Why are American colleges so expensive in the first place?

charlespig

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Lost in the recent debate on student debt cancellation is why are American universities so expensive (relative to other developed countries) in the first place. I think we can get more bang for the buck if we can make universities more affordable for current and future generations, rather than retroactively forgiving debt of a past generation, which does not help prevent the issue recurring in the first place.

So why are American universities so expensive? According to this 2018 article, there are 4 main reasons I summarize:


1) US colleges spent more on non-teaching staff (armies of fund-raisers, athletic staff, lawyers, admissions and financial-aid officers, diversity-and-inclusion managers, etc.), as well as teaching staff (the star professors who focus on research to boost the school's ranking while having little to do with quality of the everyday undergraduate student). It's no wonder that the US colleges dominate the global ranking.

2) Other countries typically have a cap on how much a school can charge students, but US don't. It is more a market-driven model, and universities extract money from students because they can. It’s the inevitable outcome of an unregulated fee structure.

3) The financial difference between college grad and high school grad is VERY steep compared to EU countries. Therefore, "it’s a diabolical cycle: Colleges are very expensive to run, partly because of the high salaries earned by their skilled workers. But those higher salaries make college degrees extremely valuable, which means Americans will pay a lot to get them."

4) Raw tuition cost is "higher", but 70% of students do receive some kind of grant aid, making the net cost lower in US than Australia.

Interestingly, the article made a specific mention to Purdue,

Over the past decade, for example, Purdue University has reduced its in-state student population by 4,300 while adding 5,300 out-of-state and foreign students, who pay triple the tuition.

This looks unfortunate. As a public in-state university, we have to resort to taking more out-of-state and foreign students instead of serving the locals. I understand the rationale behind, but it is still unfortunate.
 

charlespig

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While we are at it, let's also look at athletics. Of the 65 P5 schools, only 25 made money (in 2019). The median profit (among those 25) was $8M, while the median loss (among the remaining 40) was $16M. If you are outside P5 in D1 (64 of them), all of them operated in the red, median loss $23M.

D1 schools without foot programs (97 of them) all lost money (median loss, $14.4M). All 125 FCS (formerly D1-AA) schools lost money (median loss, $14.3M). No D2 or D3 programs make money.

In other words, only 25 of the approximately 1100 schools made money in college sports.

Yes, there are a lot of money in college sports, but they just go to the coaches and admins.

 
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gr8indoorsman

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Administrative bloat is usually the answer to why things cost too much across business.

I only employ about 30 people now. Three full time, the rest part time workers.

A primary competitor has an additional two layers of supervisory personnel at their multi-location operation: gym manager and then two overarching program managers for four locations. The owners are not directly involved in daily operations.

The result is that they charge about 15% more in order to keep profits up and pay their people. We charge less, have a 30%+ profit margin and provide a better product.

Now, our current model is unsustainable and we will have to add an additional full time staff, but we can absorb that in our current pricing structure because our margin is too high right now.

Most larger operations don’t have margins that large, so every additional non-revenue generating staff they hire is a direct hit on profit. (Even non-profits care ab

The answer? Raise prices.

(Other businesses fail because they don’t scale properly… buying the Mercedes level equipment and facility while they’re still driving a Yugo level business… but that’s probably less of an issue in academia).
 

Boiler Buck

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Lost in the recent debate on student debt cancellation is why are American universities so expensive (relative to other developed countries) in the first place. I think we can get more bang for the buck if we can make universities more affordable for current and future generations, rather than retroactively forgiving debt of a past generation, which does not help prevent the issue recurring in the first place.

So why are American universities so expensive? According to this 2018 article, there are 4 main reasons I summarize:


1) US colleges spent more on non-teaching staff (armies of fund-raisers, athletic staff, lawyers, admissions and financial-aid officers, diversity-and-inclusion managers, etc.), as well as teaching staff (the star professors who focus on research to boost the school's ranking while having little to do with quality of the everyday undergraduate student). It's no wonder that the US colleges dominate the global ranking.

Yep....Non teaching staff....$$....
1st Purdue, like all woke schools, have several diversity related staff, besides this their are a host of expensive cultural centers under their woke umbrella. Expensive.
2nd Unique to Purdue... they have a large Extension program. Several hundred are off campus and teach NO Purdue students....but still cost taxpayers millions annually.
3rd they have alot of researchers at all colleges teach no classes, or only 1 class ....many bring in their salary & benefits in grants. But many do not. Props to Daniels upping the grants coming in though....tons raised.
4th Purdue like all colleges have many "requirements" are just filler classes not related to or essentially needed for any particular major. Still all those departments of non essential courses have expesive staff requiring benefits & salaries.
 
