<p>'Suffice to say, that's the reason that all of these big endowment colleges don't expand in the face of increased demand. "Per student endowment" is the whole enchilada in college finance.'</p>
<p>Good point. If the new endowment money comes primarily from alumni, increasing enrollment won't increase the size of the alumni base for a good number of years, especially that portion of the alumni in a position to make large bequests.</p>
<p>Here's a link to the Williams Econ Department Paper, "Grow the College? Why Bigger May be Far From Better"</p>
<p>The paper looks at the economics of growth and touches on the rationale of three schools in the middle of growth efforts: Middlebury, Chicago, and Princeton.</p>
<p>I'll probably be sorry for wading into this highly esoteric conversation which is, I am sure, way over my head, but, anyway, this is my conclusion:</p>
<p>those of you who think the whole elite college thing is a racket--congrats! No need to wade in; you just saved beacoup bucks.</p>
<p>Everyone else, I'm entranced by your various angel on the head of the pin counts. Keep it up, it's rather entertaining!</p>
<p>"I seriously doubt that there is a state university in the country that spends $45,000 per undergrad"</p>
<p>Take a look at the Moorehouse scholars program at North Carolina which has just had another $100 million pumped into it. And btw spending per pupil hardly tells the full story of amenities and resources available. Few if any LACs have the library resources of a major state flagship university. Spread among 35,000 students that big building in the middle of campus might not cost much per student but it represents an unmatchable resource for an LAC.</p>
<p>"Suffice to say, that's the reason that all of these big endowment colleges don't expand in the face of increased demand."</p>
<p>Either that or because they are really in investment banking business and the attached educational enterprise exists as a tax shelter. In fact that would seem to be the case since the banking enterprise provides the bulk of the revenue.</p>
<p>Odd isn't it that these Uber Liberal schools should be some of the fattest capitalists porkers around? get rich off of investments in oil. tobacco, defense, mining, Walmart and spend it constructing a socialist paradise open by invitation only.</p>
<p>Oh, I don't know about all that, higherlead. I thought the valedictorian at Amherst 2005 graduation hit it on the head when he acknowledged that, within their graduating class, sat someone who might become the next President of Enron, and someone else who'd become the prosecutor to send him to prison.</p>
<p>For the record Ken Lay went to a big state flagship - the University of Missouri and grew up the son of a Baptist preacher/tractor salesman in some backwater fly speck of a town. he got a PhD from Houston. He wouldn't seem to be Amherst material. He died on vacation and has technically never been convicted of anything.</p>
<p>Jeffrey Skilling who was also CEO of Enron briefly went to SMU but did pick up an MBA from Harvard and probably a prison tat from somebody you wouldn't want to meet in a dark alley. He told the Harvard admission officer, "I'm f***ing smart" and went to prison for 24 years 12 days before Christmas 2006.</p>
<p>Andrew Fastow the chief book cooker and stoll pidgeon in the Enron case copped a plea. He likewise has his prison tat by now and will be vacationng at government expense for the next six years. he was Tufts undergrad and Northwestern for his PhD. Interestingly he managed to bankrupt the Continental Illinois bank during the savings and loan crisis before moving on to Enron.</p>
<p>John Hueston who prosecuted Ken Lay went to Dartmouth and Yale Law School.</p>
<p>Sean berkowitz who prosecuted Jeffrey Skilling graduated from Tulane University summa cum laude and Harvard Law cum laude.</p>
<p>Anyway it looks like the Amherst kids are more likely to end up as the prosecutors or the fink than the CEO of Enron and it was the Univesity of Mizzou hick who outsmarted them all.</p>
<p>higherlead:</p>
<p>OK, I checked UNC-CH's most recent financial statements -- for fiscal year ending June 2005.</p>
<p>Counting debt service, but not counting financial aid, they spend an average of $66k per student. That includes $11k per student in expenses carrying out their R1 contracted research. That includes all the grad schools and professional schools: nursing, med, law, biz, dentistry, pharmacy, public health, social work, etc. </p>
<p>The FTE enrollment breakdown is:</p>
<p>16,311 undergrad
6,440 grad
2,292 professional</p>
<p>I don't know how to allocate undergrad expenses. The rule of thumb I've seen is that grad students cost 1.5 times and undergrad and prof school students cost 2 times, but who knows? The 2 times multiplier for the prof schools may be low. For example, the med school has 2 faculty for every student versus 14 students for every faculty in undergrad. I also don't know how much of the operating budget goes to operating the UNC Medical Center hospital.</p>
<p>UNC-CH has a chart showing the cost allocations per undergrad. It looks like they are allocating everything including admin, depreciation, gardens, sports, and so forth...but I can't swear to it. They estimate that they spend $17,604 per undergrad, including $1,200 per student of financial aid. This probably does not include the costs associated with providing room and board for some of their undergrads.</p>
<p>Hoedown might be able to help us out with university cost allocations.</p>
<p>Re Ken Lay's "death."</p>
