<p>As newmassdad explained, the percentage taken off grants goes to cover overheads: building maintenance, electricity, heating, support staff, and so forth. That is accepted practice and does not constitute making profits. 60% for overheads is not outrageous. I have seen 75%.
There are many foundations that refuse to subsidize overheads, yet they do not realize that a project generates more work not only for the researchers but for the administrative staff, and may lead to the hiring of more staff, which requires more space, etc...</p>
<p>Some research generates profits. A lot that is carried on at the university level does not. When my H was in grad school, his research was subsidized by the Dept. of the Navy but he was involved in basic research. The recent phenomenon of universities cultivating close ties with industry (pharmaceutical research in particular) has given rise to a great deal of anxiety about scholarly standards and agenda.</p>
<p>I challenge posters such as ashernm to show me all these million dollar patents, other than Columbia/Axelrod, the recent NYU/Vilcek situation, Cohen-Boyer. Where are all these millions? Keep in mind, too that, for those fortunate U technology transfer operations that make money on patents, most of it goes back into research. </p>
<p>Ariesathena, your comments about unis losing money on students sounds like the classical alum funraising plea. For most places, it is just not true. It sounds reasonable - just take the cost of running the U as a denominator, use tuition revenues as the numerator...but of course it just does not work that way. It is too bad, but probably not accidental, that good information on cost of instruction is so hard to come by. For example, take one of the links in post 39, to U. Chicago's 2003-2004 financial statement. On page 26, they claim to spend 520 mil on instruction and 186 mil on research. Yet, page 4 shows 286 mil for govt grants and contracts, almost all of which is for research. Even if the number were accurate, U. Chi brings in almost 400 mil in tuition, so the percentage of instruction cost is closer to 77%.</p>
<p>Hoedown, Thanks. Unfortunately, I have not had much luck searching for "budget" or "operating budget" elsewhere. Maybe "financial statement" will work. Thanks for the links - that is a start.</p>
<p>marite, you are not proving anything one way or another. Obviously, there is profitable research and unprofitable research. The question is in general, if the university surcharge covers more than the needed overhead. If you make a generalization, try to support it with some evidence. </p>
<p><a href="http://web.mit.edu/newsoffice/1999/patents-0113.html%5B/url%5D">http://web.mit.edu/newsoffice/1999/patents-0113.html</a>
It's arbitrary where to draw the line between what is and is not prestigious. But here are some of the schools according to the article: All 9 UCs, MIT, Stanford, FSU, MSU, Columbia, UWisconsin, Harvard, Yale, CMU, UWashington. Also mentioned are Purdue, Cornell, and UIowa. I'm not sure if the article includes medicine. I think not. Medicine carries some of the bigger grants and royalties.</p>
<p>The way licensing departments are run is different at many of the schools. Whether they are a "profit" center or an extension of the schools research mission is really school dependent.</p>
<p>Most people look at Stanford receiving $120M when Google went public as what schools are doing. As marite points out there is a bit of anxiety about agenda and scholarly standards. At the time of the license to the Google founders Stanford did not really expect such a windfall. Their objective was to get the technology commercialized. To do this they granted Google limited exclusive rights (for a period of time) to the technology in exchange for stock.</p>
<p>Recently I had reason to have a long talk with the technology licensing department at MIT. Their mission is to see that research is commercialized in some manner. Their metric is not profit or revenue into the university. Instead their metric is job creation. Harvard is in the process of a change in its licensing practices where they are looking to generate revenue from the discoveries at Harvard. Trouble is that MIT produces many more patents and more commercially viable research, at least right now.</p>
<p>I know I will not be able to find the actual reference but to the local economy MIT is much more important than Harvard because it is more of a job creation engine.</p>
<p>I have found it a bit odd that schools seem to live in their own reality distortion field. Year in and year out they have increases in tuition that outpace inflation. This is passed on to the paying public as the actual cost of providing an education and we all know how important education is.</p>
<p>Perhaps it is because I have worked in business too long but what I would like to see is more of an effort by the schools to determine the outcome of their work on a per dollar basis. Further, the large endowment at many of the private universities seem to go against the "non-profit" charter they are operating under.</p>
<p>Though I generally prefer no gov't intervention I think a certain amount of reporting and guidelines may be in order. I believe that the cost of education is spiraling out of control and needs to be monitored a bit more so we can better understand why.</p>
<p>Alternatively, perhaps the schools are raising tuition now in anticipation of some sort of reporting or regulation later. ;-)</p>
<p>On the one hand, you think schools should be held to a higher standard than the for profit world: "Year in and year out they have increases in tuition that outpace inflation. This is passed on to the paying public..." Yet, in the for profit world, this is normal behaviour IF the "public" is willing to pay the price, as the public obviously is in purchasing education.</p>
<p>On the other hand, you think they should be regulated: "Though I generally prefer no gov't intervention I think a certain amount of reporting and guidelines may be in order."</p>
<p>So, which is it - free market or regulated? Can't have both.</p>
<p>This concept "Perhaps it is because I have worked in business too long but what I would like to see is more of an effort by the schools to determine the outcome of their work on a per dollar basis." comes up frequently, even within higher ed circles. The problem with the concept is that quite a few parts of the higher ed mission cannot be quantified on a $$ basis. How does one measure benefit to a community? How does one quantify providing opportunity to first time college attendees? To outreach to local communities, such as volunteer tutoring by undergrads, especially as practiced by many urban universities. </p>
<p>It is interesting how folks want to hold a college to the same measures the for profit world uses, yet at the same time expect the college to do far more than they would expect out of a for profit, AND criticize them when they do succeed in making money on something, like an invention. </p>
<p>In fact, there are better indirect ways to see the value. Look at the impact a college has on the local community. Are property values higher or lower? Neighborhoods better or worse? Setting aside the sporadic town-gown tensions, how many communities (of any size) would rather the local colleges close and leave town for elsewhere (perhaps so an industrial park can be built on the playing fields?)</p>
<p>
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Research as demonstrated by the links above does produce revenue, but it is difficult to discern whether it is indeed profitable or not, though I doubt that universities would pursue research as vigorously as they do without the incentive of profits.