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BoilerTom90

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If you haven't seen the Prager U video on this topic, it explains a lot of the reason. It's already 7 years old, but still spot on. Bottom line is colleges have no incentive to keep costs under control. Purdue was fortunate to have Daniel's.

 

tjreese

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Yep....Non teaching staff....$$....
1st Purdue, like all woke schools, have several diversity related staff, besides this their are a host of expensive cultural centers under their woke umbrella. Expensive.
2nd Unique to Purdue... they have a large Extension program. Several hundred are off campus and teach NO Purdue students....but still cost taxpayers millions annually.
3rd they have alot of researchers at all colleges teach no classes, or only 1 class ....many bring in their salary & benefits in grants. But many do not. Props to Daniels upping the grants coming in though....tons raised.
4th Purdue like all colleges have many "requirements" are just filler classes not related to or essentially needed for any particular major. Still all those departments of non essential courses have expesive staff requiring benefits & salaries.
What about the first 12 years of schooling? Take any public school and check the money going towards core course study and what percent out of the total salaries money the core course teachers (math/science/history (and social studies ) and reading/English (Language ARts) make and it might surprise you. I'm guessing around 40% or so...
 
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tjreese

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While we are at it, let's also look at athletics. Of the 65 P5 schools, only 25 made money (in 2019). The median profit (among those 25) was $8M, while the median loss (among the remaining 40) was $16M. If you are outside P5 in D1 (64 of them), all of them operated in the red, median loss $23M.

D1 schools without foot programs (97 of them) all lost money (median loss, $14.4M). All 125 FCS (formerly D1-AA) schools lost money (median loss, $14.3M). No D2 or D3 programs make money.

In other words, only 25 of the approximately 1100 schools made money in college sports.

Yes, there are a lot of money in college sports, but they just go to the coaches and admins.

not a new topic. 30 years ago Murray Sperber (Purdue grad) wrote

 
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SDBoiler1

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While we are at it, let's also look at athletics. Of the 65 P5 schools, only 25 made money (in 2019). The median profit (among those 25) was $8M, while the median loss (among the remaining 40) was $16M. If you are outside P5 in D1 (64 of them), all of them operated in the red, median loss $23M.

D1 schools without foot programs (97 of them) all lost money (median loss, $14.4M). All 125 FCS (formerly D1-AA) schools lost money (median loss, $14.3M). No D2 or D3 programs make money.

In other words, only 25 of the approximately 1100 schools made money in college sports.

Yes, there are a lot of money in college sports, but they just go to the coaches and admins.

You forgot the Title IX mandate. How many sports are required, which likely all lose money, in order to satisfy this requirement?
 

Bethboilerfan

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Lost in the recent debate on student debt cancellation is why are American universities so expensive (relative to other developed countries) in the first place. I think we can get more bang for the buck if we can make universities more affordable for current and future generations, rather than retroactively forgiving debt of a past generation, which does not help prevent the issue recurring in the first place.

So why are American universities so expensive? According to this 2018 article, there are 4 main reasons I summarize:


1) US colleges spent more on non-teaching staff (armies of fund-raisers, athletic staff, lawyers, admissions and financial-aid officers, diversity-and-inclusion managers, etc.), as well as teaching staff (the star professors who focus on research to boost the school's ranking while having little to do with quality of the everyday undergraduate student). It's no wonder that the US colleges dominate the global ranking.

2) Other countries typically have a cap on how much a school can charge students, but US don't. It is more a market-driven model, and universities extract money from students because they can. It’s the inevitable outcome of an unregulated fee structure.

3) The financial difference between college grad and high school grad is VERY steep compared to EU countries. Therefore, "it’s a diabolical cycle: Colleges are very expensive to run, partly because of the high salaries earned by their skilled workers. But those higher salaries make college degrees extremely valuable, which means Americans will pay a lot to get them."

4) Raw tuition cost is "higher", but 70% of students do receive some kind of grant aid, making the net cost lower in US than Australia.

