Cooper Union Ends a Longtime Custom: The Free Degree

http://www.nytimes.com/2013/04/24/nyregion/cooper-union-to-charge-undergraduates-tuition.html?pagewanted=all&_r=0

by joe8756438 • 13 years ago

93 115 13 years ago

bkanber7• 13 years ago

It's a sad day for education. I'm a Cooper alum and have been following this fiasco for quite some time. Feel free to ask me any questions you may have and I'll do my best to answer them.

brudgers2• 13 years ago

My grandfather was a first generation American. He was able to attend college by earning admission to The Cooper Union. Tuition would have kept him out.

luke_s• 13 years ago

So, its this really caused by them borrowing $170m to play the stock market? What were they thinking?!

Also: What happened with the failed fundraising drive? I would have thought such an exclusive school would have had many well off graduates, who would be happy to help out their old school in its hour of need.

bkanber7• 13 years ago

Not quite. The media saying that the loan was for playing with the stock market is erroneous. The $175M loan was to build a new building in the east village. However, when the building was complete, some geniuses decided that the leftover money would be better spent in the stock market rather than using it towards paying back MetLife. They did calculations and saw that the gains from new investments would outpace losses from the additional interest. It was a hedge, basically. But then the recession hit, and naturally that investment failed, leaving Cooper both without gains from the investment AND with extra debt burden.

kingkawn2• 13 years ago

This really feels like a smaller version of the American story. Corporate boards make large investment gambles, stock market tumbles, the regular people end up paying when it all goes south. Nobody on Cooper's board has been asked to step-down for the decisions that led to this crisis.

bkanber7• 13 years ago

We alumni have actually asked basically the entire board and the Cooper president to step down. (Edit: though I don't believe we've made an official petition yet. I'm sure that'll happen soon.)

Crake8• 13 years ago

Good.

kingkawn2• 13 years ago

glad to hear it, they are so incomprehensibly bad it is hard to put into words. They took a beautiful thing and ruined it for what I do not see. A new building? Higher profit margins? A desire to keep-up with the aspirations of the other corporate boards they are on?

SoftwareMaven5• 13 years ago

One of the biggest problems in higher ed shows its face here: increased administration costs[1]. It is ridiculous how bureaucracy has insinuated itself so thoroughly and, as a result, has driven so many costs up, especially during a time when people should be getting more productive thanks to technology.

1. http://www.bloomberg.com/news/2012-11-14/bureaucrats-paid-25...

HarryHirsch3• 13 years ago

The chief problem besetting universities in the US is administrative bloat, administrative bloat and reduced NIH funding lines. The two problems besetting universities are bloat, reduced NIH funding, and a collapsed endowment due to the funding crisis. And reduced state funding. Amongst the problems besetting universities are bloat, reduced NIH funding, and a collapsed endowment due to the funding crisis, reduced state funding, and reduced alumni donations.

Says Cardinal Ximenez. Pinning the very real problems facing colleges and universities on one cause, top-heavy administration, and then insisting that it can be remedied somehow through technology is simplistic.

SoftwareMaven5• 13 years ago

I did not say it was the only problem, nor do I believe it is. I do think it may be the most critical one, but that is just an opinion with only data from having worked in the higher ed vertical once upon a time.

The reason I think it is most critical is two-fold. First, extra administration just pulls money away from the actual teaching in salaries. But worse, the costs grow exponentially, as administrators ensure people know the "value they bring" or grow their "fiefdoms". The actions wind up creating additional costs and drag throughout the organization.

Universities have seen a near doubling of non-teaching staff[1][2]. These people do not bring much value to students, instead, they focus on the university. But it's the students that pay their salaries.

Now, a bigger question is how to fix it. The reading I've done on it lays much of the blame on the easy availability of student loans: they've allowed universities to jack up tuition prices well beyond the consumer index. Universities kept the teaching ratio about the same[1], so students get roughly the same education, while employing many other professionals and administrators with the extra money they could pull out of the system. Because they can continue raising tuition, they have a way to keep their staff through spending cuts from their funding sources.

