Report Sheds Light on Where College Tuition Goes

A study examines how tuition dollars are allocated at public, private, and community colleges.

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Ever wonder why tuition is rising so rapidly or where all that money is going? If so, the American Institutes for Research's Delta Cost Project's reviews of trends in college spending, including the comprehensive "Trends in College Spending 1999-2009" report, are good places to start looking for answers.

Their recent update, "College Spending in a Turbulent Decade," takes a close look at how the 2008 financial crisis and the Great Recession had affected higher education spending by 2010.

[Estimate your net price of college.]

One advantage to the Delta Cost Project's deep data dive is that, in looking at higher education financing, they go beyond looking at total bottom line revenues, which can be misleading because contracts, grants, and auxiliary enterprises that are earmarked for non-academic purposes are included. The report focuses on the revenue that actually funds academics. 

At public institutions, most academic funding comes from tuition and state and local appropriations. In 2010, for the second consecutive year, public colleges faced cuts in state appropriations.

And the 2010 cuts were the largest in the decade. The cuts to public research, master's, and bachelor's institutions averaged between 9 and 13 percent. These costs were passed on to students; tuition rose between 5 to 7 percent on average at these institutions. Even this steep rise in tuition was not enough to offset the loss of government revenue.

For community colleges—which accommodate more than 40 percent of new higher education students and serve some of the most economically and academically challenged students—2010 was a particularly tough year.

They added 450,000 new full-time equivalent (FTE) students, as both college-aged students and experienced workers flocked to schools to improve their skills and credentials and avoid a tough job market, while absorbing a 15 percent cut in state and local appropriations. They also limited their tuition increases compared to other public institutions.

[Read about colleges that are freezing tuition.] 

It is heartening to note that most four-year public institutions faced with declines in state and local appropriations that were not fully offset by tuition increases chose to continue spending in areas that are directly related to students' education, such as instruction, student services, and academic support. Unfortunately, community colleges made cuts across the board, including spending almost 7 percent less on instruction and student services, almost 14 percent less on research, 8 percent less on academic support, and more than 15 percent less on operations and maintenance.

This continued a decade-long trend of community colleges falling behind other institutions in the resources necessary to ensure access, attainment, and quality.

At private institutions, revenue from tuition and fees usually covers the majority of the cost of education and related spending (E&R). The subsidy covering the difference comes from endowments earnings, grants, or private gifts, instead of government appropriations.

Although investment portfolios made significant gains and contributed to an increase in operating revenues of 1-2 percent in 2010, private institutions cut spending across the board. Spending on instruction declined by 1 to 2 percent, student services faced small cuts or remained the same, academic support was decreased by 1.5 to 2.3 percent, and operations and maintenance took larger cuts of 4.1 to 7.7 percent.

As a result, the average amount of costs covered by tuition jumped 2 to 3 percentage points. 

While the cost per degree/certificate completion declined in 2010, that cost was higher in almost all public and private institutions than five and 10 years ago, and the greatest cost increases came from private research and master's institutions. The one exception is community colleges, which, thanks to a growth in less costly and shorter-term certification programs, is the only group in which the cost per completion was lower in 2010 than it was 10 years ago.

[Find out why starting at community college could save money.]

One point that "College Spending in a Turbulent Decade" makes very clear is that, for public institutions of higher education, the startling rise in tuition is closely related to the long-term decline in state and local appropriations.

The Student Loan Ranger believes the public dialogue should include a frank acknowledgement of the necessity for greater public investment to ensure continued excellence and to prevent an unsustainable burden of student debt from falling on the shoulders of not only young graduates but on every generation of Americans.

For those of you paying off student loans or about to take them on, make sure you utilize the comprehensive resources on the Equal Justice Works website, including our free webinars and our new eBook.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works' educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.