The Malcolm Gladwell podcast from years ago, My Little Hundred Million, is a wonderful story about the impact of gifts for less well-endowed institutions.
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According to this, total cost to educate at Bowdoin is $114k. Total cost of attendance for full pay students is $88k. So even the full pays are getting $26k in freebies.
Almost all of their FA budget comes from the endowment.
Either way, if the full pay kids are getting $26k in freebies, none of their money is going to kids getting financial aid.
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Forgot link:
Nonsense. We have friends who pay more than $100K a year to support their kid at Dartmouth. It does NOT cost Dartmouth $100K (or any other school) a year to house, feed and educate a kid.
You, and others in this thread, are falling for school propaganda and cost accounting tricks. Schools just shove lots of costs into the “cost of educating a kid” category and then make the non-sensical claim that they are losing money with only $100K of revenue per kid.
I worked at a not-for-profit that did the same thing.
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You can look up their audited financial statements for yourself if you like. Here is Bowdoin’s, audited by KPMG:
One thing that always stands out to me when looking at the operating budgets at these colleges is that employee compensation (salaries, wages, and benefits) is inevitably a huge component of operating costs.
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Well, this one is needed. My tour guide child walked backwards into a streetlamp, and no one on the tour said anything till afterwards 
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Exactly right.
Universities do many things besides educate students. Research is a big and obvious one. But there are many examples of little things that add up.
We are friends with a husband and wife couple who both work for a prestigious university. They are both PhD-level community activists on the university payroll. They both teach 1 course per year and are counted as faculty (lowering the university’s student : faculty ratio). The rest of the time is spent as activists.
Simply dividing what the university spends by the number of students and then comparing that number to university fees is a simplistic and incorrect way to look at this.
It is important to also note that Congress, in recent years, took action against universities because they were not spending their endowments and just hording money. New laws, rules and formulas require them to spend a portion of their endowment or put their tax status at risk. So universities are spending lots of money right now, historically speaking.
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So keeping this at the most basic level… is the cost of the admissions department included or excluded from the numerator in your “education cost per student” calculation?
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And colleges as well.
So when you pay your college bill, in addition to helping to pay for instructional faculty, you are helping to pay for: departmental administrative staff; deans and such and their staffs; cleaning and landscaping and building maintenance staff; campus security/police and their staff; student health professionals and their staff; librarians and their staff; career services and their staff; athletic departments; and on and on.
Indeed, you can even think of yourself as helping to pay for the people who raise funds and manage endowments and such. Obviously one hopes that is all at a large net return to the institution (at least most years), but money is fungible so your contributing to operating costs are helping there too.
Yes, although some research is of course funded by outside grants, which is usually another big source of operating revenues for research universities. LACs typically get a much lower percentage of operating revenues from grants, but Bowdoin, to continue the example, did get some.
Of course from a consumer perspective, what matters is how much you actually value all this.
Although this is a bit simplistic, at a high level one of the main variables is how many students an institution enrolls for every comparable “unit” it spends on all these different employees. And some people value the predictable consequences of an institution enrolling fewer students per such unit, but that means the operating cost per student is going to tend to be higher. And even if some of that additional cost per student is covered by endowment income, gifts for present use, grants, revenues from various operations, and so on, you may or may not think the actual benefits are worth what it is actually going to cost you.
And then at a more detailed level, different institutions spend more or less in different ways. For example, again research is complicated by outside grants, but for sure some institutions devote more financial resources to supporting faculty research (not covered by outside grants). And others devote more to instruction, particularly undergrad instruction. My experience is different kids (and families) have different priorities over such variables.
Obviously another controversial subject is athletics. Again athletics is complicated because they can sometimes generate revenues. But there are very, very few institutions that really make a profit on athletic operations as a whole. So how much an institution spends on athletics is another variable over which different kids/families are going to have different priorities.
So, as usual, there are no one-size-fits-all answer here as to what is the best consumer decision. But the standard guidance here is a good start.
With a little interpretation, I would phrase that as something like:
First, make sure it is comfortably affordable in general.
Second, try to find institutions that have values and thus prioritize spending in ways that you value the most as well.
Then third, see where you can maybe get your best bang for your buck.
