
Cooper Union Ends a Longtime Custom: The Free Degree - joe8756438
http://www.nytimes.com/2013/04/24/nyregion/cooper-union-to-charge-undergraduates-tuition.html?pagewanted=all&_r=0
======
HarryHirsch
_According to Cooper Union’s president, Jamshed Bharucha, it currently
operates at a $12 million annual deficit. The number reflects several factors:
... most significantly, $10 million a year in payments on a $175 million loan
the school took out a few years ago, in part so that it could invest money in
the stock market._

And this, ladies and gentlemen, is why meaningful bank regulation is long
overdue. The signs of the present crisis were there to see for anyone with
eyes in 2005: in that year my ex-landlady, who was from Bushwick, one of the
poorest parts in New York, bought five rental properties with no-money-down
loans.

Let's have this again: Bank of America found nowhere better to invest than in
this clueless lady that perceptibly could not run her rental empire
successfully, and they loaned her the funds anyway.

~~~
fusiongyro
I find the whole idea of borrowing money for investment purposes a little
strange. Isn't that basically just gambling?

~~~
fijal
It's a gamble along the lines of "I bet I can invest money better than the
bank". Often turns out the bank can invest money better. I wonder who
convinced them to invest, er, gamble.

~~~
EliRivers
If the bank's so smart at investing, why did they give the money to someone
who was going to lose it all on the stockmarket? :)

~~~
ptaipale
Because the borrower had good collateral, and this was good business for the
bank. It is what banks are supposed to do.

Bottom line: I think this is _not_ a good case why you need more regulation of
banks. It may be a case why you need more regulation of universities.

~~~
Gormo
Before we discuss more regulation of either banks or universities, perhaps we
should first consider the extent to which we need more regulation of
_regulation_.

~~~
ptaipale
Indeed. That is perhaps the first priority.

Too often the approach "this didn't work out, so we need more of it".

------
SoftwareMaven
One of the biggest problems in higher ed shows its face here: increased
administration costs[1]. It is ridiculous how bureaucracy has insinuated
itself so thoroughly and, as a result, has driven so many costs up, especially
during a time when people should be getting more productive thanks to
technology.

1\. [http://www.bloomberg.com/news/2012-11-14/bureaucrats-
paid-25...](http://www.bloomberg.com/news/2012-11-14/bureaucrats-
paid-250-000-feed-outcry-over-college-costs.html)

~~~
rdtsc
That is always my question. Where is all this money going? Tuition goes up
well above inflation, that money doesn't disappear? Are more professors hired,
more facilities built? Keep adding middle managers and secretaries?

~~~
HarryHirsch
State and federal funding has shrunk dramatically, and universities must make
up the shortfall through tuition. At my university they are building new
dormitories, from money out of the general fund, and they hope to recover this
through increased enrollment.

They are expanding the faculty, too. But here is the problem: there isn't an
infinite supply of capable students; the squabble that is going to happen for
the few capable students in the mediocre horde isn't going to be fun. I
predict that the model isn't going to be successful, but I cannot see what is
going to take its place.

~~~
SoftwareMaven
That squabble started happening 10 years ago, as universities started shifting
far more money to marketing efforts for prospective students. I was working
for one of the biggest companies in the higher ed space at the time, and
following those dollars became its highest priority.

But you are right, it is going to get _ugly_ as more students question the
value of an education versus not or look to other alternatives. The higher ed
balloon is stretch pretty thin right now and easy student loans are the only
thing left inflating it, IMO.

It's going to pop, and I wouldn't want to be employed in higher ed when it
does.

------
SeoxyS
The part that I find the most repulsive about this – aside from the fact that
the school got itself into debt by borrowing money to gamble it, and then lost
it – is that its board of trustees went from a visionary model of free
tuition, and against the advice of the professionals it hired to analyse the
decision, opted, _on purpose_ , for a sliding scale.

Schooling in america is not fucked up because it charges tuition; that's fine.
It's fucked up because it charges tuition so unequally. Often, half the
student body does not pay a dime, while the other half gets itself in massive
debt because of bureaucratic technicalities. In my case, I paid full $50k/yr
tuition, by myself, because not being a US citizen made me ineligible for all
scholarships, whereas many of my peers got a free ride even though their
families were much wealthier than mine. All around me, and throughout the
academic culture of the united states, I see this. Students struggle to battle
for the few scholarships schools offer subsidized by the financial hardships
of other students.

We'd all be much better off if we abolished all scholarships and dropped
tuition to a price much more reasonable for everybody. School ought to cost
5-10k a year, not 50. And everybody should pay it, or take out a loan for it,
because at that price, it's a no-brainer.