[/quote]
</p>
<p>I don't think "profits" is the way they'd think about it. Maybe on tech transfer and patents, but I still think the correct term is revenue. The IRS would certainly think so!</p>
<p>Similarly, research funds would be also considered revenue. Some ICR is indeed added "revenue" for the general fund. To the extent that research grants pay part of some faculty salaries and pay for graduate fellowships, for example, they certainly help the bottom line and free up GF that would otherwise be spent on them, but the grant money is considered restricted and must be used to pay for the things the grants stipulate. It's not part of the General Fund (except, as I said before, some of the ICR). ICR makes up 13% of Michigan's General Fund, for example.</p>
<p>
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If one school has a 10:1 ratio, and another a 5:1 ratio, and both seek to uphold their ratios, the former must hire 10 more professors, and the latter twenty more, for enrolling a hundred more students.
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</p>
<p>This isn't true unless you're talking about a very small school. If a school has 5000 students and 500 faculty, adding 100 students is not going to push the ratio to 11:1. You'd have to add something closer to 500 students before you'd have to add faculty to maintain the ratio. It's not just the algebra--think about how a university works. absorbing 10 students in the student body means a few more students enrolling in a psych section, one more in religion, a few more in calculus, etc. You don't have to immediately add a new faculty member to accommodate the addition of 10 students, even if you value your 10:1 ratio and think it's important to educational quality.</p>
<p>I think you have misread what I wrote. Let me see if I can help clarify and respond.</p>
<p>Actually the for profit world does not always increase prices. Usually they work to reduce their costs so they can generate more profit or reduce prices as competition heats up. The simplest example of this is the computer industry. The PC you can buy today for less than $1000 is dramatically better than the one you could buy 10 years ago at the same price.</p>
<p>Additionally, I did not say regulate. To me that implies price controls. What I did say is monitor and reporting. The only word I used that could imply regulation was guidelines. Guidelines are not regulations. Guidelines are more like recommended practices.</p>
<p>Further, there is no pure free-market or totally regulated environment. I said that I prefer no government intervention. However, I am not so dogmatic as to believe that a free market would solve all our problems. An example of government regulation that I believe is necessary is environmental regulation . . . though I believe some of those regulations have gone too far.</p>
<p>Regarding making money on an invention, often the funding of the research to generate an invention came out of my pocket in tax dollars. Further, the schools are non-profit institutions so they are not taxed on the "profit" they make from the invention. It goes directly to their endowment not back to the government or to me in a tax break or refund.</p>
<p>My point is that to me tuition is rising way ahead of the rate of inflation and it has my whole life. I do not see why this is so necessary. I guess I would like to understand why you think that it is.</p>
<p>
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Further, the large endowment at many of the private universities seem to go against the "non-profit" charter they are operating under.
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</p>
<p>Many non-profits have endowments. Look at foundations! Having an endowment does not make a non-profit suspect.</p>
<p>
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Though I generally prefer no gov't intervention I think a certain amount of reporting and guidelines may be in order.