To fix the administration problem, you have to fix the student loan problem. Unfortunately, it's a catch 22.

1. http://www.washingtonmonthly.com/magazine/septemberoctober_2...

2. http://www.economist.com/news/united-states/21567373-america...

rdtsc• 13 years ago

That is always my question. Where is all this money going? Tuition goes up well above inflation, that money doesn't disappear? Are more professors hired, more facilities built? Keep adding middle managers and secretaries?

rdouble5• 13 years ago

For state schools, there are many websites where you can see where all the money goes. There are armies of administrators who make unbelievable salaries. My sister is an academic and her advisor went into administration which bumped his salary up from $90K to $400K+.

HarryHirsch3• 13 years ago

State and federal funding has shrunk dramatically, and universities must make up the shortfall through tuition. At my university they are building new dormitories, from money out of the general fund, and they hope to recover this through increased enrollment.

They are expanding the faculty, too. But here is the problem: there isn't an infinite supply of capable students; the squabble that is going to happen for the few capable students in the mediocre horde isn't going to be fun. I predict that the model isn't going to be successful, but I cannot see what is going to take its place.

prostoalex3• 13 years ago

California top 2 public salaries are sports coaches (back in 2011), that's before pension

http://www.sacbee.com/statepay/

Add up the loans and loan interest to build out sports facilities, hundreds of "athletic directors", bunch of underlings they direct on a daily basis, staff and maintenance hired to run the sports facilities, sports scholarships handed out to gifted students, multiply by number of universities and it starts to add up.

specialist• 13 years ago

No contest on rising overhead.

But my understanding, in my state, and I have skin in the game, is that tuition is rising as state subsidies are declining, pretty much 1:1. Whereas previously residents would get a discount compared to out of state students, pretty soon there will be no discount.

Said another way, all of my state's universities will be 100% tuition supported within a few years.

tokenadult• 13 years ago

What is the level of alumni donation like at Cooper Union? I would think a free education in architecture or engineering (I can't say the same about a free education in art) ought to have some real economic value, and allow some alumni to pay it forward to keep alma mater financially sound.

http://www.collegeresults.org/search1b.aspx?institutionid=19...

brudgers2• 13 years ago

Apparently, you are unfamiliar with the economics of architectural practice. Six figure salaries are for senior licensed staff. The typical age these days for completing licensure requirements is about 33 based on the few states which have made such data available...and new graduates, well New York City has a long tradition of unpaid internships ( graduates are interns in the licensure process). In the heady days of the boom, an intern from a top school at a big firm might make 60k - for 70 hours a week and holding a degree which takes at least five years to complete.

To put it in perspective, Frank Gehry was unknown until his mid-forties, and only came to the national spotlight for work he did on his own house. How many programmers do you know who are still running a company in their 80's?

Edit: Mathew Arnold did the study which extracted the age at which licensure is achieved. It is presented here: http://www.di.net/blog/tag/ncarb/

Matt is a Cooper Union Alum. I played a minor role in the data collection phase - I egged him on.

mturmon• 13 years ago

All that. And, if you're at a small firm, you're often chasing small commissions with cheapskate clients who use all kinds of methods to stiff and delay payments. It's tough to build a good portfolio that way. (Like lots of design work in that regard.) Add in the cyclical nature of the construction trade, and it's a rough business.

bane• 13 years ago

Architecture is currently oversupplied with architects. The salaries are not that great, especially for starting (it runs under $50k and more likely in the low 40s).

sources

http://www.ehow.com/info_8019468_average-starting-architect-...

http://stats.bls.gov/oes/current/oes171011.htm

(a few architecture boards I frequent, for the cool pictures, are full of endless complaining about the lack of jobs and the poor pay for starting architects)

http://www.jobshadow.com/interview-with-a-general-architectf...

Starting salary right now is probably $32,000 to $33,000. Then, licensed architects, usually licensed architects are making around $50,000. It varies between all of their capabilities .

ics2• 13 years ago

Also keep in mind that all of these people, regardless of salary level, are pulling 60-80 hour weeks on average, often without pay.

