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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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).
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