<p>Some of us think that rumors of his death have been greatly exaggerated. I'm normally not a paranoid type or conspiracy-theory friend, but I depart from habit in this case.</p>
<p>Again interesteddad per student expenditures tell only part of the story. A very nice bed and breakfast undoubtedly spends more per guest than a large four star hotel but try and order room service at 1 AM, use the pool, or the on premises health club.</p>
<p>Now when you take and combine the vast facilities of UNC with an honors program like Morehead it is very hard for even the Amhersts and Swats of the world to compete. The spending per student needn't be as high for the overall experience to be comparable or better. There are economies of scale in education.</p>
<p>Interesteddad, thanks for the link.</p>
<p>The older I get, the more I am disappointed with professors, researchers, experts, experts in my field. They can really write some misleading nonsense.</p>
<p>I could write about marginal costs and marginal revenues, variable costs and fixed costs, consumption expenses and investment, allocation of expenses, etc., but if you think a school paying a gardener $25 an hour instead of $18 gives a student a bigger subsidy (because he doesn't pay for the gardener), and therefore a better education, we are never going to agree. </p>
<p>From what I read, Swat looks like a great place to get an education. So, if you're happy and your daughter is happy, I'm happy too.</p>
<p>
[quote]
Now when you take and combine the vast facilities of UNC with an honors program like Morehead it is very hard for even the Amhersts and Swats of the world to compete.
[/quote]
</p>
<p>Higherlead:</p>
<p>You don't really think that the Morehead program was the first honors program in the United States do you?</p>
<p>Here's a little historical blurb on the implementation of an early honors system in 1922:</p>
<p>
[quote]
Believing that education is an active, not a passive, process and that the best and only true education is self-education, he proposed the Honors Program. At a meeting of the local chapter of the American Association of University Professors (AAUP), he outlined his idea: a more challenging set of seminars for chosen students in their last two years. These students would receive no term grades or exams but instead would be tested by external examiners at the end of the senior year. For these advanced students, he abolished the lecture method of teaching. Moreover, the seminars would serve, in Aydelotte’s phrase, “to educate the faculty.” The program grew from 11 students in 1923 to 146 students in 1939. It became the College signature and remains the centerpiece of Swarthmore’s curriculum.</p>
<p>To critics who argued that honors was the “Oxfordization” of Swarthmore, Aydelotte pointed out that students met in small groups with two faculty members, not a single tutor. Some complained it was undemocratic. He countered that it was a stimulant to the entire college—faculty and students alike—and that all faculty members taught in both honors and in course. Some said it was too expensive, so he raised more money to finance it, obtaining a large grant from the Rockefeller-funded General Education Board, whose president, his friend Abraham Flexner, called the Honors Program “frankly an endeavor to spot and to develop excellence.”
[/quote]
</p>
<p>Today, about a third of Swarthmore's students are in the Honors Program. Eighty-five years later, outside professors from other schools still spend a week on campus in May giving written and oral exams to each of the honors students. These days, about 130 professors visit for exams, from all over the country.</p>
<p>The program has accomplished three things:</p>
<p>a) Provided intense academic preparation for the Honors students</p>
<p>b) Increased the academic prestige of the College as all of the visiting professors for 85 years have taken their first hand impressions of the school and students home with them.</p>
<p>c) Changed the entire approach towards education at the College.</p>
<p>
[quote]
...but if you think a school paying a gardener $25 an hour instead of $18 gives a student a bigger subsidy (because he doesn't pay for the gardener), and therefore a better education, we are never going to agree.
[/quote]
</p>
<p>The underlying premise of your argument is that adminstrators at big endowment schools are somehow less dedicated to undergrad education and allocating resources accordingly as the administrators at a low endowment school.</p>
<p>I think that's a false premise. Yes, there are idiots serving as Presidents of colleges. However, on average, if you give the Presidents of a poor college and a wealthy college an extra dollar to spend, both will make a good faith effort to spend the extra dollar wisely.</p>
<p>While there are differences in the physical plants at poor colleges and wealthy colleges, the overwhelming difference is the size and quality of the faculties.</p>
<p>You keep going on about gardeners, but put it into perspective. The endowment that funds the upkeep of the 360 acres of gardens, lawns, and woods at Swarthmore is $21 million out of a total endowment of $1.25 billion. It's loose change in the sofa. In terms of operating expenses, it's less than a penny out of every dollar. Faculty and staff is 57 cents out of every dollar.</p>
<p>Suppose I want to help out the 40K-92K crowd that gets a fair amount of need-based aid, but still feels the squeeze. The current system, controlled by the colleges, makes that quite difficult. Here's what happens:</p>
<p>Assumptions:
1) The Purely Hypothetical Fund (PHF) is established to provide scholarships of $2000 per student for up to 4 years in college.