Interestingly, the article made a specific mention to Purdue,



This looks unfortunate. As a public in-state university, we have to resort to taking more out-of-state and foreign students instead of serving the locals. I understand the rationale behind, but it is still unfortunate.
I don’t like this method of keeping in-state tuition low - Purdue is a public state university and it should not be doing this. Sure it sounds good that tuition has not been raised but it is at a high (too high IMO) cost. Cut some (a lot) of the non-revenue sports that no one except parents attend and therefore, are costing $$
 

SDBoiler1

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I don’t like this method of keeping in-state tuition low - Purdue is a public state university and it should not be doing this. Sure it sounds good that tuition has not been raised but it is at a high (too high IMO) cost. Cut some (a lot) of the non-revenue sports that no one except parents attend and therefore, are costing $$
Purdue isn’t doing this. The AD is funded separately from the school. As well, Purdue already has the least number of sports (I believe it’s 18) of any BIG school.
 

bonefish1

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Administrative bloat is usually the answer to why things cost too much across business.

I only employ about 30 people now. Three full time, the rest part time workers.

A primary competitor has an additional two layers of supervisory personnel at their multi-location operation: gym manager and then two overarching program managers for four locations. The owners are not directly involved in daily operations.

The result is that they charge about 15% more in order to keep profits up and pay their people. We charge less, have a 30%+ profit margin and provide a better product.

Now, our current model is unsustainable and we will have to add an additional full time staff, but we can absorb that in our current pricing structure because our margin is too high right now.

Most larger operations don’t have margins that large, so every additional non-revenue generating staff they hire is a direct hit on profit. (Even non-profits care ab

The answer? Raise prices.

(Other businesses fail because they don’t scale properly… buying the Mercedes level equipment and facility while they’re still driving a Yugo level business… but that’s probably less of an issue in academia).
How much do you pay your part time workers?
 

SCBoiler1

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Unfortunately, there are cost involved in running a University. A large portion of those costs are subsidized by private donors and the state. If you really want to understand the revenues and expenses associated with a University, start by reading the Universities financial statements. If your still curious there are other ways to learn about the cost of certain programs. The bottom line is that every students education is subsidized.

Spouting off what intuitively makes sense to you based on your political or other biases adds nothing to the conversation.
 

gr8indoorsman

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Unfortunately, there are cost involved in running a University. A large portion of those costs are subsidized by private donors and the state. If you really want to understand the revenues and expenses associated with a University, start by reading the Universities financial statements. If your still curious there are other ways to learn about the cost of certain programs. The bottom line is that every students education is subsidized.

Spouting off what intuitively makes sense to you based on your political or other biases adds nothing to the conversation.
When Mitch Daniels took over at Purdue, the first thing he targeted was administrative bloat.
 
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kvc

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Unfortunately, there are cost involved in running a University. A large portion of those costs are subsidized by private donors and the state. If you really want to understand the revenues and expenses associated with a University, start by reading the Universities financial statements. If your still curious there are other ways to learn about the cost of certain programs. The bottom line is that every students education is subsidized.

Spouting off what intuitively makes sense to you based on your political or other biases adds nothing to the conversation.
Did it used to be subsidized (%) even more than now; before tuition shot up?
 

TheGunner

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Lost in the recent debate on student debt cancellation is why are American universities so expensive (relative to other developed countries) in the first place. I think we can get more bang for the buck if we can make universities more affordable for current and future generations, rather than retroactively forgiving debt of a past generation, which does not help prevent the issue recurring in the first place.

So why are American universities so expensive? According to this 2018 article, there are 4 main reasons I summarize:


1) US colleges spent more on non-teaching staff (armies of fund-raisers, athletic staff, lawyers, admissions and financial-aid officers, diversity-and-inclusion managers, etc.), as well as teaching staff (the star professors who focus on research to boost the school's ranking while having little to do with quality of the everyday undergraduate student). It's no wonder that the US colleges dominate the global ranking.

2) Other countries typically have a cap on how much a school can charge students, but US don't. It is more a market-driven model, and universities extract money from students because they can. It’s the inevitable outcome of an unregulated fee structure.

3) The financial difference between college grad and high school grad is VERY steep compared to EU countries. Therefore, "it’s a diabolical cycle: Colleges are very expensive to run, partly because of the high salaries earned by their skilled workers. But those higher salaries make college degrees extremely valuable, which means Americans will pay a lot to get them."

4) Raw tuition cost is "higher", but 70% of students do receive some kind of grant aid, making the net cost lower in US than Australia.

Interestingly, the article made a specific mention to Purdue,



This looks unfortunate. As a public in-state university, we have to resort to taking more out-of-state and foreign students instead of serving the locals. I understand the rationale behind, but it is still unfortunate.
Because stupid parents let their stupid kids go to college to get stupid, worthless degrees. Many of the kids should accept working in “trades” (such as plumbers, electricians, etc) but nope, every parent wants their kids to be a white collar worker.

Going to school to get a degree in sociology is “financially stupid.”

