Even Farther Off-Topic: Costs, Subsidies, and Value

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This is a further offshoot of the Off Topic thread regarding campus visits:

The general topic in this thread is how colleges and universities spend money, where they get that money, and ideas for how to assess all that when making college choices.

Just to get started, in the prior thread we were discussing how some prominent US colleges and universities have very high operating costs per student, and would have even higher costs per student if you allocated out a portion of capital costs.

This can be so high that it exceeds even full pay for privates, let alone OOS or in-state costs. These colleges and universities therefore rely on more than just student payments for revenues. Some have very large endowments with a lot of endowment income. Some get a lot of gifts for present use. Some have a lot of research grants and other contracts. Some have an associated medical system which transfers over some revenues. Some get other revenues from various services they provide. And so on.

But just because they spend a lot of money per student, does that mean all that spending benefits each student? This is a tricky question because each individual student will make use of different things in different portions. And even if they make use of something, perhaps they would have gotten all they really needed or indeed wanted out of a less expensive version of that something. So very likely any given student’s hypothetical ideal college or university would spend less, or nothing at all, on some things than any actual college or university they attend.

But of course there cannot be one perfect college for each individual, there are economies of scale and so like-minded individuals have to group together to create efficient scale. And that means at least some compromise.

Given this analysis, the goal would be to identify those colleges catering to groups of sufficiently like-minded people which are at least closer to your ideal, even if some compromise is inevitable. And then you can balance out how much those colleges will cost you against what they provide that you actually do care about, and pick your best value.

But that is just one way to think of it, and others can and should express different thoughts in this thread.

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This is a really great thought, but one issue with this thinking is that it assumes a level of financial transparency that is not really there.

Just looking at high level accounting statements (i.e., the 50K foot view) does not really give you a good idea of how a school spends money. The line items are buckets containing “allocated” costs that are so big and contain so many things that it is impossible to really understand what is happening in them. Profligate spending and wise spending are combined in the same buckets and cancel each other out. Most schools of a similar type (e.g., LACs) wind up looking very similar, even if they are actually pretty different.

Even if schools gave you data at the “activity” level, the need to allocate costs to these activities would inevitably lead to gamesmanship. I spend a career working in for-profits and not-for-profits. This is what organizations do.

Just going on an admissions tour might give you clues as to where a school’s priorities lie. Like some schools costing $100K fully loaded who have peeling paint on a lot of their buildings.

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Yes, I actually didn’t mean you should try to understand college spending priorities by looking at their public financial documents. I think you should look at what they are actually doing in substance.

Like if you are interested in a certain academic program, look at the relevant program and department pages, look at relevant faculty pages and course catalogs, maybe visit if possible and look at actual facilities, and so on. I also like looking at data on who is actually majoring in what at a college, because people vote with their feet.

None of this will tell you exactly how much the college is spending on that program, but I don’t think it is usually too hard to figure out if an academic program is a high priority for a college, or a normal priority, or a low priority.

And so on for anything you care about. Some people really want to investigate housing and dining. Some people athletic programs and facilities. Or career services. Or study abroad. And on and on. Lots of colleges superficially “have” something, but whether they are really putting serious resources into that something requires this sort of investigation.

Of course what I am describing is just a more or less normal in-depth college search. In that sense, maybe not so off-off-topic.

But I do think one of the perspectives you can adopt when doing your college search is trying to see “where the money went” in tangible ways. And if it appears a lot went to things you value, good, and if not, not so good.

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Ah. OK. You had posted some audited financial documents in the other thread and talked about operating costs and capital costs above.

But yes, we are doing exactly this. The schools we are looking at all charge about the same thing, but are very different when you see them IRL.

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Yeah, I find the financial documents interesting, but not really for practical purposes like choosing a college. At the end of the day, you still need to balance what you have to pay personally versus what you get back personally.

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Course catalogs are fine to look at, but many programs have courses that are on the books but never offered in practice. You need to see what classes are actually offered in a two year span to get a feel for what will be available.

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I think one way to evaluate where the money goes is what centers of research they support. Some have dedicated centers to studying very specific (maybe even esoteric) topics. I’ve found that to be at least one way to evaluate colleges and their spending.

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If you search for “course offering” or “course registration” you can usually find this info without needing an account. It’s a good way to figure out not only what the courses being offered are, but on many school’s sites I could see what the seat capacity was, and if it was filling, etc.

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Course offerings are one thing to consider for sure. So are the facilities for disciplines that require them. I pursued a course of study as an undergrad that was mostly faculty-dependent. State of the art labs, maker spaces, etc would have made NO difference to my experience.