HarryHirsch3• 13 years ago

According to Cooper Union’s president, Jamshed Bharucha, it currently operates at a $12 million annual deficit. The number reflects several factors: ... most significantly, $10 million a year in payments on a $175 million loan the school took out a few years ago, in part so that it could invest money in the stock market.

And this, ladies and gentlemen, is why meaningful bank regulation is long overdue. The signs of the present crisis were there to see for anyone with eyes in 2005: in that year my ex-landlady, who was from Bushwick, one of the poorest parts in New York, bought five rental properties with no-money-down loans.

Let's have this again: Bank of America found nowhere better to invest than in this clueless lady that perceptibly could not run her rental empire successfully, and they loaned her the funds anyway.

eru3• 13 years ago

And the problem is not so much that the bank made a mistake, but that those mistakes affect the rest of the world so much.

If a normal company makes a bunch of mistakes, they go bankrupt, and competition takes over.

MaysonL• 13 years ago

The problem was that, for the guy making the loan, and his superiors all the way up, this was not a mistake, but rather the whole foundation of their bonuses. The loan was almost certainly at a higher than normal interest rate, and thus when bundled with other such loans, could be sold at a substantally higher price, thus generating higher profits. This, even though everyone making these loans knew (or should have known) that there was no way they were going to be repaid. The trouble was that the bank regulators, unlike those in the 80's during the savings and loan crisis, let this go on unchecked, and have not prosecuted anyone for the massive frauds that took place.

Note, of course, that the profits booked for such loans, were temporary and delusional. The bonuses paid, however, were real, and permanent - never clawed back.

rodgerd• 13 years ago

The problem is the bank isn't allowed to go, well, bankrupt. Why do sane risk assessment when the taxpayer will underwrite investors' mistakes?

examancer• 13 years ago

If she had been able to run a business, now would be a good time to own property in Bushwick. Seems to be quickly gentrifying and rents are increasing.

prostoalex3• 13 years ago

They would probably then get a loan from a credit union or a sovereign fund, or bond buyers with appetite for junk, or one of those fancy Silicon Valley social lending sites.

It's not like Cooper Union is the paragon of financial prudence here, borrowing money to play the stock market.

At least BofA could repo your landlady's estate, rent it out, and have it bounce back by now.

rrrrtttt• 13 years ago

I don't see how your conclusion follows from the data. It appears to have been a very wise decision by the bank, given that even though Copper Union's investments have gone bad they're still paying the loan back. If I were a bank I would jump at an opportunity to own a loan that's backed by the land under the Chrysler building.

leoh• 13 years ago

I agree with his conclusion. Another way to put this: you should absolutely never invest money you can't afford to loose.

fusiongyro4• 13 years ago

I find the whole idea of borrowing money for investment purposes a little strange. Isn't that basically just gambling?

fijal• 13 years ago

It's a gamble along the lines of "I bet I can invest money better than the bank". Often turns out the bank can invest money better. I wonder who convinced them to invest, er, gamble.

reeses• 13 years ago

It's just debt arbitrage. The problem is that they were not sufficiently sophisticated (i.e., they were ignorant about how the game was rigged, the house was built on an old cemetery, or that they were walking through the part of town with the highest violent crime rate) to profit in an extremely hazardous environment.

I won't get into the "providing liquidity" or "it's just moving money around" arguments (feel free, though), but it's not significantly different from taking out a loan or accepting funding for a start-up. In most cases, you are accepting more financial risk than you can afford to pay in the belief that you can leverage that capital to generate a profit above the principal and interest.

