Watch CBS News

Why students should be wary of college leaders' high pay

State universities are supposed to offer a lower-cost option for the college-bound, a place where students can graduate with a good education at a lower cost than higher-priced out-of-state or private schools.

But a new study is calling into question what happens when students enroll at public colleges with the highest-paid presidents. Graduates of those institutions end up with higher debt loads than the average state university graduate, according to "The One Percent at State U" from the liberal-leaning Institute for Policy Studies.

The study found that high executive pay at state universities and rising student debt are "closely related and should be addressed together in the future." When public schools pay their presidents far above the norm, students go deeper into debt, partly as scholarships are reduced, and the universities rely more on low-paid faculty labor by hiring more adjuncts and fewer full-time professors.

"At public universities with the highest executive pay, increased spending on non-academic administration came at the expense of scholarships," the study's authors, Andrew Erwin and Marjorie Wood, wrote.

At the top 25 state universities with the highest-paid presidents, tuition and fees increased an average 61 percent, while scholarships only rose 46 percent from 2006 to 2012, the study found.

Executive pay at state universities has come "roaring back" since the 2008 financial crisis, the authors note. Public universities that paid their presidents above-average salaries before the crisis increased their pay by about one-third, reaching nearly $1 million on average by 2012. By comparison, the average executive pay at all public research universities rose only 14 percent during that time.

Much like the pay gains seen in the corporate world, public universities are boosting presidents' pay packages by arguing that their leaders are earning "fair market value." The pay packages are decided by universities' Boards of Trustees, which are often comprised of private-sector executives from local businesses as well as philanthropies.

But the arguments that top-paid presidents at public universities are earning competitive salaries are "spurious at best," the authors noted, given that some presidents at the biggest and best-known public universities -- such as University of California-Berkeley -- made less than $500,000 each.

Meanwhile, the Chronicle of Higher Education on Friday issued its ranking of executive compensation at public colleges for 2013, with Ohio State University president E. Gordon Gee topping the list with total earnings of $6.1 million.

Ohio State University was ranked in the IPS report at the top of its list of "worst overall offenders," citing the university's 23 percent jump in student debt. It also hired 670 new administrators from 2010 to 2012, while only hiring 45 permanent faculty during the same period.

Gee resigned from Ohio State last year, after he apologized for making gaffe-filled jokes. Earlier this year, he was tapped as president of West Virginia University.

But separating from top-paid college presidents can also cost their schools a pretty penny, the Chronicle reports. Ohio State provided Gee with a $1.5 million "release payment," just one example of how colleges can find saying goodbye to high-paid presidents to be an expensive endeavor.

According to IPS, the "top 5 most unequal public universities" are: Ohio State University; Pennsylvania State University; University of Minnesota; University of Michigan; and University of Washington.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.