New Web Tool Helps Both Experts and Public Grasp Colleges' Costs

July 09, 2010

Higher-education finance is too opaque, says Jane V. Wellman, an expert on college costs, and policy makers as well as the general public often lack basic information about how colleges spend money.

Her group, the Delta Cost Project on Postsecondary Costs, Productivity, and Accountability, aims to change that. This week the group released a Web-based database that tracks the spending and revenue sources of 2,300 public and private institutions. The database, Trends in College Spending Online, tracks a wide array of categories at each college, enabling comparisons among institutions, states, and sectors.

The database will increase transparency and help drive the debate over how higher education should adjust to the "new normal" of reduced revenue sources.


"We know how to cut budgets," says Ms. Wellman, Delta's executive director. "We don't know how to restructure costs."

Along with the new tool, the Delta project also released a report on trends in college spending from 1998 to 2008. Although the findings predate the recession, Ms. Wellman says there are lessons to be learned from them. The patterns include a shift toward reliance on tuition revenue during economic downturns, and a spending frenzy by wealthy private universities, which helped fuel competitive pressure and spending across much of higher education.

But the Web tool's potential outshines the newsworthiness of the accompanying report's conclusions.

Building on publicly available numbers from the U.S. Department of Education's Integrated Postsecondary Education Data System, the Delta project organized data into spending categories on a per-student basis at each college. The six major metrics include the average educational cost per student and college spending per degree.

The database's major contribution is that it translates murky, complex information into standard formats that can be tracked over time, with annual data from 2002 to 2008. It also peels away layers of spending that aren't directly related to student learning.

Ms. Wellman says the most important metric is "education and related spending" (which excludes auxiliary operations like hospitals as well as research and public-service costs). Those core expenses—which include instruction and student services—give the best view of the full cost of education and who is paying for it.

As an example, she points to an entry from the database for the University of Maryland at College Park. In 2008 its total education and related spending per student was $16,802. Students paid for 56 percent of that amount, according to the Web tool, while the "subsidy" from institutional revenues such as state funding, endowment spending, and private fund raising was 44 percent.

The entry also includes inflation-adjusted trends in those numbers dating back to 2002. Over those six years, Maryland's education-related spending decreased by about $1,400 per student. And students are now picking up more of the tab. In 2002 they paid for 36 percent, and the subsidy covered 64 percent. Ms. Wellman says her group plans to update the Web tool on an annual basis. Next year's release would include the early impact of the recession.

Declining Share for Faculty

The trend report is the third in a series of studies on higher-education finance by the Delta project, which is an independent, nonprofit research organization. The report was financed by the Lumina Foundation for Education.

Questions the report seeks to answer are clear from its title: "Trends in College Spending 1998-2008: Where Does the Money Come From? Where Does It Go? What Does It Buy?"

It identifies several troubling patterns on the national level. One of the most controversial is the declining share of spending on the "direct cost of instruction," a category that consists largely of faculty pay and benefits.

That expense, like others in the report, is put into context. Instructional costs are given as portions of education spending, on an inflation-adjusted, per-student basis. Across all types of institutions, instructional costs, while increasing, dipped relative to spending on administration, academic support such as libraries and computing, and student services.

For example, an average of 53.7 percent of education-related spending by private research universities in 2008 was on instruction, down from 55.9 percent in 1998. At the same time, the proportion of spending on administration and academic support increased to 35.9 percent from 34.3 percent, while spending on student services went to 10.4 percent from 9.8 percent.

The sole constant among the mounds of data the group analyzed is hardly a surprise: Tuition rates have gone up faster than inflation and family income, with "no discernible payoff in quality, opportunity, or results."

The repeated tuition increases have fed public skepticism about wasteful spending by colleges. And the evidence suggests that people are right to be skeptical, at least in some cases. For example, many private colleges raised tuition despite explosive growth in private gifts and endowment income in the three years before the recession. As the report states, those healthy revenue streams just enabled higher overall spending rates.

The Delta project also points to findings showing that spending patterns are not always consistent with policy priorities.

The Obama administration has set a lofty of goal for the United States to have the world's highest proportion of college graduates by 2020. Yet colleges serving the most students spend the least, per capita, on their education.

The report found that community colleges spend about $10,000 annually on each student, while private research universities spend almost $35,000.

"The current recession will almost certainly increase these inequalities," the report says, "just at a time when more students are forced to consider low-cost educational options."