While in come cases it can be very much like gambling, that also covers "games" where skill can influence the outcome. For example, slot machines in a Russian casino are probably not the best risk. However, if you're a good poker player, you can do quite well in private games.

arethuza3• 13 years ago

Of all the possible reasons for borrowing money I would have thought that investment is by far the best!

namdnay• 13 years ago

You could argue that this is exactly what you're doing when you buy a house. You're more or less borrowing money to invest it in real estate. I think the problem is borrowing money for risky purposes (which btw seems to be the scenario for about 50% of gangster related movies)

roel_v3• 13 years ago

No, it isn't. People across the world make billions (combined) every week doing just that. From Fortune 500 LBO's over leveraging assets to finance real estate portfolio expansion (despite what you read in the papers, there are still many profitable ways of doing this) to bank loans for starting small businesses - it's all about risk management and entrepreneurs having better access to information on profitable opportunities than those with capital (often, banks, but also angel investors). I'm a bit fed up with the 'finance = gambling' fallacy - there is a spectrum of risk profiles, and money can be made in arbitraging this risk, without it being 'gambling' (which is, by definition, risking money on a 100% or near 100% stochastic process. Yes I realize one can argue that poker wouldn't fall under gambling under that definition, but I'm not talking about the margin).

nohuck13• 13 years ago

What would bank regulation would have done to stop Cooper Union's getting a loan and blowing it?

If you own the land under the Chrysler building, someone is going to be willing to lend you money. It seems to me this is the bank functioning pretty well.

scotty793• 13 years ago

Regulation that would requie borrower to declare what the loan would be used for and force lender to get all the money back if the borrower spends it on something else.

I'm not saing that this would be good regulation or if this regulation would prevent this exact case. Just giving an example.

patio11• 13 years ago

And this, ladies and gentlemen, is why meaningful bank regulation is long overdue.

This would sound a little less popular as: "Even if your college owns the land under the Chrystler building and has entirely predictable cash flow for loan service, you should be unable to construct a new academic building which you sincerely, but perhaps unwisely, believe to be your most important priority, unless you can come up with $160 million in cold hard cash."

I'm just finding it hard to square the narrative of sophisticated Wall Street operators conning low-sophistication average Americans into making wildly leveraged bets on real estate with the facts of this case, where (presumably) highly educated New Yorkers who own a lease with NPV of several hundred million dollars are assumed to be incapable of making a judgement call like "Do we want to build out facilities to support our core operations or not."

arethuza3• 13 years ago

I must admit that I don't spend a lot of time on HN defending banks, but I'm not sure what they are supposed to have done wrong in this case. A commercial entity wants to borrow money and they have plenty of assets to cover the loan if it goes bad - not the bank's fault they were bad at investing.

robryan• 13 years ago

Well the bank would normally be on the hook for making the bank loans. Unless it bought insurance then it would only be on the hook if the insurer failed. Luckily they had buddies at the fed/ government to ensure this insurance was paid out at the full 100 cents on the dollar.

signalsignal• 13 years ago

Bank regulation isn't worth the paper it's printed on. The contracts reflect the culture, and if the culture is rotten the benefits will be the same.

D_Alex• 13 years ago

>...it currently operates at a $12 million annual deficit. The number reflects several factors ... most significantly, $10 million a year in payments on a $175 million loan the school took out a few years ago, in part so that it could invest money in the stock market.

In case you were wondering what is the real cause of this event, 85% of the problem is due to an ill advised stock market gamble.

Which brings me to my hobby horse; why are stockbrokers, financial advisors and investment bankers able to collect such huge pay? Y'all should stop feeding these leeches.

bradleyjg4• 13 years ago

I hope the entire board that approved the gambling scheme has been removed.

If not the state attorney general, who is responsible for supervising non-profit boards, should open an investigation.

MichaelApproved• 13 years ago

Why not kick out the board and open an investigation?

rdouble5• 13 years ago

I'm not sure what precedent there would be for either of those actions.

All of the major universities "gamble" with their endowments in the various markets. There's the corny adage that Harvard is a hedge fund with a university attached.

kintamanimatt2• 13 years ago

The funny thing is, if it were to have paid off it may have been incorporated into business lore in much the same way as the story of FedEx's founder's Vegas trip has. People would have called Cooper Union's gamble a good thing, and while acknowledging it as reckless (or, more charitably, risky) would have also argued that you can't argue with success!

