So my college is currently in 4 million dollars of debt. I’ve tried finding out how that is even possible for them considering they are land grant university, however they are also an hbcu. Were they misappropriating funds? If they were how are misappropriated funds usually used and what are the consequences of it for colleges?
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It is a huge leap to go from debt to misappropriated funds.
Colleges are like most other organizations. Even if they are a private non-profit, they have board of directors and governance structures to oversee budgets. And they have to submit financial reports. If it is a private for profit, then even more they have to submit records and pay taxes. In any case, the debt alone is not sufficient evidence of financial wrongdoing. Even if they are a public organization, the university is bound by funding rules and oversight by government audits etc.
As with any organization universities rely on funding sources (grants, tuitions, federal/state subsidies) and have costs to pay (salaries etc). In nearly every case, universities will borrow money from banks for major capital expenditures like new building construction or upgrades. 4 million dollars is not a sizable sum of money unless it is a very small college (I’d guess). A faculty of 50 staff alone would easily have their annual salaries exceed this amount.
Consequences? The obvious would be tuition cost increases, reducing the number of classes, closing down departments, cost savings. Many things can be done to cut costs.
it seems like a small amount of debt for a major college. Let’s say they charge $50,000 per student, and 80 students less than expected applied they’d be short of 4 million dollars. of course they probably didn’t project breaking even but if they were expecting more students than actually applied they will be short money
Colleges get into debt the same way people get into debt. Sometimes bad choices, sometimes bad luck, sometimes a bad economic environment. Usually a combination of factors.
A college doesn’t have a W-2 job. Revenue comes from a bunch of sources. Tuition and fees are just one piece of the puzzle. There’s also grants, donations, government aid and income from the endowment (the school’s investments). And costs aren’t always predictable.
Maybe enrollment projections fall short. Not enough tuition dollars come in. You know why colleges admit so many foreign students? They pay full price. So maybe foreign enrollment falls off too. Even worse.
Maybe the endowment has a bad year and can’t contribute anything to the operating budget.
Maybe alumni and “friends” of the school don’t donate as much as expected. Maybe the football team has a bad year and boosters aren’t as motivated to give.
Maybe the grants the school was counting on don’t come through.
Maybe inflation drives up salaries for faculty and staff with cost of living adjustments in their contracts, while also driving up the costs of everything else the school has to pay for.
Maybe the numbers show that the school can’t raise tuition any higher without pushing out enough students that every $1 increase costs the school $2 in lost tuition from dropouts.
Maybe a structural analysis shows that the econ building needs immediate work or it’ll collapse.
Maybe some student just sued the school because they won’t let him keep his emotional support goat in his dorm room.
Maybe the financial planning and analysis staff is just bad at their jobs.
And yeah, maybe someone “misappropriated. funds,” but that’s probably the least likely scenario.
On top of this all, what kind of “debt” are we talking about? A school borrowing $4 million to put up a new building or acquire land for expansion (investment in the future, akin to taking out a mortgage on a home) is completely different from a school having to borrow money for operating expenses (akin to putting the electric bill on a credit card).
Debt isn’t necessarily a bad thing. If they used that 4 million to say open some new student halls or provide some new courses they could easily make more than the 4 million + interest by the time they’ve paid it back.
Also check to see if the government owes your school money. There’s been a lot of legislation in south especially over the last 10 years about the state government owing HBCUs hundreds of millions of dollars.
Colleges spend lots of money. Faculty cost money, staff costs money, buildings cost money to build/maintain/upgrade, utilities cost money, landscaping costs money, extracurriculars and organizations cost money, sports cost money, etc. Most large entities like a university, business, etc. need to borrow money to find large projects. And until that loan is repaid, there is debt. Doesn’t mean something bad, shady, illegal happened. It just mean that a university needed to build a new dorm or science lab and intends to pay for the construction over time, hopefully generating enough alumni donations or tuition to cover the payments as they’re due.
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