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</p>
<p>"A certain amount." Something more than what's currently required, I suppose. I'm thinking of the Clery Act, reports on gender equity, on financial aid.</p>
<p>Or a lot wider in scope: IPEDS. IPEDS is a huge reporting effort. and yes, it has a whole section on instructional costs and the price of higher education, such as "the change in tuition and fees; faculty and administrative salaries and benefits; academic support services; research; operations and maintenance; and institutional expenditures for construction and technology and the potential cost of replacing instructional buildings and equipment."</p>
<p>I don't want there to be any misunderstanding--institutions are not currently running willy-nilly with no reporting. There is plenty of gov't oversight. Maybe it's not the right kind, maybe it doesn't address costs thoroughly, but it's there.</p>
<p>
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It (revenues from tech transfer) goes directly to their endowment
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</p>
<p>Are you sure about that? Not at my institution. Perhaps we're unusual?</p>
<p>I don't know about tech transfers, but any institution of higher learning that did not have an endowment would go bankrupt pretty soon. Tuition revenue, by the way, does not go into endowment.</p>
<p>I am not saying that schools should not have an endowment nor that they should not charge tuition. Just that I see no reason for tuition increases to far outstrip inflation. Additionally, with endowments growing faster than inflation perhaps some of the endowment could be used to keep tuition down more.</p>
<p>I understand that the endowments are used for worthy things like financial aid. However, even with that factored in, many schools endowments continue to increase at a rate greater than inflation. Further, I also understand that endowments are used to build and repair buildings.</p>
<p>My point is that increases in tuition have outstripped inflation for a long time. I am not sure what to do about it except pay it . . . but it does not make sense to me. Or at least I have not seen an explanation yet that does.</p>
<p>When I was in college, there was one payphone per floor, a couple of outlets per dorm room, no lounge on my floor. No one dreamed of bringing minifridges (did they even exist), microwave ovens (ditto) and electric typewriters, if they had been invented, were not yet in widespread use.
No attention was paid to making the buildings wheel-chair accessible, there was a limited range of sports available, and no pressure from Title 9 to spend money on sports that women are more likely to take up. There was very little in the way of academic support: no bureau of study skills, writing center, or drop-in math center. There was no technology staff to fix computers, teach faculty how to use powerpoint, use slide projectors, etc...
Read college visits reports and see what parents and students enthuse about various college campuses: not cramped dorm rooms with rickety furniture, not outdated labs, not huge classes.
Parents and students as consumers have always asked for more, more, more, never less.</p>
<p>"Actually the for profit world does not always increase prices. Usually they work to reduce their costs so they can generate more profit or reduce prices as competition heats up. The simplest example of this is the computer industry. The PC you can buy today for less than $1000 is dramatically better than the one you could buy 10 years ago at the same price."</p>
<p>Yes, it is true that in SOME markets, prices go down over time, but not all. Healthcare is a good example. Housing is another. Food, energy also come to mind. In fact, it is generally market pressures that drive prices down, not the ability to reduce internal costs. Maybe that's what you were saying? In the case of higher ed, the entire system has been quite resistant to any effort to reduce costs, as shown by the strong reaction (in the traditional higher ed segment, not the for profit segment) against increased class sizes, recorded lectures, internet learning and so forth. That the cost of higher ed has consistently gone up means nothing to me in and of itself. That consumers are willing to pay the increases DOES tell me something. It tells me that the consumer must still perceive that the cost is worth it, or they would look at alternatives. I am neither condoning nor condemning the price increases. I'm agnostic on this topic. Personally, I don't like them, as I shell out a good deal of tuition for my D. But, as a consumer, I made a conscious decision to do so, rather than accept much less expensive alternatives. I made the choice willingly. </p>
<p>"Additionally, I did not say regulate. To me that implies price controls. What I did say is monitor and reporting."</p>
<p>OK. We just have a different view of regulation, I guess. I view monitoring and reporting as a form of regulation.</p>
<p>
[quote]
Where do the tech transfer licensing revenues go at your institution?
[/quote]
</p>
<p>I had to ask a colleague, and he said it really varies according to the department that the patent came out of. Very rarely, if ever, into the endowment.</p>
<p>
[quote]
Additionally, with endowments growing faster than inflation perhaps some of the endowment could be used to keep tuition down more.... many schools endowments continue to increase at a rate greater than inflation.
