Higher education
The college-cost calamity
Many American universities are in financial trouble
Aug 4th 2012 | CHICAGO | from the print edition

WITH its leafy avenues and Gothic buildings, the University of Chicago seems a sober, solid sort of place. John D. Rockefeller, whose money built it, said it was the “best investment I ever made”. Yet Chicago and other not-for-profit American universities have been piling on the debt as if they were high-tech start-ups.

Long-term debt at not-for-profit universities in America has been growing at 12% a year, estimate Bain & Company, a consultancy, and Sterling Partners, a private-equity firm (see chart 1). A new report looked at the balance-sheets and cashflow statements of 1,692 universities and colleges between 2006 and 2010, and found that one-third were significantly weaker than they had been several years previously.

A crisis in higher education has been brewing for years. Universities have been spending like students in a bar who think a Rockefeller will pick up the tab. In the past two years the University of Chicago has built a spiffy new library (where the books are cleverly retrieved by robots), a new arts centre and a ten-storey hospital building. It has also opened a new campus in Beijing.

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