2) Applicants to PHF must have an EFC above $5000.
3) Neither PHF or the students it helps will cheat. i.e., the scholarships will be disclosed to the colleges.
4) The colleges meet 100% of need.</p>
<p>Plan A: Student gets PHF scholarship, reports in to the institution, the institution reduces their need-based GRANT by $2000. The family is not helped. PHF efforts end up subsidizing the college. PHF doesn't like that scenario, so they decide not to provide scholarships under these circumstances.</p>
<p>Plan B: Student gets PHF scholarship, reports in to the institution, the institution reduces their need-based LOAN by $2000. They family is helped by the $2000 reduction in loan. The institution is helped a little. But that's just in the first year. When filling out next year's FAFSA, the $2000 scholarship is seen as income, and EFC will drop $800 as a result. Over 4 years the student gets $5600 benefit and the institution sees EFC increase by $2400 and they reduce grant. PHF likes this better. However, while PHF's contribution makes thing better after college, less loan to pay off, EFC goes up as a result. The cash strapped family has a bigger burden in the present. Where does that money come from?</p>
<p>PHF wants to help students and their families, but the current system makes that quite difficult. High college costs put even well to do people in need and the system makes it difficult for others to help. So what should PHF do? It seems that the only way to help a student without the colleges wanting to claim all of the assistance, or a healthy portion thereof, is to provide aid after graduation, when the colleges stop paying attention (assuming no grad school). But this doesn't help in the present. But suppose PHF comes up with,</p>
<p>Plan C: Students get no-interest loans from PHF. This helps the student immediately and the colleges don't care. It just helps the student to go to their school.When the student graduates, she can apply to PHF for a post-grad grant up to the full amount of the no-interest loans. PHF would not make any guarantee that any such grant would be forthcoming. In fact, if the students didn't graduate, that would be the case. But in reality, PHF would intend to make as many post-grad grants as possible. Colleges probably wouldn't like this because they would see it as a disguised scholarship, which is what it is, but only because that's the only way PHF can get around institutional control of financial aid, even to well meaning organizations such as PHF.</p>
<p>There are in fact many organizations like PHF. They have names like Moose Lodge or Women's Club or Consolidated Industries. They provide small scholarship money some of which really helps students and their families if they have EFC less than college cost. But as rapidly increasing college costs put many more families in a position of need, these well-intended scholarships do not have near as much impact.</p>
<p>I'm not an economist and have a lean understanding of financial aid. This example is how I percaive the practical outworking of financial aid as my kids approach college. I'd welcome any comments or corrections.</p>
<p>standrews - the PHF could be a Pell Grant and the effect is no different. Governments attempts to make college more affordable have only driven the costs higher. The "price" is set by the market, the consumers willingness to pay. Any additional mpney thrown into the system simply increases the costs. The consumer is always willing to spend somebody else's money, especially if he cannot pocket any of it by negotiating a better deal with the provider, and the college will take all the consumer is willing to spend.</p>
<p>The answer to rising college costs is not more government aid programs but a leveling of the market place playing field. The coleges have a huge information advantage over the consumer. For starters they have the consumers tax return, FAFSA, College profile, and of course all the information the merit blind schools share with each other. Second colleges have a defacto exemption from anti-trust laws. That is what need only aid is. It is no coincidence all the tuitions go up every year the same amount regardless of endowments, location, etc.</p>
<p>Let us start with an anxiom - everybody has need some people's need is just more than others. Under the current system the colleges get to define what that need is in dollars and cents based on whatever criteria they want. A small group of elite colleges and universities have banded together to coordinate their definition of "need". In the real worl we call this price fixing and prosecute other types corporations for doing it.</p>
<p>Now imagine for a moment Elite U was running a four star hotel and not a college, and the hotel was in a desirable location where demand was exceeding supply. This situation came about in part because the hotels had banded together to form accrediting agencies and you had to be accredited in order to get a license to operate an inn. Now because the hotel is in this rather comfy situation they decide to have an admissions committee to select which guests they would take and which they wouldn't based on what they think is the best mix of guests to further the aesthetics of the overall inn experience. i.e. the hotel says to hell with several constitutional amendments and reams of federal, state, and local civil rights legislation. </p>
