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College Tuition: Where Does the Money Go?

As college tuition and fees continue to rise, many complain that an education has become too expensive. It’s not exactly an exaggeration; tuition as increased 1,228% since records dating back to 1978, according to Bloomberg.fees-Ken Drysdale

Every term, students across the U.S. pay, and sometimes, go into debt because of these tuition costs. In fact, for many students, a college education might be one of the biggest investments they make in their lives. If you’re a current student, a future student, a former student, or the parent of a student, chances are you’ve asked yourself at some point where all that money goes, and why tuition keeps rising.

Where does the money go?

Instruction: Your first thought about tuition and fees must be that it must cost quite a lot to employ so many faculty members. Surprisingly, this isn’t really the case. Although instruction makes up the largest percentage of college expenses, it only makes up 27% of college costs and public universities, according to Radio Open Source.

Other costs involved in a college’s budget:

  • Research (e.g., research institutes, labs, individual research) – 12%
  • Hospital services – 11%
  • Auxiliary enterprises (e.g. residence halls, athletics, dining services) – 9%
  • Institutional support (e.g. general administration and management, public relations) – 8%
  • Academic support (e.g. administrators, deans, libraries) – 7%
  • Public service (e.g. conferences, institutes, reference bureaus) – 5%
  • Operations & maintenance (e.g. utilities, insurance, maintaining facilities) – 4%
  • Student services (e.g. admissions, counseling, student activities & organizations) – 4%
  • Scholarships & fellowships (e.g. grants, awards, stipends) – 3%
  • Depreciation (losses in capital assets per year) – 3%
  • Independent operations (indirect enhancement of programs) – >3%

Why does it keep going up?

Now that you understand how your college tuition and fees are allocated, roughly speaking, you may be wondering why your tuition is constantly on the rise. It doesn’t seem to be the case that class sizes are getting smaller or that the quality of education is necessarily getting better. So why is it that just when it seems like college has gotten just too expensive, it goes up even more?

Decreased state funding: In the case of public schools, a lot of tuition increases can be explained by decreased state funding. According to the Washington Post, students of non-research institutions, such as community colleges, experience rising tuition costs not because of out of control institutional spending, but because of a shift in where schools receive their money. Students and families are spending more for the same quality of education because of cuts in state spending on public higher education, despite the fact that institutional spending has either stayed the same or even decreased in some cases.

Increase in spending: Many research universities have continued to increase spending while state and local funding has decreased, and tuition increases have been used to make up for this growing discrepancy. However, tuition increases simply can’t keep up with the increase in spending. For example, between 2000 and 2010, tuition on average increased $3,142 while spending per full-time student increased $3,917, according to the Washington Post.

Prestige: When it comes down to it, a college institution is sort of like a business: colleges compete with other colleges to draw as many students to their institution as possible. In an interview with NPR, Kevin Carey, the director of Education Policy Program at the New America Foundation, argued that many colleges aren’t necessarily competing with each other to make money, but to increase their profiles. “So they buy things that increase their status and prestige in relation to their competitors,” he said. “They’re big on construction. … They’re always building things.”

Carey points out in the same interview that even though campuses might look nicer with new buildings, less than 40% of students are now taught by tenure or tenure-track faculty. Students, now more than ever, are being taught by non-tenure-track faculty, such as teaching assistants and adjunct or visiting faculty.

Are all the bells and whistles really worth it?

Many colleges around the country are continuing to spend money on expanding or improving their facilities. But are additions like large-scale recreation centers and fancy student lounges worth the cost that is passed on to the student through tuition increases? Although many students find these additions and improvements nice, it’s important to consider the overall cost to the student. With the average student loan debt of a college graduate approaching $30,000, perhaps it’s time to separate what is necessary for a quality education from unnecessary luxuries.

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The Author

Dave Harriman

Dave Harriman

Dave Harriman, SHRM-CP, has a background in human resources, anthropology, and international education. His experience teaching English abroad during a gap year as an undergraduate student in Spain ignited his passion and advocacy for student travel. As a human resources professional, Dave is interested in helping students prepare for future career growth, and for helping facilitate social & cultural inclusion in the workplace.