30 years ago, colleges would have flunked kids out and they would have found real work. Today, colleges are incentivized to keep kids in college and have them “graduate”. Often, this means moving them down to “lesser” degrees, but the college still collect $$$$$.

The cost of a degree should be somewhat linked to the value that it will be long term to a student, but nope, all degrees pretty much cost the same (unless they are graduate degrees).

As many people have said, hold universities accountable (Purdue has held tuition frozen for a decade…have others?). University administrators get fat, while students and parents foot the bill (now the tax payers get to assist).

This could easily be fixed by Democrats (because their base….university administrators are the ones stealing money) but nope, they don’t want to fix it. They just want to keep everyone hook on the education drug so their base can stay fat and happy.

Thank the Democrat political elite for this problem and Joe and really, Jill, are making sure this problem stays a problem. Teachers and professors benefit, and Democrats get to brainwash (oops)….”teach” more kids about climate change, the Democrat social agenda, political correctness, etc.

If you think the above is wrong…ask yourself who benefits from college debt?

Universities.
How many Republicans are in the University administration (I can guarantee you, Mitch Daniels is one of the very few Republicans).

if it’s the Democrats…hold them accountable. They’re not “fixing” the problem, they are in the business of keeping junkies on the education drug.
 
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TheGunner

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Oh, and If you didn’t like my rant above calling everyone involved in the student debt crisis “stupid” ….ask personal financial fixer Dave Ramsey…he basically says the exact same thing

 
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BSIT

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I'll venture a guess that, in spite of staff bitching, the fiscal control during the Daniels' era will be sorely missed 10 years from now.
College education is one of the biggest rackets going. As long as colleges can get their students loans subsidized by the government, they have a backstop that allows them to keep increasing tuition higher than the rate of inflation. Mitch shattered this myth
 

TMan92

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The other thing not being mentioned are the arms races these schools have had with amenities. It’s like living at a country club. Maybe all these kids growing up in McMansions and getting everything they ask for their whole lives is part of the problem.

How many kids going to college actually share a bathroom at home? I took my daughter to a lot of schools considered “conservative” and my jaw dropped on how these kids live on campus. That has to be part of this expense equation.
 

tjreese

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The other thing not being mentioned are the arms races these schools have had with amenities. It’s like living at a country club. Maybe all these kids growing up in McMansions and getting everything they ask for their whole lives is part of the problem.

How many kids going to college actually share a bathroom at home? I took my daughter to a lot of schools considered “conservative” and my jaw dropped on how these kids live on campus. That has to be part of this expense equation.
Ya know…It seems as though the “child-centered” pedagogy once contained in primary grades that has infiltrated higher grades may lead to an expectation that the sun revolves about the child…unlike some of the older people that realize it’s not all about us. Many parents are nonstop taking their children to one activity after another making sure they don’t deprive the children. Where is the balance????
 

TMan92

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Ya know…It seems as though the “child-centered” pedagogy once contained in primary grades that has infiltrated higher grades may lead to an expectation that the sun revolves about the child…unlike some of the older people that realize it’s not all about us. Many parents are nonstop taking their children to one activity after another making sure they don’t deprive the children. Where is the balance????
The kids didn’t do it themselves. And here in Orange County the people wearing BLM shirts or red hats all think their kids are perfect.
 
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TheGunner

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The other thing not being mentioned are the arms races these schools have had with amenities. It’s like living at a country club. Maybe all these kids growing up in McMansions and getting everything they ask for their whole lives is part of the problem.

How many kids going to college actually share a bathroom at home? I took my daughter to a lot of schools considered “conservative” and my jaw dropped on how these kids live on campus. That has to be part of this expense equation.
Living expenses at college can be part of the college debt. Nothing like asking tax payers to pay for a country club way of life, if the student decides not to pay their loans back.

Sadly, this is opening a “Pandoras Box”.

No one will pay back their loans now…(just my opinion) and there’s zero being done to reduce costs (except by Mitch Daniels).

There are several links to people just waving their hands at their college debt. Zero desire or personal responsibility to pay it back.

(I was amazed when I walked through the Cary Quad “cafeteria” about a decade ago and found out they were offering sushi. Makes sense based on part of Purdue’s demographic, but sushi was something my wife and I would go out for once a month because of the cost. But that’s just me. I couldn’t believe that was an everyday thing. But I lived on $2 for food/day in college in the early 90s so….)
 