~~~
argonaut
To be fair, I've examined the way college admissions works in the US, and by
and large those who get financial aid actually need it, and those who are
charged full freight tend to actually be able to pay full freight.

Secondly, in the case of private institutions, they _are_ private institutions
and are largely free to spend their endowment as they wish. Most thus choose
not to give financial aid to internationals, but some do give aid.

~~~
Crake
Well, and then you have people like me who had to wait 6 years to become
eligible for enough aid to even pay tuition, much less pay for food or rent.
(I applied for about 40 scholarships when I was 18, so it's not like I didn't
try or anything.) I wasn't out to study Chicano Lit or whatever, either; I'm
an EE+physics major. Meanwhile, many of my friends who studied liberal arts
with thousands of dollars of financial assistance from the state and federal
government continue to work the same level of job they held in high school.

~~~
argonaut
Without knowing more about the reason you never got aid (wealthy parents
refused to pay tuition?), there's not much I can say about the general
applicability of your anecdote.

~~~
Crake
There are plenty of articles out there documenting the inaccessibility of
higher education. In my experience, and many others, the "aid" system is a
ploy to make people who can afford college feel good that they're there on
merit (instead of ability to pay, even if that's the actual primary criteria),
as well as to give colleges excuses for jacking up tuition even more ("well it
-says- $50,000/year, but act now and we'll give you it for
$29,999!"...inflates people's egos that they're "so smart" that the college is
giving them a $20,001 discount, increases perceived "value" of an institution,
and also helps to obscure the real price of attendance so that the only way to
find out if you can afford to attend is to gamble away $100+ in application
fees before they'll tell you or not).

~~~
argonaut
That does not match with my experience, especially considering that the
majority of scholarships are need based. Especially at top universities, where
merit scholarships are vanishingly rare (except at top LACs - liberal arts
colleges).

edit: changed colloquial use of word.

~~~
Crake
Unfortunately, your experience does not match reality, wther it "jives" with
it or not. Blithely ignoring the actual situation is, of course, almost
guaranteed to ensure that poor but smart people will continue to be priced out
of college educations in the US.

~~~
argonaut
You see, now your arguments are just devolving into non sequiturs. Do you have
any evidence to back up your claims?

The Ivy Leagues, for example, have a strict policy of not giving out merit
scholarships or even athletic scholarships. That is a fact.

~~~
Crake
"Over all, the report found, published college tuition and fees increased 439
percent from 1982 to 2007 while median family income rose 147 percent. Student
borrowing has more than doubled in the last decade, and students from lower-
income families, on average, get smaller grants from the colleges they attend
than students from more affluent families."

<http://www.nytimes.com/2008/12/03/education/03college.html>

"While 79% of students born into the top income quartile in the U.S. obtain
bachelor’s degrees, only 11% of students from bottom-quartile families
graduate from four-year universities, according to Postsecondary Education
Opportunity."

[http://www.forbes.com/sites/danielfisher/2012/05/02/poor-
stu...](http://www.forbes.com/sites/danielfisher/2012/05/02/poor-students-are-
the-real-victims-of-college-discrimination/2/)

Anyway, if 1 trillion dollars in student loan debt doesn't sound like a
problem to you, there's probably not much to be gained from continuing the
discussion.

People like you have no idea what it's like to live below the poverty line.

------
D_Alex
>...it currently operates at a $12 million annual deficit. The number reflects
several factors ... most significantly, $10 million a year in payments on a
$175 million loan the school took out a few years ago, in part so that it
could invest money in the stock market.

In case you were wondering what is the real cause of this event, 85% of the
problem is due to an ill advised stock market gamble.

Which brings me to my hobby horse; why are stockbrokers, financial advisors
and investment bankers able to collect such huge pay? Y'all should stop
feeding these leeches.

~~~
bradleyjg
I hope the entire board that approved the gambling scheme has been removed.

If not the state attorney general, who is responsible for supervising non-
profit boards, should open an investigation.

~~~
rdouble
I'm not sure what precedent there would be for either of those actions.

All of the major universities "gamble" with their endowments in the various
markets. There's the corny adage that Harvard is a hedge fund with a
university attached.

~~~
bradleyjg
It's one thing to gamble with an endowment, that can be couched as investment,
and another to borrow money to gamble with and endanger the operational budget
of the non-profit you are overseeing.

That may well violate the fiduciary duty of prudence under the New York
Prudent Management of Institutional Funds Act.

~~~
rdouble
Borrowing money against the endowment is how it's done everywhere, though.

