NCPA - National Center for Policy Analysis

Who Subsidizes Whom in Higher Education?

April 28, 2011

Conventional wisdom holds that colleges and universities heavily subsidize their students.  This assertion seems correct, given that total spending per student is almost always in excess of per student tuition payments.  However, the conventional wisdom is wrong because it inappropriately compares only one revenue source -- tuition payments -- to total institutional spending, says Andrew Gillen, research director, Matthew Denhart, administrative director, and Jonathan Robe, a research associate, with the Center for College Affordability and Productivity.

Such a comparison is seriously misleading because institutional spending encompasses far more than just the educational expenditures that tuition revenues are ostensibly designed to cover.  The more logical comparison is between what colleges and universities are paid to provide an education versus what those institutions actually spend to provide that education.

  • In many cases student tuition and third-party payments on behalf of students easily cover the portion of spending that is actually used for educational activities.
  • Between 52 percent and 76 percent of all students attend institutions where educational payments exceed educational spending.
  • For four-year students, this figure is between 59 percent and 87 percent, and for two-year students, it is between 24 percent and 63 percent.
  • In other words, not only are most students not being subsidized by their college, but most colleges are able to divert money towards non-educational activities, all the while claiming that this spending is for the benefit of students.

Convincing people that you are giving them a big discount when you are doing no such thing is not a new idea.  What is new is its application to and celebration within higher education, say Gillen, Denhart and Robe.

Source: Andrew Gillen, Matthew Denhart, and Jonathan Robe, "Who Subsidizes Whom? An Analysis of Educational Costs and Revenues," Center for College Affordability and Productivity, March 2011.

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