Learning Leadership in the Face of Rising Tuition

A recent comment on Orange County MBA brought to light the challenges prospective MBA students face trying to apply and enroll at CSUF.  Matias shared a recent experience from the Mihaylo MBA Prospective Student Information Session, and had learned there that CSUF won’t be accepting new MBA applicants for Spring 2013 due to California’s budget constraints.  The sad part is that this is only the tip of the iceberg.  The outlook for prospective MBAs won’t be improving anytime soon.

Increasing tuition is nothing new, but in recent years certain state university systems have imposed greater tuition increases than others.  California is one of the worst examples.  The average tuition increase for in-state students around the country was 8% last year.  Compare that to California’s increase of over 20% for that same period.  And public tuition has been increasing at a faster rate than private tuition.  Granted, the average private university tuition still exceeds the average public university tuition ($24,000 vs. $8,000 per year on average), still arguably making the public degree an excellent value.  But that may not last for long; California public tuition nearly doubled over the last 5 years!  At that rate, it won’t be long before public and private educations are similar in price!

CSUF faces its own budget challenges.  Tuition could increase again next year, and it all depends on whether Governor Brown’s November tax initiative is approved.  If the tax initiative is not approved, students will face an additional 10% tuition increase for Spring 2013.  The increase will help cover a budget shortfall estimated to be between $250 to $375 million.  The shortfall may force the university to slash salaries and benefits, reduce enrollments, and eliminate jobs.  Since 2007-08, California budget deficits have cost the CSU system approximately $1 billion in budget funding.

Here’s the major problem, and it was highlighted in Matias’ comment.  CSUF announced at the Information Session that it would not be accepting applications for Spring 2013.  Now folks either have trouble getting into CSUF, or once accepted they face the risk of paying ever-increasing tuition.  The CSU system administrators aren’t showing they feel their students’ pain, which only worsens the situation.  Just recently, the Board of Trustees approved pay raises for 3 university presidents.  The initiative raised salaries by as much as 10%, and were approved on top of the car and home allowances the administrators are already receiving.  CSU administrators say the raises come from funding sources separate from the universities’ operating budgets.  And that’s where the problem lies – these actions (whether warranted or not) send mixed messages to students.

How are students and prospective applicants going to believe CSU administrators when they say they “feel their pain” and “have their best interests at heart?”  The pay raises and tuition increases don’t seem to be affecting those administrators.  Now it may be true that the money for the raises came from sources outside the CSU system operating budget, meaning it couldn’t be spent on services or tuition reduction anyways.  But that’s beside the point – it’s sending a mixed message.  Students see their tuition increasing and the universities’ services diminish.  They need someone to blame, and who better to blame than the mixed-message administrators receiving pay raises while cutting enrollment and increasing student fees?

Despite this heated situation, this mixed-message issue can serve as a lesson for MBA students.  Leaders need to lead, and leading often requires sacrifice.  Students are sacrificing their finances; prospective students are sacrificing their education plans.  Administrators need to demonstrate that same level of sacrifice.  Some of the firms that survived the recent economic downturn had executives who cut their own pay and curtailed their perks in order to save employees’ jobs.  I’m not saying leadership is easy, and I’m not saying I have all the answers for this education challenge.  But times are difficult, and leaders need to demonstrate they are fighting for their employees (or students) while keeping those peoples’ best interests at heart.  The solutions to the CSU system’s budget woes won’t appear overnight.  So maybe the politicians and administrators should toss these challenges to the MBA students at these universities.  Maybe the students can offer some solutions the administrators hadn’t even considered, while learning lessons about the challenges of leadership in the process.


3 Responses to “Learning Leadership in the Face of Rising Tuition”

  1. 1 Shona October 8, 2012 at 9:00 pm

    Great post! The problem however is that the “market” for higher education is unique and not really replicated elsewhere. In fact, standard business logic is routinely not applied in the higher education setting…especially within non-profit education. I used to work for a public university and the budget process is incredibly strange. Basically, you submit a budget for approval….including all sorts of projects and initiatives (feasible or not) to justify your $XXX amount of dollars. Towards the end of the year, there is a mad dash of sorts to spend all of the money remaining in the budget so that in the upcoming year(s), you can again justify the same or an even higher budget amount. There is no audit or review of spending….as long as the money was spent with an authorized vendor that we hold a contract with.

    On the student side of things, as long as students are interested enough to enroll, the money is not too difficult to obtain afterwards. The tuition, no matter how high, can be paid for via financial aid. This is a deterrent to making the tuition a consumer market price. Also colleges hold all the cards. If you do not like the quality of your education or the results, you only have a very small window of time (the add/drop period at the beginning of the semester) to get ANY of your money back. Yes, a student can always transfer or even drop out all together. But eventually the goal (hopefully) is to get a degree; which comes with requirements in regards to how much credit must be earned at the granting school (so how much money needs to be paid…minimum).

    It’s mind boggling because there is absolutely no other consumer market like it. You can’t negotiate, you can’t get a refund, you can’t easily switch service providers. It would be a great exercise in advanced fiscal management and leadership…but you would have to make big adjustments to your approach.

    • 2 orangecountymba October 9, 2012 at 3:00 am

      Those are all great points! It’s going to be extremely interesting over the next several years to see how free online university courses are developed (and possibly tied into universities’ degree programs). Education resources like Khan Academy and MIT’s MITx appear to be at the cutting edge of potential new developments in education that may pave the way for greater choice and competition. I’m very interested to see if any of these ventures can disrupt the education market and help tilt things a little more in the favor of students.

  2. 3 Matias October 9, 2012 at 12:11 am

    Hello Matthew,
    As an update, I talked to Andrew Choi, Recruitment Specialist at the Mihaylo College of Business and Economics. It appears that some kind of arrangement has been reached at CSUF and now they will finally receive applications for the Evening Flexible MBA starting next spring….

    Spring – Early Deadline: September 15, Final Deadline: October 15

    I finally started the FEMBA program at UCI this fall…
    hope to meet you some day,


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