~~~
bradleyjg
I'm sure most endowments use some margin, but there are different leverage
ratios. The Harvard endowment has since eliminated net levage, but before the
crisis they were levered to 105%. The borrowing that Cooper Union did amounted
to 30% leverage.

Further each the duty of prudence has to be measured against each sitution
individually, according to the eight factors listed in the law:

(1) general economic conditions;

(2) the possible effect of inflation or deflation;

(3) the expected tax consequences, if any, of investment decisions or
strategies;

(4) the role that each investment or course of action plays within the overall
investment portfolio of the fund;

(5) the expected total return from income and the appreciation of investments;

(6) other resources of the institution;

(7) the needs of the institution and the fund to make distributions and to
preserve capital; and

(8) an asset’s special relationship or special value, if any, to the purposes
of the institution.

Which is not to say that other boards aren't also violating their duties of
prudence, but an egregious case is a good place to start.

------
ianb
This article has a less forgiving take on the finances:
[http://blogs.reuters.com/felix-salmon/2012/04/25/why-
cooper-...](http://blogs.reuters.com/felix-salmon/2012/04/25/why-cooper-union-
cant-be-trusted/)

And this fairly extensive piece goes into it as well:
<http://nplusonemag.com/save-cooper-union>

It seems like administration and trustees have been treating Cooper Union with
the standard expansionary approach that is the norm for universities –
spending money to make money, extravagant capital projects, overpaying and
overstaffing administration. Disappointing. There are few institutions left
for those that value frugality.

------
noonespecial
Note to self: If I ever find myself a billionaire industrialist and I want to
start a tuition free school, bake into the rules for operation that any
administration that decides to charge a tuition anyway becomes immediately
fired along with all administrative positions at that time. If they really
feel its best for the institution, let them prove it with unemployment.

~~~
bkanber
Well, that's exactly what Peter Cooper did. Education being "as free as air
and water" is even in Cooper Union's charter.

With that being said, that's exactly what I would do too.

------
bkanber
It's a sad day for education. I'm a Cooper alum and have been following this
fiasco for quite some time. Feel free to ask me any questions you may have and
I'll do my best to answer them.

~~~
luke_s
So, its this really caused by them borrowing $170m to play the stock market?
What were they thinking?!

Also: What happened with the failed fundraising drive? I would have thought
such an exclusive school would have had many well off graduates, who would be
happy to help out their old school in its hour of need.

~~~
bkanber
Not quite. The media saying that the loan was for playing with the stock
market is erroneous. The $175M loan was to build a new building in the east
village. However, when the building was complete, some geniuses decided that
the leftover money would be better spent in the stock market rather than using
it towards paying back MetLife. They did calculations and saw that the gains
from new investments would outpace losses from the additional interest. It was
a hedge, basically. But then the recession hit, and naturally that investment
failed, leaving Cooper both without gains from the investment AND with extra
debt burden.

------
tokenadult
What is the level of alumni donation like at Cooper Union? I would think a
free education in architecture or engineering (I can't say the same about a
free education in art) ought to have some real economic value, and allow some
alumni to pay it forward to keep alma mater financially sound.

[http://www.collegeresults.org/search1b.aspx?institutionid=19...](http://www.collegeresults.org/search1b.aspx?institutionid=190372)

~~~
brudgers
Apparently, you are unfamiliar with the economics of architectural practice.
Six figure salaries are for senior licensed staff. The typical age these days
for completing licensure requirements is about 33 based on the few states
which have made such data available...and new graduates, well New York City
has a long tradition of unpaid internships ( graduates are interns in the
licensure process). In the heady days of the boom, an intern from a top school
at a big firm might make 60k - for 70 hours a week and holding a degree which
takes at least five years to complete.

To put it in perspective, Frank Gehry was unknown until his mid-forties, and
only came to the national spotlight for work he did on his own house. How many
programmers do you know who are still running a company in their 80's?

Edit: Mathew Arnold did the study which extracted the age at which licensure
is achieved. It is presented here: <http://www.di.net/blog/tag/ncarb/>

Matt is a Cooper Union Alum. I played a minor role in the data collection
phase - I egged him on.

~~~
mturmon
All that. And, if you're at a small firm, you're often chasing small
commissions with cheapskate clients who use all kinds of methods to stiff and
delay payments. It's tough to build a good portfolio that way. (Like lots of
design work in that regard.) Add in the cyclical nature of the construction
trade, and it's a rough business.

------
danielamitay
I understand the financial mistakes (underperforming investments). I
understand the building mistakes (extravagance, over-spending). What I don't
understand is this policy that will (in my opinion) destroy The Cooper Union's
core asset: the student body. Having attended, I whole-heartedly believe that
nearly all of Cooper Union's value-add is in being surrounded by incredibly
intelligent peers. Peers who are now less likely to apply or attend.

Me: Spent two years at Cooper, currently graduating from NYU.

