College Spending Trends Show Students Bearing a Growing Share of the Costs

September 14, 2011

The White House, foundation leaders, and other policy makers love to tout community colleges as key players in raising national educational levels, yet as the recession hit in 2009, two-year colleges were also the sector of higher education that took the hardest financial hits, according to the latest Delta Cost Project report, released today.

Squeezed by growing enrollments and diminished levels of state and local support, the sector—which already educates the greatest number of American students with the fewest resources—saw its per-student spending for educational and related activities shrink by 3.4 percent from 2008 to 2009, more than did other sectors of public higher education.

"Community colleges bore the brunt of the downturn in higher-education spending," the report says bluntly, a trend that endangers those institutions' ability to successfully serve the millions of students who depend on them.

The recession has also exacerbated the yawning gap between higher-education's haves and have-nots.

"Disparities between rich and poor institutions in overall spending levels have never been larger," the report says. "The 'new money' coming into higher education is coming from either student tuitions or user fees. Rich institutions are getting richer and poor institutions are getting poorer."

Many private colleges saw declines in endowment values in recent years, but those were essentially paper losses, the report says. Sources of other revenue for those institutions increased, it says, and their spending went up, continuing a 20-year trend of widening differences between public and private institutions.

That disparity, the report warns, has national ramifications. While so much public and media attention goes to a small handful of elite institutions, "the largest majority of students are being served in institutions that spend on average, about $10,000 per student per year—no more than we spend for elementary and secondary education."

The report, "Trends in College Spending, 1999-2009," paints a picture of higher education in the United States as an enterprise that is turning increasingly to tuition increases to fill financing gaps—a trend that fuels students' and parents' unease about the cost of higher education.

"They see prices going up, and they don't see the benefit" from those increases, says Jane V. Wellman, a co-author of the report. "And they're right."

Private colleges by and large channeled the additional revenue they took in from tuition into spending for student aid and offsetting the higher levels of "tuition discounting" that many increasingly use to attract students. Public colleges used the additional money to make up for cuts in state spending and to cover their rising costs of employee health care and other benefits. In 2009, the cost of benefits at public colleges approached 25 percent of total compensation, up from less than 20 percent in 2002.

Cost Tradeoffs

Historically, public institutions have offered generous benefits to help compensate for offering smaller salaries than those of private colleges, but in an era of shrinking public subsidies for higher education, the cost of that trade-off may be becoming too dear, says Ms. Wellman, who is executive director of the project, known formally as the Delta Project on Postsecondary Education Costs, Productivity, and Accountability.

"Either we pay for another generation of students to go to college, or we keep the level of benefits," she says.

Private institutions are culpable, too, the report says. They've done a better job of keeping benefit costs in check, but they've also added more staff, so on a "per student" basis, the value of those savings are lost.

As the report highlights, it's not necessarily faculty members receiving those benefits. While faculty ranks as a whole have been growing as enrollments have increased over the past decade, faculty still make up less than half of employees at colleges, except at community colleges (where they make up 58 percent) and private master's-level institutions (where they're 51 percent). At all institutions, the growth in faculty ranks between 2000 and 2008 (the latest year for which data were available) was fueled by expansion of the ranks of part-time faculty and graduate assistants.

The bulk of the report is based on analysis of information from the U.S. Department of Education on more than 2,000 private and public colleges. It largely excludes for-profit colleges from the analysis on revenues and spending, but notes that for-profit colleges account for an increasing share of student enrollments, particularly in the market for graduate and professional degrees—long an important and lucrative market for nonprofit colleges. In that market, the for-profit-college share has increased by seven percentage points in a decade.

Degrees at all levels from for-profit colleges now account for nine percent of all degrees awarded.

Among other conclusions, the report found:

  • Institutional subsidies for educational and related expenses per student fell at all categories of institutions except for private research universities. At public institutions, where state funds help provide the subsidies, the level of spending per student dropped by 3 to 5 percent, depending on the kind of institution. At private master's-level institutions, the subsidy fell by more than 8 percent, a 10-year low.
  • Tuition revenue now pays for more than half of the educational and related costs at public research universities, nearly half of those costs at comprehensive public colleges, and one-third of the costs at community colleges.
  • Institutions halted a long-term decline in spending on instruction by cutting, but only by a hair, spending on administration and maintenance.

Ms. Wellman and the report's co-author, Donna M. Desrochers, say that shift away from administrative and maintenance spending, however slight, is a positive sign that institutions were managing budget cuts more strategically than in past recessions, when across-the-board cuts were more common. Looking at only educational and related costs (not things like spending on research or new construction), the report found that at public research institutions, the share of spending on administration and maintenance per full-time-equivalent student went from 29.5 percent to 28.9 percent; at most other institutions, the proportion of such spending declined by only a few tenths of a percentage point.

Those tiny percentage changes give little solace to the growing cadre of critics who see administrative bloat at the root of higher education's cost spiral.

"These numbers are small comfort," says Benjamin Ginsberg, a professor of political science at the Johns Hopkins University, who in his new book, The Fall of the Faculty (Oxford, 2011), takes aim at the growing numbers of "deanlets" and other proliferating species of academic administrators. "A major recession only resulted in a tiny decline in administrative growth."

He says the reversal on administrative spending is just a blip. "As soon as schools have money, they'll resume" it, Mr. Ginsberg predicts. And that trend is not likely to change, he says, unless that kind of spending by colleges becomes as visible to trustees, parents, and alumni as the average SAT scores and selectivity measures that go into popular rankings by magazines.

"If that affected their rating," says Mr. Ginsberg, "you could be very sure trustees would start asking questions."

Public Colleges Gain Students With Little Increase in Funds

As private colleges have significantly increased their spending per student, they have added relatively few new students over the past decade. Public colleges, however, have seen big jumps in the number of new students without a proportionate increase in money.

Chronicle of Higher Education