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TagsBY DORIANNE PERRUCCI
NEWJERSEYNEWSROOM.COM
COMMENTARY
In the late 1990s, administrators at New Jersey's public colleges and universities panicked as they looked at the tsunami of graduating high school seniors about to hit their campuses. You have to admit, they found an ingenious way to pay for the cost of expanding facilities, without adding a single dime to their budgets:
Hand students the bill for capital improvements.
In 2008, public college students got stuck with a $250 million bill for the debt service on $3.86 billion worth of debt, but can you blame the schools? The last time voters approved a statewide capital bond for higher education was in 1988. Since then, "There's been no state investment," Paul Shelly of the New Jersey Association of State Colleges and Universities told www.northjersey.com. "So it's not a great puzzle that we're in the situation we're in." In a 2007 report, the State Commission of Investigation found that "virtually unrestrained borrowing has saddled New Jersey's public colleges with some of the heaviest long-term ... debt loads in the nation."
Unlike K-12 school districts, higher education gets no money from the state for construction, which led to another tarnished "first" for the state, wrote The Press of Atlantic City. "New Jersey was in the forefront of an unfortunate national trend of states not putting money into college construction," said Roger Anderson, executive director of the New Jersey Educational Facilities Authority.Schools have been quietly tacking a fee for debt service for the past few years, but now more students and parents are paying attention. A student I know just transferred to Kean College. She works hard for the money she earns from her part time job, and tracks every dime. She wants passionately to teach preschoolers, but I passionately want her to pursue what I call "forensic economics." She'd be devastating in Trenton; they'd be running for the hills if she followed the money. She bellowed when she saw a "capital debt service fee" on the bill for her first semester's tuition and fees.
"What's that?", she asked.
That's her share of Kean's debt service, which is the interest on the money Kean borrowed to build new facilities. Kean has run up a big debt service bill - $10.3 million for the current year, but students have to pay it; they don't get a grace period, as they do with a student loan. That one fee adds about 15 percent to what it costs to attend Kean as a full-time undergraduate student. That's not fair, the student said.
Right or wrong, without funding from the state, public schools were forced to borrow on their own, and, over time, began operating like private colleges, Rowan University President Donald Farish told The Press. He estimated that if the state paid the college's $17 million annual academic debt service, tuition could be lowered by almost a third.
Dorianne Perrucci is a financial journalist and author.