[/quote]
</p>
<p>Are you suggesting that an endowment should grow at a rate * less than* inflation? The endowment would be losing value, wouldn't it? I think that would be extremely poor money management and a terrible stewardship of an institution's resources. </p>
<p>I think what you're getting at is that you think some institutions should spend a larger portion of the proceeds from the endowment, or dedicate more of it towards the general fund. They spend some of the returns and put the rest back in. You wouldn't be the first to question is they're being too conservative in their ratio. But to suggest that they should spend so much that the endowment grows only at the rate of inflation, or below, is one I think you'd have a hard time finding support for. An endowment is supposed to grow, so that in the future the returns will be even higher.</p>
<p>I am suggesting that some schools use more of thier endowment toward the general fund. I am not advocating that the endowment shrink only that the escalating size of the endowments could/should be used to keep tuition costs down more. Further, more could be done to decrease the cost of class/course delivery. </p>
<p>Let me cite one example to help illustrate my point. I have 2 sons, one in college, one in high school. The college student was looking for a Linear Algebra class that he could take over the summer. The prices ranged from $1800 (BU) to $5000 (MIT), with Stanford at around $2500. My second son may be able to take Linear Algebra through Stanford's EPGY program for $700 as a high school student. If you are a college student you are directed to the same offering only for college students, the $2500 version I cited above. I am not sure I fully understand or can justify the difference in the pricing. </p>
<p>newmassdad,</p>
<p>Often a disagreement is over the use of terms, i.e. my use of monitoring and not viewing it as regulation. As I think about it a bit more it is regulation but lighter regulation than say price controls. At the end of the day I have a strong preference against government intervention but I also think that college tuition increases are perhaps more than necessary.</p>
<p>
[quote]
Let me cite one example to help illustrate my point. I have 2 sons, one in college, one in high school. The college student was looking for a Linear Algebra class that he could take over the summer. The prices ranged from $1800 (BU) to $5000 (MIT), with Stanford at around $2500. My second son may be able to take Linear Algebra through Stanford's EPGY program for $700 as a high school student. If you are a college student you are directed to the same offering only for college students, the $2500 version I cited above. I am not sure I fully understand or can justify the difference in the pricing.
[/quote]
</p>
<p>My guess is that the price differences don't necessarily have to do with the direct cost of instruction. That's true of tuition generally. Colleges can, and do, calculate the direct costs of instruction. But those aren't going to necessarily be used to base a per-class tuition charge on, especially at the kind of institutions you just named. </p>
<p>It's hard to price a university education one class at a time. I mean, no one is going to like the math when you divide MIT or Stanford tuition by credit hour or course. It will seem exhorbitant. From the university's standpoint, however, you're not just paying for what it costs to use the room, the chalk, and the professor's time in each of those courses. You're paying for all the things that make the university the university, some of which are pretty expensive to provide but aren't visible in that classroom. </p>
<p>Of course, when you're coming on to campus for just one class alone, you're not likely to take advantage of any of those things. And you're also not getting to have the university stamped on your diploma. So that price seems like a bad deal, and I'd suggest it probably IS a bad deal. Better to take the class at an institution which prices things differently and has subsidies, like a state college or community college. Or, take advantage of a special rate offered to special students like high school students, which brings me to the next point.</p>
<p>It's not as if Stanford COULD comfortably teach that course to every student for $700, but instead they rack it up to $2500 for some of them. I would guess that the $700 is a special price they set for NCFD students or high school students. Probably in recognition of the fact that they are not university students and aren't getting the degree.</p>
<p>I think part of the confusion in this discussion is the commonly held belief that the sales price of a product or service has some relationship to the seller's cost. This is only true, and only in the long run, only in so far as the price must be higher than cost in order to stay in business. Beyond that, the market (=customers) set the price by their purchase decisions. This is the essence of free, unregulated competitive markets. And, with the thousands of colleges in the US, we DO have pretty competitive markets.</p>
<p>A brief comment on the earlier theme, as well as Vedder's book "Going Broke...) Note that Vedder's book was supported by, and published by, the AEI Press, and arm of the American Enterprise Institute. Fan or not of the latter, we DO know where they stand. Vedder conveniently compared college costs to the CPI. Easy but misleading. The CPI is heavily weighted with manufactured goods that have manufacturing economies of scale and learning curve effects. That's one of the reasons why computers cost less each year, as do many other manufactured goods. Note however, that education is not manufacturing. You don't assemble students. Rather, education is a highly specialized service industry - one where obtaining productivity improvements is particularly difficult. And this is true for many other service industries. Look at health care, cleaning, etc. </p>
<p>BTW, you will love Vedder's solutions to rising college costs:</p>
<p>"Can economies be made here? There are at least four ways these costs can be reduced: by increasing the student-faculty ratio; by ending or modifying tenure; by increasing the use of part-time or adjunct faculty; and by using more capital-intensive instructional techniques."</p>
<p>I'll spare you the rest of his "solutions". Suffice to say he's a fan of privatization, and seems to like the for profit colleges like University of Phoenix.</p>
<p>So please, those of you unhappy with higher ed costs, there are alternatives. Try U. Phoenix, or maybe a local jr. college. Otherwise...</p>
<p>The classes at Stanford are actually the same, no chalk, no classroom required. Both the EPGY class and the summer online class were the same. I don't mean to single out Stanford in this example but it is the data I have. Not sure why there is a difference in price.</p>
<p>Newmassdad,</p>
<p>I don't mind the more capital-intensive instructional techniques. I have often wondered where education will be in say 25 years. I am not a big fan of the University of Phoenix but some of what they are doing is sure to change the economics of the industry. Further, I suspect that the Open Courseware initiative at MIT and online classes at a number of schools will change things quite a bit.</p>