Then again, where is the line between reckless and calculated risk? A lot of non-entrepreneurial people would call the business of startups a reckless gamble.

cpeterso• 13 years ago

Gambling your company's last $5000 in Vegas is quite different than taking out a $175M loan to gamble.

bradleyjg4• 13 years ago

FedEx (alledgedly) was otherwise bankrupt; Cooper Union was just fine. It's administrators and board members were just having a severe case of building envy. Go on any university campus in the US and you will find them building something. I've never heard of a building educating anyone.

jcheng• 13 years ago

According to this[1], $160 million of that was for a new building.

> And what of the huge new $160 million (ish) academic building? The trustees still say that it has nothing to do with the fiscal crisis, despite the fact that it’s responsible for some $10 million a year in interest payments

[1] http://blogs.reuters.com/felix-salmon/2012/04/25/why-cooper-...

danielamitay2• 13 years ago

I understand the financial mistakes (underperforming investments). I understand the building mistakes (extravagance, over-spending). What I don't understand is this policy that will (in my opinion) destroy The Cooper Union's core asset: the student body. Having attended, I whole-heartedly believe that nearly all of Cooper Union's value-add is in being surrounded by incredibly intelligent peers. Peers who are now less likely to apply or attend.

Me: Spent two years at Cooper, currently graduating from NYU.

Crake8• 13 years ago

Why did you transfer? Just curious.

danielamitay2• 13 years ago

Basically, I derive a significant amount of esteem and happiness from making things that people use. It was this that lead myself and those around me to believe I should pursue Engineering. Unfortunately, I derived very little to no esteem from what I felt was merely "book learning" at Cooper. The school system I grew up in was extremely liberal and forward-thinking, so Cooper Union felt extremely rigid to me (although I acknowledge the possibility that all Engineering programs are like this). I simply couldn't survive four years like that.

Ultimately, I studied Economics at NYU, so I moved away from Engineering to allow myself to pursue development on my own. There are other reasons why I moved to Economics, but thats the gist of it.

brianbreslin2• 13 years ago

I had never heard of cooper union before, but am curious, did they have a huge endowment to fund the school for so long? The article states they own land under the chrysler building, and the founder endowed them with the buildings and land 100+ years ago. However for ongoing expenses (staff, upkeep, etc), how were they funding this prior?

rdouble5• 13 years ago

They just have one building, small staff and student body, and don't have to pay taxes. The main expense is salaries.

brianbreslin2• 13 years ago

Yeah but with no tuition how do they even pay that?

kkwok• 13 years ago

When your expenses are greater than your revenue, increasing your risk exposure is not a real solution...

cinquemb• 13 years ago

Hardly the first university to step up to the chopping block faced with growing expenses y/y.

FRBNY website has some nice chart porn for those looking for more insight into the student loan debt bubble thats in full upswing :D

loucal• 13 years ago

from free to 40 grand a year...

ics2• 13 years ago

To be fair, every semester we were given a bill for the total cost with tuition "discounted", so it usually looked something like:

    Subtotal: $37,000
    Amount Due: $1400 (student fee)

I thought they were just making passive hints until the new president came in and had to tell us all the bad news...

SeoxyS• 13 years ago

The part that I find the most repulsive about this – aside from the fact that the school got itself into debt by borrowing money to gamble it, and then lost it – is that its board of trustees went from a visionary model of free tuition, and against the advice of the professionals it hired to analyse the decision, opted, on purpose, for a sliding scale.

Schooling in america is not fucked up because it charges tuition; that's fine. It's fucked up because it charges tuition so unequally. Often, half the student body does not pay a dime, while the other half gets itself in massive debt because of bureaucratic technicalities. In my case, I paid full $50k/yr tuition, by myself, because not being a US citizen made me ineligible for all scholarships, whereas many of my peers got a free ride even though their families were much wealthier than mine. All around me, and throughout the academic culture of the united states, I see this. Students struggle to battle for the few scholarships schools offer subsidized by the financial hardships of other students.

We'd all be much better off if we abolished all scholarships and dropped tuition to a price much more reasonable for everybody. School ought to cost 5-10k a year, not 50. And everybody should pay it, or take out a loan for it, because at that price, it's a no-brainer.

argonaut5• 13 years ago

To be fair, I've examined the way college admissions works in the US, and by and large those who get financial aid actually need it, and those who are charged full freight tend to actually be able to pay full freight.

