Does Compliance Cost $11K per Student?

While discussing the Higher Education Act, Vanderbilt's chancellor equated cost of compliance to $11,000 per student -- and the message snowballed.

August 3, 2015
U.S. Senate
Nicholas Zeppos, chancellor of Vanderbilt University, testifying at a February hearing of the U.S. Senate

Vanderbilt University Chancellor Nicholas Zeppos earlier this year testified before a U.S. Senate committee and cited a rather compelling, if somewhat surprising, fact: the cost of complying with federal regulations “equates to approximately $11,000 in additional tuition per year” for students.

The math was simple: $146 million in compliance costs in 2013 divided by some 12,800 students equals about $11,000 per student.

Yet perhaps it was too simple, as the figure snowballed into an arguably misleading message about the cost of compliance, which is being debated as lawmakers in Washington consider renewing the Higher Education Act and possibly loosening regulations to ease the perceived cost burden on colleges and universities.

Though the issue has been a hotly contested one, there is little concrete data regarding how much universities actually spend to comply with regulations. Vanderbilt's figure, derived from a 2014 study by the Boston Consulting Group, is one of the only modern accountings of an individual institution’s comprehensive compliance costs.

So U.S. Senator Lamar Alexander, chair of the Senate Committee on Health Education, Labor and Pensions (HELP), the committee Zeppos testified before in February, took full advantage of the illustration, citing the $11,000 figure in an op-ed last month in The Wall Street Journal.

A Summary of Vanderbilt's Findings:

  • $146 million in total compliance costs in 2013
  • $117 million in research compliance costs, or about 17 percent of the overall research budget
  • $14 million in higher-education specific compliance costs, including for accreditation
  • $14 million in non-higher education specific compliance costs (such as compliance with human resources, immigration and finance regulations)
  • non-research specific compliance costs account for about 4 percent of the non-research budget

“Clear out the federal red tape that soaks up state dollars that could otherwise go to help reduce tuition,” the Republican from Tennessee urged. “In one year Vanderbilt University spent a startling $150 million complying with federal rules and regulations governing higher education, adding more than $11,000 to the cost of each Vanderbilt student’s $43,000 in tuition."

While the notion of a student at Vanderbilt paying an additional $11,000 in tuition because of compliance costs is compelling, it’s also largely inaccurate.

That’s in part because students don’t bear the bulk of those costs, especially those linked to research.

Of the $146 million the university spent that year on compliance, according to its calculation, $117 million went toward complying with research regulations. Research at a major institution like Vanderbilt -- which received $473 million in federal funds for research in 2013 and is one of this biggest conductors of federal research in U.S. higher education -- is mostly faculty driven. And the federal government picks up part of the tab for compliance, with additional funding to cover the overhead costs of university research.

Ben Miller, senior director for postsecondary education at the Center for American Progress, wrote in an email that the $11,000 figure “seems awfully misleading given that it suggests Vanderbilt charges students 100 percent of the costs of complying with research grants.”

Brett Sweet, Vanderbilt’s chief financial officer, said the figure is not to be taken at face value. It was instead an attempt to contextualize and “calibrate” how much the university spends on compliance.

“We are in no way, shape or form saying that compliance increases our tuition cost by $11,000,” he said, adding that tuition and compliance “are not connected.”

He continued, saying the $11,000 figure used by the chancellor earlier this year “is not an addition to tuition. It’s a calibrating mechanism to help people understand, at Vanderbilt only, how big is this number.”

The tuition figure's impact shows how quickly a message can get lost in the midst of a political debate.

After all, the comparison was used in Zeppos's testimony before the HELP committee (written and oral), and then taken by the influential leader of that committee and included in an op-ed for one of the nation’s most-read and respected newspapers. It has since confounded policy experts who are engaged in the debate over whether compliance regulations are too burdensome for colleges and universities.

“It’s an inflammatory number,” said Amy Laitinen, deputy director of New America's higher education program and a former White House and U.S. Department of Education official. And it’s a figure made even more provocative, she said, by the fact that the cost of college is a big concern for many Americans, so anything that appears to add to that bottom line is troublesome.

After the hearing, reporters asked Vanderbilt for more details about its compliance study. The university demurred until The Chronicle of Higher Education and The Hechinger Report ran articles questioning the numbers Vanderbilt used in February.On Friday the university released much more information about the Boston Consultant Group's research.

Also concerning, Laitinen said, is that Vanderbilt used the tuition figure during a hearing on the reauthorization of the Higher Education Act, which governs federal financial aid and does not deal with research funding. Of the $146 million Vanderbilt spends on compliance, just $14 million is non-research and higher-education specific, Sweet said.

Alhough HEA reauthorization “kick-started” a conversation on Vanderbilt's campus about compliance, the self-study “was not tied to the Higher Education Act,” Sweet said.

“We’re an educational institution,” he said. “We’re not trying to make a political statement.”

Zeppos is the co-chair of a HELP committee task force that considers the cost of federal regulations on universities. 

"Colleges and universities find themselves enmeshed in a jungle of red tape, facing rules that are often confusing and difficult to comply with," the task force said in a February report, adding that some regulations have excessive reach and drive colleges' costs up. "Smarter rules are needed." 

For as muddled as Vanderbilt's message got in the months after Zeppos’s  February testimony, the school is an outlier among its private peers in having studied the costs of compliance, and then voluntarily sharing its findings with the public.

Hartwick College in 2012 studied the cost of its compliance efforts. Hartwick, a private institution, isn't a research college and has a much smaller student body (between 1,500 and 1,600 students a year), budget and employee base than Vanderbilt. Its cost of compliance was measured at roughly $300,000 a year.

Sweet says Vanderbilt wanted to map out its compliance costs, what factors were driving them and where the university could become more efficient.

-- Paul Fain contributed reporting to this article.


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