And that third part may sometimes mean choosing a particularly good scholarship offer. Or it might mean choosing an in-state option where you are getting the benefit of state subsidies.
But sometimes, it might mean choosing an institution where some combination of endowment income, gifts for present use, research grants, other revenues, and so on really leverage up what you have to pay personally.
But only if you can comfortably pay that, and if at least broadly they are doing that in the ways that you value.
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You are getting there. It is a question of degree in many cases.
It is important to note that “not-for-profit” is just a tax status. It says nothing about greed and profligate spending.
It just means that if the school brings money in, they have to spend it because they can’t show a profit. Often on dubious things.
When I was at Harvard, the school paper was constantly full of students complaining about how the school spent money. This is nothing new.
I hesitate to mention the Federal Student Loan program which is the greatest scourge on the American student ever. It gives American students artificially deep pockets and allows schools to charge insane tuitions.
We would not be in this mess if not for that program. And school lobby to keep that program.
Lobbying the government…another great use of tuition money, btw.
Yes, admissions is fine.
How about counter questions? You OK with using tuition money to lobby the government? Building $200 million dollar stadiums? Hiring prestige faculty for top dollar who barely teach or do research? Using tuition money to cross-subsidize research? Engaging in partisan community activism?
If you are OK with all of that, cool. Your opinion. I believe that the roles of universities are teaching and research. Anything beyond that should be strictly scrutinized. My opinion.
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This was, I think, sarcastically delivered, but the sorts of solutions and regulations legislators and governmental executives think will work for higher education are often completely and phenomenally underinformed, to put it mildly.
So yeah, lobbying the government is an absolutely vital function of higher education (as is the case for pretty much every sector of the economy and society, really).
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As I mentioned in the first sentence…it is a question of degree. Weighing in on issues related to university education is one thing. Being a lobbying super heavy weight is a very different thing.
I mentioned above that schools lobby for the federal student loan program. They lobby for big increases in student loan limits every year. It gives students artificially deep pockets and allows schools to hike their tuition to the astronomical levels that we see today. Is putting kids in debt a good thing for America?
I question the causal chain you give, when the limits on federal student loans are (for undergraduates) actually very low, compared to tuition costs—and student loans are often defended as giving students some “skin in the game” to encourage them to actually complete their degrees, though it’s reasonable to argue whether they actually have any such effect.
However, such discussion is rapidly moving toward something that’s better as a thread in the Politics Forum than here.
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Yes, this thread is dangerously moving to politics Please move on from endowments and how they are being used or take it to PM.
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Just for the record, these institutions are typically classified as exempt organizations under IRC Section 501(c)(3). These are sometimes called generally “charitable organizations,” but as usual, the lay conception of a charitable organization does not necessarily track how it is defined in the tax code or by the IRS. Basically the organization just has to be engaged in what is called an exempt purpose, which is a long and varied list as reflected here:
Colleges and universities tend to actually qualify under many of those purposes. Again, from a consumer perspective, what you should consider doing is choosing an organization that does more of the things you actually value.
By the way, as such, they can in fact actually have net earnings, which again normal people would call profits. But 501(c)(3) provides that no part of those net earnings can inure to the benefit of any private shareholder or owner.
Yes, they do tend to do that.
Again from a consumer perspective, if you don’t like how a service provider spends its operating revenues, you could consider using a different service provider. And of course there are many different colleges and universities with all sorts of different financial and operating models.
But of course if you are a resident of a state and do not like how your state universities are operating, that becomes a policy issue and not just a consumer issue.
As instructed, though, I think we should stick here to helping people understand how to evaluate these issues from a consumer perspective.
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We’re aligned that schools should prioritize education.
$200M stadiums? Don’t even get me started on NIL money and scholarships. Why should a football player making 7-figures not have to pay tuition?.. but we digress…
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A literal million dollar question right now. Hoping NIL will dramatically change athletic scholarship practices.
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There are many impacts from high exposure sports that may not be obvious from the accounting numbers.
Because they bring in many millions of dollars to the university.
Still remember cases where major conference star football players got in trouble over trying to get more food.
Before NIL, many alumni handshakes with football players included a hidden $50 or $100 bill intended for food.