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SDBoiler1

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Because the decrease in state funding for schools and the work to destroy the Dept. of Education done by the Reagan administration meant schools had to get more and more of their money from students.
There is a kernel of truth to this, but compare the rate of growth of college tuition, room, and board costs vs. inflation by year since 1981. College tuition, room, and board have gone up many multiples vs. inflation, and good part of the reason for that is bloat in college administration staffs since 1981. There are more administrators than professors at most schools now.
 

tjreese

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The kids didn’t do it themselves. And here in Orange County the people wearing BLM shirts or red hats all think their kids are perfect.
No, the "child-centered" pedagogy is externally applied, but the effected outcome is internal for some. Years ago the transition took place in lower grades. Parents love their children and want to give them every opportunity they can even if they run themselves ragged over something that really isn't that important and all of a sudden the children expect the world to be at the fingertips of their desires. You can blame adults for showering children with everything in their power, that a child and the immaturity he or she desires to be fulfilled.
 

SIBoiler2

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I shake my head when I look at today's college cost. When I was in HS in the late 60s I worked two summers in a canning factory. I made 1.80/hour. For about 9 weeks I averaged 70+hours a week. Labor laws today likely would never allow such hours. There were twin brothers three years older than me that went to ISU. They made enough in the summer to pay for their entire school cost each year and graduated with no loan debt. In 1970 fees were 350/semester at Purdue. Two semesters in Cary cost 980 for the year. So for 1680 fees and housing were covered. If a student is able to find a job in the summer paying 15/hr and could work 40 hrs, which is unlikely, the total for 12 weeks of work is 7200. Far short of the cost of today's education. Quite obviously the return on investment was much greater 50 years ago.
 
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tjreese

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I shake my head when I look at today's college cost. When I was in HS in the late 60s I worked two summers in a canning factory. I made 1.80/hour. For about 9 weeks I averaged 70+hours a week. Labor laws today likely would never allow such hours. There were twin brothers three years older than me that went to ISU. They made enough in the summer to pay for their entire school cost each year and graduated with no loan debt. In 1970 fees were 350/semester at Purdue. Two semesters in Cary cost 980 for the year. So for 1680 fees and housing were covered. If a student is able to find a job in the summer paying 15/hr and could work 40 hrs, which is unlikely, the total for 12 weeks of work is 7200. Far short of the cost of today's education. Quite obviously the return on investment was much greater 50 years ago.
I only got the $350 for 1 maybe 2 semesters and then a whole $375 and possibly $450 towards the end. In the summer of 70 I drove about 45 miles to work maintenance..or "janitor" for $2.25/hour. I was Cary East room 122 that first year. No roommate other than first 3 weeks or so and directly across from the lounge and beside the "powder room" which was fantastic!!! ;)
 

SIBoiler2

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I only got the $350 for 1 maybe 2 semesters and then a whole $375 and possibly $450 towards the end. In the summer of 70 I drove about 45 miles to work maintenance..or "janitor" for $2.25/hour. I was Cary East room 122 that first year. No roommate other than first 3 weeks or so and directly across from the lounge and beside the "powder room" which was fantastic!!! ;)
I was in SW on 3rd floor in 70. Roommate was a black kid from Gary. He came in early for the BOP program. He majored in basketball at the CoRec. I learned a lot about living in a small space with someone whose clock was the opposite of mine. I had 7:30 classes 3 days a week so in bed before midnight. Roomy came in at 1AM, fired up a cigarette and played the Jackson 5 til long after I passed out. He disappeared without a word before Thanksgiving. Since he didn't officially leave I had the room to myself the rest of the year. I learned more that year about coexisting than I learned from a book.
 
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tjreese

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I was in SW on 3rd floor in 70. Roommate was a black kid from Gary. He came in early for the BOP program. He majored in basketball at the CoRec. I learned a lot about living in a small space with someone whose clock was the opposite of mine. I had 7:30 classes 3 days a week so in bed before midnight. Roomy came in at 1AM, fired up a cigarette and played the Jackson 5 til long after I passed out. He disappeared without a word before Thanksgiving. Since he didn't officially leave I had the room to myself the rest of the year. I learned more that year about coexisting than I learned from a book.
I feel for those that had a roommate. I tried to keep my schedule no earlier than 8:30 and no later than 2:20 and was pretty successful doing so. Back then I would search for a class that was only offered at 7:30 and one that might only be offered after 2:30. I would have the computer schedule the classes I needed as well as the time slot classes I didn't and then drop the courses I didn't need. Most of the time it would work out and sometimes I would need to drop and add a couple of times to make it work. I spent far too much time at the CoRec in the afternoon as well...and if not there...in the union shooting pool. Basketball, shooting pool and having a room beside the powder room made for an easy adjustment to the social life at Purdue.