~~~
Crake
Why did you transfer? Just curious.

~~~
danielamitay
Basically, I derive a significant amount of esteem and happiness from making
things that people use. It was this that lead myself and those around me to
believe I should pursue Engineering. Unfortunately, I derived very little to
no esteem from what I felt was merely "book learning" at Cooper. The school
system I grew up in was extremely liberal and forward-thinking, so Cooper
Union felt extremely rigid to me (although I acknowledge the possibility that
all Engineering programs are like this). I simply couldn't survive four years
like that.

Ultimately, I studied Economics at NYU, so I moved away from Engineering to
allow myself to pursue development on my own. There are other reasons why I
moved to Economics, but thats the gist of it.

~~~
bkanber
I'm a Cooper grad -- the first two years are book learning, the second two
were hands on. I built lots of fun stuff; interactive art projects with the
art school, lots of robots, and even a race car for my senior thesis.

~~~
Crake
Race cars sound quite exciting.

------
kingkawn
This really feels like a smaller version of the American story. Corporate
boards make large investment gambles, stock market tumbles, the regular people
end up paying when it all goes south. Nobody on Cooper's board has been asked
to step-down for the decisions that led to this crisis.

~~~
bkanber
We alumni have actually asked basically the entire board and the Cooper
president to step down. (Edit: though I don't believe we've made an official
petition yet. I'm sure that'll happen soon.)

~~~
kingkawn
glad to hear it, they are so incomprehensibly bad it is hard to put into
words. They took a beautiful thing and ruined it for what I do not see. A new
building? Higher profit margins? A desire to keep-up with the aspirations of
the other corporate boards they are on?

------
brianbreslin
I had never heard of cooper union before, but am curious, did they have a huge
endowment to fund the school for so long? The article states they own land
under the chrysler building, and the founder endowed them with the buildings
and land 100+ years ago. However for ongoing expenses (staff, upkeep, etc),
how were they funding this prior?

~~~
rdouble
They just have one building, small staff and student body, and don't have to
pay taxes. The main expense is salaries.

~~~
brianbreslin
Yeah but with no tuition how do they even pay that?

~~~
rdouble
They have (had?) a $600 million dollar endowment.

I also looked it up on wikipedia, and it looks like the endowment also owns
the land underneath the Chrysler Building.

 _A substantial portion of the annual budget, which supports the full-tuition
scholarships in addition to the school's costs, is generated through donations
from alumni in both the public and the private sector. In addition, real
estate has become a very important asset to the College and has drastically
increased its endowment to over $600 million.[43] The land under the Chrysler
Building is owned by the endowment,[44] and as of 2009, Cooper Union received
$7 million per year from this parcel. Further, under a very unusual
arrangement, New York City real-estate taxes assessed against the Chrysler
lease, held by Tishman Speyer, are paid to Cooper Union, not the city. This
arrangement would be voided if Cooper Union sold the real estate. In 2006,
Tishman Speyer signed a deal with the school to pay rent that will escalate to
$32.5 million in 2018, $41 million in 2028 and $55 million in 2038. Cooper
Union investment committee member John Michaelson acknowledged to the Wall
Street Journal that Tishman Speyer "would not have signed a generous agreement
like that had it been approached in 2009."_

~~~
bkanber
Cooper has a $600M endowment. $120M of that is non-real-estate, and $60M is
restricted.

------
kkwok
When your expenses are greater than your revenue, increasing your risk
exposure is not a real solution...

------
cinquemb
Hardly the first university to step up to the chopping block faced with
growing expenses y/y.

FRBNY website has some nice chart porn for those looking for more insight into
the student loan debt bubble thats in full upswing :D

------
scotty79
They borrowed money to gamble with it on the stock market?

And now they are going to drain their userbase to cover for their gambling
debts and their overblown salaries?

That's not an institution I'd like to attend to.

~~~
bkanber
Not quite. They borrowed money to build a building, but used the leftover cash
to invest in the stock market. They calculated that capital gains would
outpace the additional debt interest. But then the recession hit, and they
basically lost that money.

------
petercooper
Oh, my poor institution! :-(

------
loucal
from free to 40 grand a year...

~~~
ics
To be fair, every semester we were given a bill for the total cost with
tuition "discounted", so it usually looked something like:

    
    
        Subtotal: $37,000
        Amount Due: $1400 (student fee)
    

I thought they were just making passive hints until the new president came in
and had to tell us all the bad news...

