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Tuesday, January 05, 2010

Q: How do you know tuition is too high?

A: When no student is paying full tuition.

This is a revelation in an article about the Lubavitch Twin Cities Yeshiva which is facing foreclosure as the church providing the Yeshiva a private mortgage has recalled the mortgage. Not a single parent pays the full tuition of $20,000. And according to the article, that $20,000 tuition only represents 50% of the budget and this year not one student pays full tuition. Clearly there is a problem when tuition and the cost of running the school aren't correlated.

It seems that the Yeshiva has found a surprising new funding source as non-Jews are contributing to help save the Yeshiva of 40 students which needs to raise $620,000 by February 1.

I'm not keeping count, but I believe this is the second Lubavitch Yeshiva facing foreclosure. The circumstances are different than the Florida Yeshiva which took out an eight million dollar bank loan, but it is important to remember that commercial loans are not 30-year fixed loans. They generally balloon every 5 years at which point the bank will evaluate the credit worthiness of the organization based upon financial compilations. I don't know if the recent foreclosures amongst Chabad schools are something that other institutions could face, but I wouldn't discount the possibility as the "build it and they shall come (and pay)" mentality is alive and well.


Miami Al said...

Wow, it's like going to a used car lot! The prices are written on soap as the "deal of the week" that nobody is paying!

Anonymous said...

They have an entire building with football fields for only 40 students. Assuming this is grades 9-12, that is only 10 students per grade. I wonder how many employees there are. The lack of economies of scale may be part of the problem.

David said...

Something will give.

Anonymous said...

Holy smokes. Posts over at Honestly Frum regarding yeshiva tuition have generated over 500 comments in the past week or so. Orthonomics made this a hot issue. Nice work!

Shoshana Z. said...

I happen to know the people who run this institution and it is a very unique and caring place where boys are succeeding in both conventional and unconventional ways. They are graduating with real degrees and real "secular" knowledge that will serve them well as husbands and fathers. I have no idea where the money is supposed to come from, but it would be very sad to see such a place go under. And that's saying a lot for a dyed-in-the-wool home-schooler such as myself! ;)

Honestly Frum said...

I can also add to your point that getting an institutional loan for a non for profit of the size that some of the yeshivos are looking for is a virtual impossibility in this market.

ymr said...

The business model is not viable in a depressed economy. Survival demands adaptation.

efrex said...

To be somewhat fair, the "no student pays full tuition" model is quite common in the private college sector (which, admittedly, is having its own problems as well), where 90+% of students might be getting some form of scholarship. The bigger issue, as you point out, is the disconnect between tuition receipts and total expenses incurred.

Miami Al said...

First off, 90% getting assistance in the private college world is unusual, 50% - 67% is somewhat common, and it's the same mess as in the Yeshiva world.

The poor are able to go to elite colleges for free, the wealthy are able to pay, and the middle class that is reaching up to get out of the middle class gets smacked down. Federal aid makes it easier and easier to give free rides to the poor is running up costs and pricing out the middle class.

The anger from the middle class is watching their costs go up to help the poor join them, and their ability to maintain or increase their lifestyle getting squashed.

Another major difference is that there isn't DIRECT subsidization in the college world... tuition may overall be driven up by the availability of aid, but the College/University COLLECTS 100% tuition per student, some from the parent, some from the government, and some from the separate scholarship fund. Scholarship funds are actual real dollars contributed by alumni and other supporters, not cross subsidies at the school's discretion.

One of the general themes here is "separate scholarship from school," with the idea that the school should have the goal focusing on education at certain price, with schools diversifying into price points naturally. The school should NOT be tasked with "giving every Jewish student a Jewish education regardless of ability to pay," that's a communal responsibility and needs to be funded separately from the school.

However, is NOBODY is paying "full price," then the advertised price is like that on a used car, and opening point for negotiation.

Offwinger said...

I agree that tuition should be related to cost & separated from scholarships. Miami Al's comment raises another point of frustration regarding tuition - the idea that pricing is variable.

If you read the promotional materials of many yeshivahs, whether online or in print, in many cases, it is extremely difficult to find a "list" tuition price. If you call and ask, as I believe Prof K tried, you won't get very far either.

There are some industries where we can accept that pricing is variable. I know that when I fly, other passengers probably did not pay the same amount that I did. Some paid more, some less.

In general, though, I find the act of negotiating and haggling to be stressful. I find the idea that if I *don't* negotiate, then I'll pay more to be unsettling. In most cases, I would happier paying a set, slightly higher price, that I *know* is not negotiable, than having to spend the time & energy negotiating & then worrying that the slightly lower price I'm paying is "too much."

Some people may enjoy the "game" of being in the shuk. I suspect that many people, though, feel similar to how I feel.

Orthonomics said...

See this post which reference a problem Reed College is having. They are admitting full paying students over others.

Thomas Sowell writes about the economics of college and financial aid and how loans push up the cost of college. A lot of posters didn't care for the post. Interesting reading none the less.

Tuition Talk said...

I hope SephardiLady doesn't get upset at me for a little advertising, but I have been reading her blog for a while and the recent posts about yeshiva tuition have inspired me to start my own blog:

I've just started the blog, so there's currently only one post, but I welcome people to comment on that post or email me at tuitiontalk at gmail dot com to suggest future topics or if you would like to guest post.

Joseph said...

>>In general, though, I find the act of negotiating and haggling to be stressful. I find the idea that if I *don't* negotiate, then I'll pay more to be unsettling. In most cases, I would happier paying a set, slightly higher price, that I *know* is not negotiable, than having to spend the time & energy negotiating & then worrying that the slightly lower price I'm paying is "too much."<<

You can say that again!

Orthonomics said...

Tuition Talk-I will link to your blog and help you advertise.

Light of Israel said...

Private colleges have a lot in common with our yeshivas. Both had other sources to pay the bills, and not surprisingly - the cost of educating the children went sky high over the past 10 years.

Private colleges got sources to pay when kids were (and I believe continue to receive)granted huge student loans. College kids in droves sign on for debts they can't afford and the colleges were happy because they get paid. 100k in debt for someone who will graduate and get a 30-40k job is in trouble.

Yeshivas, the same way. They spend as much as they "should" according to the "best" educators and then keep raising the price (cost) and the scholarship burdens that accompany those rises. At yeshivas, there are othere social issues that kept tuition parents from questioning the rising tuition until finally (only recently) people woke up and realized that too many tuition paying parents are going broke over this system.

Will college or yeshivas change?

Tuition Talk said...

Thanks, SL. I truly appreciate it.

Anonymous said...

Time to think outside the box.

What about video conferences? One start teacher teaching hundreds of students across the usa, a teacher's assistance in each classroom.

Charlie Hall said...

A substantial part of the costs of private colleges are paid for by endowment funds. Other than Yeshiva University, is there any Jewish educational institution with a decently-sized endowment?