Secondly, in the case of private institutions, they are private institutions and are largely free to spend their endowment as they wish. Most thus choose not to give financial aid to internationals, but some do give aid.

Crake8• 13 years ago

Well, and then you have people like me who had to wait 6 years to become eligible for enough aid to even pay tuition, much less pay for food or rent. (I applied for about 40 scholarships when I was 18, so it's not like I didn't try or anything.) I wasn't out to study Chicano Lit or whatever, either; I'm an EE+physics major. Meanwhile, many of my friends who studied liberal arts with thousands of dollars of financial assistance from the state and federal government continue to work the same level of job they held in high school.

thebooktocome2• 13 years ago

Yes, it's unfair that international students get boned by almost every step of American higher education. On the other hand, there's (still, for some reason) massive international demand.

> Schooling in america is not fucked up because it charges tuition; that's fine. It's fucked up because it charges tuition so unequally.

You use "scholarships" as the example in the rest of your comment, but the dominant price difference in American tuition is probably the difference between in-state and out-of-state tuition. International students (and non-residents) pay out-of-state tuition because the state is betting on its residents remaining in the state long enough to repay them in property and sales taxes. (The situation isn't nearly as sane as that, but it's approximately so.)

Most scholarships are run by private groups and individuals (though sometimes administered by the university), and seem to be completely within their rights to discriminate.

> I paid full $50k/yr tuition, by myself

Why didn't you go somewhere cheaper? (Oh, right, supply and demand didn't stop being a thing while I wasn't looking.)

> We'd all be much better off if we abolished all scholarships and dropped tuition to a price much more reasonable for everybody. School ought to cost 5-10k a year, not 50. And everybody should pay it, or take out a loan for it, because at that price, it's a no-brainer.

I'm sure there are some community colleges that could survive charging $10k/year (e.g., by gutting their support staff, hiring only adjuncts, and so on) but they're not the sort of institutions that international students would want to attend.

rtpg• 13 years ago

out of curiosity, where did you go that costs 50k a year? Even for American stuff that sounds excessive.

It would probably have been a better bet to study in your home country, and get into a school with an exchange program with a good uni in the US (Granted, your country might not have had that).

thebooktocome2• 13 years ago

International student fees can be much higher than even out-of-state tuition, supposedly to cope with the added bureaucracy. I wouldn't be surprised if that school was usually $40k/year, e.g., a Big Ten school.

noonespecial• 13 years ago

Note to self: If I ever find myself a billionaire industrialist and I want to start a tuition free school, bake into the rules for operation that any administration that decides to charge a tuition anyway becomes immediately fired along with all administrative positions at that time. If they really feel its best for the institution, let them prove it with unemployment.

bkanber7• 13 years ago

Well, that's exactly what Peter Cooper did. Education being "as free as air and water" is even in Cooper Union's charter.

With that being said, that's exactly what I would do too.

ianb• 13 years ago

This article has a less forgiving take on the finances: http://blogs.reuters.com/felix-salmon/2012/04/25/why-cooper-...

And this fairly extensive piece goes into it as well: http://nplusonemag.com/save-cooper-union

It seems like administration and trustees have been treating Cooper Union with the standard expansionary approach that is the norm for universities – spending money to make money, extravagant capital projects, overpaying and overstaffing administration. Disappointing. There are few institutions left for those that value frugality.

scotty793• 13 years ago

They borrowed money to gamble with it on the stock market?

And now they are going to drain their userbase to cover for their gambling debts and their overblown salaries?

That's not an institution I'd like to attend to.

bkanber7• 13 years ago

Not quite. They borrowed money to build a building, but used the leftover cash to invest in the stock market. They calculated that capital gains would outpace the additional debt interest. But then the recession hit, and they basically lost that money.

petercooper• 13 years ago

Oh, my poor institution! :-(

Cooper Union Ends a Longtime Custom: The Free Degree

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