Mission creep as US spends, spends, spends on the extras

Study rejects claim that sector allocates more to education than it receives in fees. Jon Marcus writes

April 28, 2011

Credit: Corbis
Subsidised how? Between 50% and 75% of US students pay more in tuition than their universities spend on them, research claims

US universities' insistence that they spend more money educating students than they receive in tuition income will be of keen interest to English universities - and the country's National Union of Students - ahead of the trebling of the tuition-fee cap in 2012.

But so too will the findings of a new study, which suggests that it is US students who are in fact subsidising their almae matres.

Using government data, the Center for College Affordability and Productivity, a Washington-based independent research body, reports that between half and three-quarters of US students pay more in tuition than their universities spend on educating them.

The rest of the money goes towards research, administrative costs, student services and areas such as athletics and fitness facilities that are used to encourage enrolment.

"What we basically show is that when you add up what the student pays and what the government pays on the student's behalf, that's more than enough to cover the educational spending," said Andrew Gillen, the centre's research director. "That goes against the conventional wisdom."

Universities have long contended that they subsidise students' educations, despite continuing rises in tuition fees in recent years.

The difference is made up by government grants, private contributions, income from endowments and other sources.

Dr Gillen said the results of the study could have important implications for universities in England, where the flow of income from student fees is set to increase dramatically to make up for the sharp reduction in the teaching grant.

The key point, he said, was whether total revenues increase, as coalition ministers have suggested they will, or remain "stagnant".

"If the revenue from increased tuition merely offsets the money universities used to get from the government, my guess is that the spending will stay the same," he said. "But if their revenues go up, it really depends on the priorities of those who are running the institutions."

Dr Gillen said that "in the higher education context, money is so fungible that the universities can find enough accounting tricks to reallocate it any way they want. So the question is, will the UK's universities have an incentive to alter their spending patterns?"

Cheap frills? Hardly

In the US, universities have expensive priorities that have nothing to do with teaching, the centre's report found.

To illustrate this, it uses the example of Dartmouth College, a prestigious Ivy League institution.

Dartmouth charges $49,974 (£30,630) for undergraduate tuition, room and board - or an average of $23,079 when scholarships and other forms of student financial assistance are taken into account - but it claims to spend $104,402 per student per year.

This includes approximately $37,000 per student for academic support, $15,000 for institutional support, $12,000 for student services and $24,000 on research, adding up to $88,000 before accounting for direct instructional costs.

But actually providing education, the centre estimates, costs Dartmouth $14,151 per student, far less than the average of $23,079 each undergraduate pays.

Universities respond that almost all of their costs go towards students, including the frills that they and their families increasingly demand.

"That is certainly plausible," concedes Dr Gillen. "The main counterpoint to that is, OK, unbundle your product. See if students are really willing to pay $3,000 for a great gym and a great student centre or whether they would like to pay $3,000 less and not have that stuff."

His research and other work on the subject, he said, shows that "students are paying more and yet schools are spending less and less of that money on the educational aspects of their missions". The problem, Dr Gillen said, "is that we evaluate colleges based essentially on how much they spend. We reward them for spending more so their incentive is to always spend more.

"That is very different from almost every other market, where you care about the cost to value - when you're buying peanut butter, for example.

"There is more of a prestige culture in higher education, where we have more of a value competition."

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