This is one of the reasons I expect that over time, there will be more differentiation among schools. Every school cannot be everything to everyone. There are already corners of the uni world where this has happened – MIT and CalTech, for example.
I wonder if tech and remote instruction will enable the start of this in the fields that are less about facilities and more about faculty (such as FL.) Or mergers of LACs where students take certain classes on one campus and others, and maybe even ones that aren’t close to each other, so it might require moving to a differentlocation fora semester. – It’ll be different and a tough transformation , especially at the price for education, but it feels to me that the current model just isn’t sustainable for many schools and families.

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Has that specialization really happened?

MIT has the second-ranked English Lit program in the country. Cal Tech is #7.

https://www.usnews.com/best-colleges/english-major-2301

If Carnegie Mellon ditched all its STEM programs tomorrow it’d still be renowned as a school for the performing arts.

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Neither specializes in FL. They have them, which is great because they are both practical and mind-expanding, but there are other places that would be a better fit for a kid interested in a program with more depth and breadth. Or for someone interested in Classics. But they do have incredibly rich offerings in almost everything STEM.

CMU has great performing arts. That has always been an area of focus for them, and they are really good at the intersection of art and science. But MIT is more limited in that regard - you wouldn’t go there for piano performance. That difference in focus is part of what I mean by specialization. MiT should not try to go head to head with CMU in the arts with its more than half century head start and investment.

It looks like only 0.4% of MIT students major in English. MIT also has an exceptional program for non-native speakers. Btw, specialization doesn’t mean schools shouldn’t have excellent faculty in the areas to which they want to expose students – this feeds creatity and opens minds. But they don’t need 100s of courses to compete with schools that do this really well.

Not every school offers nursing, occupational therapy, physical therapy, music performance, slavic languages, classics, or archeology. Some schools have incredible facilities for astronomy or physics or have access to a locale for environmental studies. My point is that many schools, especially ones with more limited resources or reach, may benefit from focus and appropriate branding. Even if the tippy-toppiest science schools have great faculty teaching English or Korean, they know that they need to stay on top in those areas, not decide to start offering Bahasa. They already have their “brands”, so perhaps are less tempted to try to compete with me-too programs. This temptation seems tougher to resist further down the food chain.

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Not suggesting you’re wrong but I’ve been hearing exactly that statement for over 30 years. Same goes for the consolidation of programs and the outright termination of “non-value” majors.

Sure, some schools that were already on shaky financial footing have gone under (or merged) and schools add/remove programs all the time but parents and society still send their kids and find a way to pay for it.

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This may be a case of overthinking. It’s true that there was a period in the history of American higher education when costs per student were assumed to be higher than the sticker price and virtually every highly esteemed college could boast with some justification that “even our full-pay students receive a scholarship” in the form of endowment and fund-raising.

The big differentiator these days, of course, is the amount of government money it takes to run labs and to sustain basic research in the sciences. It’s huge. And unless you are a STEM major, one could argue that about three-quarters of any R1 university’s external funding is irrelevant to the needs of a non-STEM student. In that sense, the SLACs more closely resemble the old paradigm.

That being said, any highly endowed LAC that isn’t putting every penny of its returns (minus seed money) into financial aid is probably asleep at the wheel.

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“And unless you are a STEM major, one could argue that about three-quarters of any R1 university’s external funding is irrelevant to the needs of a non-STEM student. In that sense, the SLACs more closely resemble the old paradigm.”

Really? I studied Classics but the investment in the sciences made the university a robust and exciting place. Some faculty looked backwards (history, archaeology, art history etc) and some looked forward (scientific research, studio art, music composition, creative writing) and the result was a challenging and intoxicating place to live and learn. Virtually every day of the week someone was presenting or debating or holding a symposium on something.

Chemistry professors teaming up with an expert on Egyptian papyrus scrolls to explain how carbon dating has evolved to an exact science, not a general “this is pretty old”. Geneticists working with Shakespearean scholars to discuss various ailments of late medieval royalty.

The world has become interdisciplinary. And I’m talking 45 years ago…even more so today!

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In other words, the very things that differentiate American colleges from their European counterparts and make them so costly.

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Yes, that’s so true. Ime, even when organizations know what they need to do, they lack the fortitude to do it, especially if it’s difficult. The ones that have no choice often finally “get it done.” Likewise, the ones that are so strong that they can set their own agendas might not be tempted to add something because everyone else seems to be doing so. They can afford to be all in on they are.

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I agree that interdisciplinary work is what is often ground-breaking, and for a lay person like me, most exciting. It is also what can make something esoteric suddenly seem useful and relevant. I suppose the question then is how much beyond its most core competency should any school go just to provide this? Do I need to know what DNA is or shows or do I need to know how to sequence it and learn more about each bit of what’s on it? Assuming I am in the first group, how does my school deliver that content? That question isn’t to contradict the need for interdisciplinary work but to ask practically, how do we do that?

