<p>I suspect that it is a complicated affair. I am really wondering if universities are given a fixed amount of money for every domestic student they educate. If that is the case, it explains why international applicant pools are so competitive.</p>
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<p>No. Universities do not receive a fixed per-capita subsidy. Just get that idea out of your mind. It’s just wrong.</p>
<p>The U.S. national (federal) government subsidizes private universities only in indirect ways. First, it makes them tax-exempt and tax-deductible, so that the universities pay no taxes on their revenues ("income’), and any contributions they receive result in a generous tax break to the donor. The number or percentage of international students is simply irrelevant to these calculations. </p>
<p>Second, the federal government makes substantial sums of money available for research in specified areas. Teams of university researchers submit competitive research proposals (or “bids”) for these funds, which are awarded ostensibly strictly on the basis of merit in a highly competitive, peer-reviewed process. Again, the presence or absence of international students is simply irrelevant to the award.</p>
<p>Third, the federal government provides a limited amount of funds to both public and private colleges and universities to be used for need-based financial aid (both grants and subsidized loans) to U.S. students who can demonstrate financial “need” according to a government-defined formula. Federal financial aid does discriminate on the basis of citizenship or residency; and this does make some difference to the universities, especially those that promise to meet 100% of financial need and extend that promise to internationals. As you can easily see, it’s costlier for a university to admit an international student with financial need than a domestic student with a similar level of need, because for the domestic student the federal government will pick up a portion of the cost of financial aid. For that reason, many colleges and universities will use a different admissions standard for international students, admitting only those international students who show an ability to pay the full (or almost the full ) cost, while admitting domestic students on a “need-blind” basis. This, I think, is the greatest source of differential admissions standards. For “full-pay” (i.e., no financial need, no financial aid) international students, admissions standards should be the same as for “full-pay” U.S. residents. For international students with financial need, the challenges are greater.</p>
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<p>And this is not exactly a “subsidy”. It is payment for products or services. In some cases, university researchers may be competing against (or partnering with) commercial firms.</p>
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<p>This is not quite correct.
FLAS (Foreign Languages and Area Studies) and Fulbright fellowships underwrite American citizens’ training in foreign languages and area studies either at home or abroad – there is no “product” except students. Similarly Title VI goes to universities that have area programs such as East Asian studies, Russian studies, etc… Proposals must be submitted and reviewed and renewed every few years.
Work-Study programs can be said to subsidize profs’ research insofar as the federal government pays part of the WS students.
A lot of NSF money goes into pure research which does not generate a “product.”</p>
<p>Tax exempt private institutions also do not pay property tax, which supports local police, road, and many public services. Indirectly, local residents are supporting those institutions. For those reasons, I am a supporter of giving American residents more preferential treatment, and have internationals pay higher tuitions, no different than OOS students. Australia has different rates for international students.</p>
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While not technically a subsidy, research grants from, for example, NSF, go way beyond a “payment for products or services.” These grants contain around 50% in overhead funds which go directly to the university and are not spent on the actual research.</p>
<p>Oldfort, very few (if any) substantial private universities or colleges in contemporary America fail to make “PILOT” (payment in lieu of taxes) payments to the communities in which they reside. These may not be full property taxes, and are generally negotiated, but are substantial nonetheless. And, remember, universities are huge employers (the largest employer in this region is a private university with a significant medical system), and often provide their own police, transportation, trash, and power generation. I think that the subsidization vector between universities and their communities tends to go the other direction.</p>
<p>There has been some noise about universities buying up properties around the campus, which then cuts down on town’s property tax. One I remember reading around Boston area, more specifically Tufts. They did mention a solution may be payment in lieu of taxes.Apparently not all institutions are cooperative in making payments.</p>
<p>I believe most do, but at very different rates. For example, MIT pays way more than Harvard in PILOT. I’m not sure why.</p>
<p>I don’t know about Massachusetts law, but here in Pennsylvania mere ownership by a university does not get a property off the local property tax rolls. The property has to be actually used for educational or charitable (or other exempt) purposes. The test is much narrower than that for the basic federal and state income tax exemption. Every hospital in the state has faced a fight over its property tax exemption (usually settled with a PILOT agreement).</p>
<p>Another nuance is that universities’ income tax exemptions do not extend to business income. If a university is operating a business (including something like a public parking lot, or a bookstore), it will have to pay regular tax on the income from that business. (Which is why universities no longer operate such businesses, and instead lease them out to private sector operators.) The famous case here was NYU’s former ownership of the Mueller’s Spaghetti Company.</p>
<p>I think Marite and I (and anneroku) are describing different parts of the federal funding elephant.</p>
<p>Yes, federal dollars make their way to universities by several paths. The one I had in mind was the federal acquisition system (including defense contracts, etc.) In these cases, the government has a need. It issues a Request for Proposals to satisfy that need. A university (or team) submits a proposal, is selected, enters into a contract, performs some work (rdt&e), and is compensated.</p>
<p>In other cases, the government has an interest in reducing poverty, encouraging the study of foreign languages or basic science research, etc… It subsidizes loans for tuition to low and middle income families; it issues grants to support research.</p>
<p>All this notwithstanding, in this country the government has no obligation to compensate private colleges and universities for the per capita costs of educating citizens. Free, universal, public education effectively ends at grade 12. Even up to grade 12, parents generally are on their own in covering the costs of private schooling (though a Supreme Court ruling earlier this week may compel compensation for private schooling of special needs children.)</p>
<p>So, I think bclintonk correctly described the limited effects of federal money (including subsidies) on competition among international applicants.</p>
<p>^^. True. I objected to the idea that the fed was solely interested in funding universities in return for “products and services.”</p>