<p>My Junior son will be looking at colleges soon, and I am confused about the tuition structure of various colleges and universities.</p>
<p>Assume for us that we will be full-pay, no merit or need aid, and that each college costs $40,000.</p>
<p>How do I find out if the college we are looking at is more like:</p>
<p>College A--Actual cost of educating my student is $50,000. Endowment, etc. picks up the rest.</p>
<p>College B-Actual cost is $40,000. We get what we pay for.</p>
<p>College C-Actual cost is $30,000. The excess tuition goes for various aid programs for other students.</p>
<p>I used to think there was no such thing as case "c", but there have been various news stories about increased tuition saying "College XXX has increased their charges in order to provide more financial aid"</p>
<p>I just want to go into this process with my eyes open.</p>
<p>IMHO, the college C model applies everywhere, even those like Williams with huge endowments. Look at it this way: If the true average cost of attendance is 30K and you are paying 40K, you are in effect subsizing those that pay less.</p>
<p>I expect flames to erupt as other posters wax eloquently about how <strong><em>everyone</em></strong> is subsidized at the wealthy places etc. But the fact is that if no one received tuition discounts (AKA financial aid) then everyone could pay less while keeping the institutional revenue constant. No way around it.</p>
<p>Many schools publish the percentage of their endowment that they spend annually. For schools with substantial endowments, it's typically in the 4-5 % range. Ironically, often slightly higher for schools with smaller endowments.</p>
<p>If you take the endowment, times the percent of endowment spent, divided by the student body, you at least get a rough figure for something that, some would think of as an institutional subsidy given to all students. But there's more: this doesn't take into account research funds coming into the college/university from sources other than tuition. At research universities, you might argue that undergrads aren't getting much return on that money, but if a prof at a small LAC lands, say, an NSF grant, and it's not uncommon, then underads will often be directly involved in that research. And there are other contributions that just go "in-an-out" as direct contributions during a particular year's operating budget and never make it into the endowment. Bottom line: I'm not sure there are too many category C schools.</p>
<p>Many of the elite colleges have huge endowments and actually do spend some of this money to support undergrad education. Colleges also differ with regards to the number of full pay students supporting others who need FA. There have been some estimates that many elite colleges fit into category A and do spend considerably more than $50k/year/student. I think this sort of analysis is not feasible. First, I doubt even the colleges could accurately allocate expenses between grad and UG students. The analysis would depend on the numbers the colleges are willing or able to provide. Expenditures are also likely to vary a lot between different departments. Science and major lab facilities can cost much more than some humanities which require only a textbook and blackboard.</p>
<p>Research Universities do track and sometimes publish figures regarding the cost of undergrad instruction. For most, undergrads cost far less than grad students and are viewed as a profit center. One major U I personally know decided a few years ago to increase the size of the undergrad student body in order to increase revenue with little additional expense. </p>
<p>Yes, it is true that simple math (take total revenue and divide by the number of students) shows huge expenditures for undergrad education at some well endowed LACs. Does it make a difference? Intuitively, it should, but the evidence, at least w/r/t education, is not there. (I suspect no one wants to try to measure such things!). </p>
<p>Nonetheless, the "subsidy" exists. The full pay are subsidizing those getting aid. BUT, SO WHAT?</p>
<p>The same argument could be made that english majors, with their low cost of instruction, subsidize the science students, with their expensive facilities and well paid faculty. It could be argued that everyone subsidizes the jocks. Or that the light appetite folks subsidize the big eaters in the cafeteria. </p>
<p>Hence my comment that all colleges are in "C". And move on.</p>
<p>And to the list of non-tuition revenues that "subsidize" education one needs to add the most obvious of all: government support, primarily, but by no means exclusively to publics.</p>
<p>It might be interesting to know what percentage of annual operating expenses come from all such non-tuition revenue (endowment spending, research grant money, other government subsidies and grants, contributions to the "annual fund," et al.), but I'm not sure that it would tell you much meaningful about the relationship between tuition dollars spent by full-freight paying parents and "value," whatever that nebulous concept means. (If I read the OP right, that's the underlying question.)</p>
<p>It's a free market. It is not so much what it costs to "produce," but what the customers will pay. As far as I can see, the customers show no sign of passing on the basis of price.</p>
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customers show no sign of passing on the basis of price
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I'm guessing you meant that the top colleges are able to attract enough customers regardless of their price but certainly there are many individual students who choose college B over college A on the basis of price. This will happen more and more as prices for the top colleges continue to rise out of proportion to inflation. It's supply and demand though; if they can still attract enough students regardless of their high prices, I expect they'll continue to keep raising the prices. I doubt HYP.. are in any danger of not being able to fill up their incoming class regardless of price (so far).</p>