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<p>I’m thinking it would be nice for those crying poverty at 200K to switch places with the parents of some of my kids at school - just for a couple of months - say those earning 40 to 50K - who often don’t have retirement savings of 30K per year, etc.</p>
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<p>I dont know that they are “crying poverty”. I think the problem is other people deciding “they can afford it” and jacking up the list price of college beyond what it actually costs. </p>
<p>Would you like it if other people decided among themselves what you could “afford” and then adjusted the prices of goods to soak you?</p>
<p>There are thousands of colleges to choose from, some of which have significantly lower list prices. So there is no need for the $200,000 household to restrict itself to $60,000 per year colleges.</p>
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<p>Not sure that it follows. The cost to deliver a private college education is upwards of $70k. Even full payers therefore, get a discount (from the endowment) off of what it costs to deliver the service. Moreover, there is no shortage of full payers, so they must not feel like they are being ‘soaked’. (Otherwise, they’d spend their money elsewhere.)</p>
<p>btw: HYPSM could charge $100k for tuition alone, and easily fill their classes, with little impact on yield.</p>
<p>As a matter of fact, I see lots of corporations deciding what costs the market will bear and setting prices accordingly- not out of the goodness of their hearts. </p>
<p>Some of the student comments here are changing my former perspective. No answers yet, but I appreciate the nudge.</p>
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<p>I would like to just say that we are full pay by any stretch of the imagination, and it has conferred tremendous advantages on us, both in life and opportunities and in terms of advantages in the app game. If you don’t think the committees know where my kids come from based on zip code, you don’t know how familiar these zips are to them.</p>
<p>I also look at education as a societal good and not merely an individual good, as you seem to do argbargy in the case of complaining about potential discrimination. So, as a societal good, in a country where we are in need of more taxpaying adults to support the social security set, it is in all of our best interests for everyone who can to subsidize the education of those who cannot pay.</p>
<p>All that said, I simply don’t buy the party line on the “true” cost of an education. High earners are not being subsidized by benevolent schools. Not happening.</p>
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I think they are being subsidized by even higher earners, who are donors to the school.</p>
<p>In no way is someone who is paying a quarter to a third of a million dollars for four years of classes being subsidized. There may well be bad business decisions going on in the administrative and board levels, but there is no way that a four year education is being subsidized at that level.</p>
<p>Sorry. May be that donors are subsidizing unfortunate choices made by the administation, but not the “value” of the classes themselves.</p>
<p>And just to muddy the waters more - there is a new “class” that is getting bigger all the time - of “mid-low” earners, between $45 - $70 for a household. They qualify for very little (no waivers, no free lunch, etc.) and may give up, say, a second car or all vacations in order to pay for some extracurriculars. Still they can’t afford the really good ones – for example, in-town baseball but no club team or competitive dance team but can’t afford the trip to nationals. These families have to pay all app fees out of pocket and have to make decisions about where the funds go. Like, should I spend $95 to apply and send scores to that reach school or spend it on an AP test that might result in college credit? Generally, these families would qualify for good aid at elite schools but literally can’t apply to very many, and how can they justify the expense for a 10-15% return?</p>
<p>[Harvard</a> 2012 annual financial report shows break-even year | Harvard Magazine](<a href=“http://harvardmagazine.com/2012/11/harvard-reports-break-even-financial-2012]Harvard”>http://harvardmagazine.com/2012/11/harvard-reports-break-even-financial-2012)
Annual Report 2012. You can see tuition related comments with a search.</p>
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<p>^ Hunt us absolutely right that even full-pays at elite private colleges are heavily subsidized . It’s hard to see at a research university where there are so many different kinds and levels of activity and budget categories, but if you look at the budget of any LAC–essentially a single-purpose organization dedicated to undergraduate education–it’s pretty apparent that even if all the students were full-pay, tuition wouldn’t come close to covering the college’s operating budget. </p>
<p>At Williams, for example, the financial statement for the fiscal year ending June 30, 2012, shows “tuition and fees” of $89.6 million, “less financial aid” of $44.1 million, for net tuition revenue of $45.5 million. But even if they hadn’t given out a dime of financial aid, the full tuition revenue of $89.6 million represents just under 50% of Williams’ total operating expenses of $182.2 million. Where does the rest come from? By far the biggest chunk is payout on endowment, which (if I’m reading the financial statement correctly) looks like about $65 million. Plus there’s another $17 million in “gifts and grants,” presumably primarily annual giving by alumni and other financial angels. (To be fair, room and board represents another $20 million or so; students pay that as well). Then there are various miscellaneous smaller-dollar income categories. Bottom line, though, there’s no question that even full-pay students at Williams are heavily subsidized by the institution.</p>