Grad students in programs at schools with many diverse top programs often don’t cross paths - even where you might expect them to do so. So to have a really invigorating education but also control costs, where do you draw the line on offerings yet create a forum forexchange of ideas and knowledge?

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Tough to tell just how much more costly American colleges are from European counterparts since the funding of those systems is so very different. The European system, being mostly funded by the taxpayer, is going to be less inclined to fund the frills. The American system funds the frills because it’s about marketing. Who has the most up to date - Library, Athletic Facilities, Bloomberg trading center, Food Services, Landscaping, Dormitories/suites, Labs, etc. The fact that some of the students won’t ever utilize many of the services goes unacknowledged during the prospective student tours when the 18 year old mind is impressed by it.

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The bottom line is that American colleges are more expensive to run no matter who’s footing the bill.

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Yep.

And I think we could also add the other thing we are discussing, that a lot of “top” US undergrad programs (at both independent colleges and universities) are on an exploratory model where you are supposed to be able to just follow your developing interests wherever they lead, possibly combining different things in unusual ways.

I really made use of that model myself, and wanted the same for my S24, but it comes at a price. Namely that an undergrad program like that can’t be too specialized in its spending, it has to fund everything it offers at a relatively high minimum level. And this is not such a thing outside the US.

Just being a fan of looking at financial statements, I believe the current highest endowment per student NESCAC is Amherst (or near enough), so here is their latest available (FY2023) annual report:

Interestingly enough, Amherst only puts about 1/5th of its endowment income into financial aid. Most of it goes into other operating categories, such that well over half their operating revenues come from the endowment. And another large chunk still comes from net student fees, but not as much as from the endowment.

So they COULD divert more endowment income to reducing net student fees, indeed in theory could zero them out and make Amherst free for everyone. But that would radically slash their operating revenues, and presumably that is why they do not.

Just to make sure this is not a specific Amherst thing, Swarthmore I believe is actually even higher per student. Here is their 2024-25 operating budget:

/https://www.swarthmore.edu/sites/default/files/assets/documents/finance-and-investment-office/OperatingBudget_Website_%20FY2024-25.pdf

They budgeted $143.7M in gross student revenues, financial aid of $60.2M, so net student revenues of $83.5. They then budget $125.4M in endowment spending to operations, which again is over half of the revenues of $220.9M (although some of that goes to capital expenditures and debt service–the actual operating budget is $185.9M.

So, pretty much the exact same deal. Swarthmore actually could afford to zero out student revenues with endowment income, but it would then have to dramatically cut its operating budget. So, it does not do that.

I’ve looked at HYPSM financial statements before, and it is the same deal. I believe all of them technically could eliminate any student revenues with endowment income, but they choose not to in order to spend more on operations.

But OK, so what does a college do if it doesn’t have that much endowment to go around?

Well, let’s look at, say, Lafayette, which has a decent endowment but nothing like these colleges:

At Lafayette, net tuition and fees is about $95.9 million–more than Swarthmore, say. But the endowment contribution to operating revenues is “only” about $43.8M, so way less than Swarthmore. Lafayette could not in fact just zero out net tuition with its endowment income.

OK, so then Lafayette actually ends up with a higher operating budget–$193M to $164.5M in the same year. But Lafayette is bigger–like 2700 to 1600, so per student that is like $103K Swarthmore, $71K Lafayette.

OK, then average net tuition per student–and very much YMMV–it is like $35.5K from Lafayette, $46.8K from Swarthmore. Huh. I note Swarthmore has very little non-need aid–a $1.8M budget in the relevant CDS, versus $47.7M for need, Lafayette instead had about $40M for need, $11M for non-need. So Swarthmore does in fact spend a lot more on need, particularly per student, but a lot less on merit.

OK, what about Amherst? Just getting to the CDS part of the analysis, same year, a little under 2000 students, over $70M for need, basically nothing for non-need. Again, way more per student for need than Lafayette, a bit more than Swarthmore.

So what is the point of all this? Well, on the one hand, it is true the highest endowment-per-student colleges are offering more generous need aid programs, to varying degrees. Not so much merit, though. And even then, they are ALSO using endowment income to support spending more on operations, indeed they are spending more endowment income that way then they are spending to fund financial aid.

So . . . what does it all mean?

Well, if you qualify for a lot of need aid and can get admitted to one of these colleges, they can be a screaming good deal from this crude financial perspective. But they are really only budgeting so much toward that sort of deal, not as much as they could (and one might wonder how nominally need blind colleges keep to that budget, which is the subject of an active lawsuit).

If you don’t qualify for need aid but do qualify for merit, one of the less-wealthy alternatives could cost you less.

On the other hand, very likely they are also spending a lot less per student. Which brings us back to the question of whether or not you value what that extra spending is paying for.

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