<p>This combination of selectivity and freedom from the usual market restraints governing other types of businesses have increased the "prestige" factor of the hotel so now it is not just a place to get a nights sleep but a desirable object of conspicuous consumption. Would government and the public tolerate this? Would government try to subsidize by offering the selected guests loans and grants?</p>
<p>"The underlying premise of your argument is that adminstrators at big endowment schools are somehow less dedicated to undergrad education and allocating resources accordingly as the administrators at a low endowment school."</p>
<p>That's not my underlying premise.</p>
<p>"You keep going on about gardeners, but put it into perspective. The endowment that funds the upkeep of the 360 acres of gardens, lawns, and woods at Swarthmore is $21 million out of a total endowment of $1.25 billion. It's loose change in the sofa. In terms of operating expenses, it's less than a penny out of every dollar. Faculty and staff is 57 cents out of every dollar."</p>
<p>The gardeners are a sample.</p>
<p>If you think the larger the expenses are per student (no matter what they are), gives that student a bigger subsidy (because he doesn't pay for every expense) and therefore a better education, we are never going to agree.</p>
<p>I don't agree with the way the subsidy is derived.</p>
<p>It doesn't necessarily follow that the larger the subsidy per student, the better the education.</p>
<p>"Under the current system the colleges get to define what that need is in dollars and cents based on whatever criteria they want."</p>
<p>This is the crux of the problem for parents trying to send their kids to college, especially to Elite U. If the try to mitigate their need, the college reduces its own contribution to need, not EFC. Until a family reduces its need to zero, they see very little payback on their efforts to secure government money, outside scholarships, or even working a second job. This is why I constucted PHF as I did: to demonstrate the difficulty of alleviating EFC once need has been established by the college.</p>
<p>While Elite U is expensive, at least they provide 100% of need. Lesser institutions provide only 85% or 70%. Elite U may also provide more grant and less loan. For institution that define need and don't fund all of it, I would suggest that scholarship money go toward relieving EFC until the gap is filled. Maybe that's already the case. I don't know. Colleges would probably respond by making sure they met 100% of need by adding a heavy loan or work/study component. If so, then make the colleges apply outside scholarships/aid to loan and work study before applying it to grant money. Some schools do that on their own.</p>
<p>One school I have looked at is U of Richmond. UR meets "100% of demonstrated need". They use FAFSA and their own supplemental form to determine need. UR is also a need-blind institution. They limit loans to $4000 and use outside scholarships/aid to offset loan first. They also provide merit scholarships. I don't know if the merit money is handed out on a need-blind or not. Even so, with a $45,000 COA, a $25,000 scholarship would still leave me with need, even the way UR determines it. This is actually a pretty good situation. I don't know that junior can get the big scholarship, but I like 100% part of meeting need, and I like the $4000 loan limit, especially since as a Virginia resident, the state provides tuition grants (VTAG) to attend private colleges in Virginia. In projecting 4-year out-of-pocket costs, UR comes out better than many lesser institutions. It can also turn out to be less expensive than William & Mary, which doesn't meet 100% of need, and I wouldn't get any VTAG money. Still, it would be quite difficult to reduce out-of-pocket expenses any more than UR's aid package dictates.</p>
<p>I've often though the same thing about federal money in college aid. When a new program or tax credit comes along, the cost of a college education goes up by that amount. In fact just about every program the government funds ends up with costs that rise faster than the underlying rate of inflation.</p>
<p>"I've often though the same thing about federal money in college aid. When a new program or tax credit comes along, the cost of a college education goes up by that amount. In fact just about every program the government funds ends up with costs that rise faster than the underlying rate of inflation."</p>
<p>These aid programs are usually set up to benefit the people who work in the industry, not the customers. (At least, that is the effect ). ;)</p>
<p>A fun exercise.</p>
<p>Then a cartoon.</p>
<p>"If you think the larger the expenses are per student (no matter what they are), gives that student a bigger subsidy (because he doesn't pay for every expense) and therefore a better education, we are never going to agree.</p>
<p>I don't agree with the way the subsidy is derived."</p>
<p>Why can't you both be correct? That the premium in costs does indeed purchase premium educational value, but there is a law of diminishing returns. that there are other ways of obtaining the same premium (the value of the arboretum) without it coming out of endowment (i.e. Berea students maintaining their own grounds.) That the per student endowment is especially suspect when the premium is spread over a very low number of students (were there 3,000 students on the Swat campus rather than 1,500, the premium associated with the arboretum would be cut in half).</p>
<p>And that there is no way that the education offered for $75k is "worth" three times that offered for $25k, except in intangibles (prestige, etc.), and that for those prepared to pay it, it might be worth it anyway.</p>