<p>Another way to get there: divide Williams’ $182 million operating budget by its 2,109 students, and the cost per student comes out to about $86,400 per student–far in excess of what Williams charges full-pays in tuition and room & board fees.</p>
<p>Right, but you are saying that this operating budget is set in stone.</p>
<p>I am saying that there are dubious decisons 1. about how much to pay administrators, and 2. AT the administrative level, which lead to this cost.</p>
<p>It’s true that expenditures rise to meet income. It’s also true that a certain percentage of endowment money has to be used every year in order to maintain tax-free status with the government.</p>
<p>No, I’m not saying the operating budget is set in stone. And I agree there may be dubious choices. But at a school like Williams, administrative costs are the least of it. It’s hugely expensive to maintain a 7:1 student/faculty ratio, and to pay faculty at a premium relative to other other LACs in order to attract and retain the faculty you want. It’s hugely expensive to maintain 15 men’s and 15 women’s varsity intercollegiate sports teams, especially when you don’t have the football revenue that a major football power has to subsidize the other sports. It’s expensive to maintain a 13,000-object on-campus art museum for the benefit of probably a couple of dozen art history students per year. It’s expensive to maintain a full schedule of music and dance and theatrical performances in state-of-the-art performance halls. It’s expensive to maintain and operate off-campus programs like Williams at Oxford, Williams in Africa, Teach in New York, and on and on. Most colleges do with less. Williams has the money, and lavishes it on in the belief that this enhances the quality of its students’ educational experience.</p>
<p>But what you can’t dispute is that they spend it, and that their ultimate justification for spending every dime of it is that it’s part of providing the package of services and experiences that constitute an undergraduate education at Williams. And that cost, on a per-student basis, is far greater than what they take in from tuition, fees, and room-and-board charges, even from full-pay students.</p>
<p>It’s fine that they spend it. But, they aren’t subsidizing the actual education. They are using it to attract more attractive candidates and to create the institution THEY want. But, it’s not “high earners ARE being subsidized”… They aren’t.</p>
<p>The actual cost of the actual education is not being subsidized. I mean it Sounds really good. But honestly. none of us are so stupid to take it at face value.</p>
<p>I mean, the institutions themselves are subsidized by being untaxed, in spite of the fact that multiple administrators earn very, very high salaries. I’m just not buying what they are selling on this one. Sorry.</p>
<p>LI- percent of endowment? Thought it was percent of growth. Many funds are written to state “revenues from.”</p>
<p>At any rate, after 2008, all these “top heavy” schools started implementing certain cuts- I can name a range, but the bottom line is folks will still say, well it’s just not enough. Doubt it got much attention, beyond H’s cuts in the admissions travel budget. I don’t even think there is a way we can characterize this. We don’t know how much fluff there is, just a few prominent salaries. Get rid of how many and leave enough to serve the kids?</p>
<p>Btw, if the Williams avg is 7-1, many instututions are already planing attrition to push it up.</p>
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<p>I don’t recall the specifics, it’s probably a minimum percentage of cash flow resulting from those endowment assets. The point is that a non-profit cannot just sock it away for decades with using a portion for the intended charitable purpose.</p>
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<p>Actually fee waivers cover all of that if your income is low enough. Not everyone who qualifies is aware that these fees can be waived, however…education about that to those students would help a lot.</p>
<p>I’m not sure what the IRS requires, but most colleges and universities take an annual payout on endowment calculated as a fixed percentage (usually around 5%) of a 3-year moving average of endowment assets. Some take a little less than 5%, some use a longer averaging period.</p>
<p>If they took a fraction of annual growth, it would produce wild swings in annual operating income.</p>
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<p>Well, who the heck else are they spending it on? You can dismiss all these bells and whistles as frivolous frills and insist they’re not part of the “actual education” if you like; but the schools are still subsidizing all their students, full-pays included, with all the bells and whistles. And that’s a huge part of what makes those schools attractive to full-pay students (and others). It’s precisely what distinguishes a place like Williams or Yale from your average state university which delivers a college education at a fraction of the cost-per-student, because it doesn’t come with all the fancy “extras.”</p>