Colleges Spend Far Less on Educating Students Than They Claim, Report Says

April 07, 2011

While universities routinely maintain that it costs them more to educate students than what students pay, a new report says exactly the opposite is true.

The report was released today by the Center for College Affordability and Productivity, which is directed by Richard K. Vedder, an economist who is also an adjunct scholar at the American Enterprise Institute and a Chronicle blogger. It says student tuition payments actually subsidize university spending on things that are unrelated to classroom instruction, like research, and that universities unfairly inflate the stated cost of providing an education by counting unrelated spending into the mix of what it costs them to educate students.

"The authors find that many colleges and universities are paid more to provide an education than they spend providing one," says a news release on the report, "Who Subsidizes Whom?"

The report's authors used data from the U.S. Education Department's Integrated Postsecondary Education Data System, or Ipeds, to conclude that more than half of students attend institutions that take in more per student in tuition payments than what it actually costs them to deliver an education.

The chief reason universities inflate the figures on what they spend to educate students, says the report, is that institutions include all of their spending—whether it is directly related to instruction or not—when calculating what it costs them to provide an education. In reality, says the report, depending on the type of institution, it can cost universities much less to educate students than what the institutions bring in through tuition charges.

"This study finds that education and related spending is only a portion of many institutions' budgets," says a news release on the study, "and that many schools spend large amounts on things unrelated to educating students."

The report uses Dartmouth College as a poster child to illustrate the gap between the actual costs of providing an education and what an institution says it spends. On its Web site, the report says, the Dartmouth College Fund maintained that while the institution charged undergraduates about $50,000 each in academic 2009-10, the college actually spent about $104,400 per student. While the center's report notes that Dartmouth indeed spent more over all per student than what it took in through tuition payments, "this does not mean that students are being subsidized because not all of that spending is used toward specifically educational purposes."

For example, says the report, Dartmouth said it spent $37,000 per student on "academic support," $24,000 per student for research, $15,000 for "institutional support," and $12,000 for "student services." But, says the report, "very little of that $88,000 is properly attributed to the cost of providing an education."

A spokesman for Dartmouth said it is legitimate for institutions to count research expenditures as part of instruction. Dartmouth faculty members are "renowned as teacher-scholars who involve their students in their scholarship," said the spokesman. "Discovery of knowledge is a key part of Dartmouth’s fundamental mission and a liberal-arts education."

The report criticizes colleges for stating that they subsidize their students' education, saying "conventional wisdom is often wrong" in that regard.

"Convincing people that you're giving them a big discount when you are doing no such thing is not a new idea," the report says. "What is new is its application to and celebration within higher education."