If I may suggest a compromise, I think it is obvious all colleges need to be careful managers of their finances if they want to fulfill their long-term institutional goals. But I also think it is obvious that colleges with much more limited sources of revenue and gifts can sometimes face very difficult tradeoffs.
To the point some end up failing financially and closing, in fact. And at the other end, some manage to build up their standing and popularity and gradually their finances improve and it becomes a positive feedback cycle.
Which is really how all competitive industries with what I would call differentiated products work. But I think sometimes we forget that these colleges are in fact operating in a competitive industry.
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Most of a universities research budget comes from external grants specifically to perform research. The grants cover graduate student tuition, stipend, salaries for faculty and staff, supplies, travel, equipment that is needed, etc. These grants also come with an overhead charge that is supposed to cover costs not explicitly covered in the grant. The research budget at some universities can be huge, but it is almost always coming from external funding for specific research rather than competing with the undergraduate budget.
That’s right. So to the extent students at least somewhat benefit from that, it doesn’t typically add to their net cost of attendance, and therefore it gives them more bang for the buck.
But a lot of the popular analysis of increasing spending by universities simply throws in research spending, including related overhead and capital expenses.