking for a way to secure your own future?
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
The article Here's 1 Big Reason College Costs So Much originally appeared on Fool.com.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.