Wednesday, December 17, 2008

Where’s all the money going?

by Andrew Gillen

Yesterday afternoon, I heard someone say something along the lines of “today, students pay about a third of the total cost of educating them.” Given that this seems to be a reoccurring statement, I’d like to demolish the idea that “the total cost of educating,” based on current university practices, is a good benchmark to use. Just because students pay X, while schools spend 3X per student does not mean the students are getting a great deal, especially if X is close to Y, the cost of educating a student in a more rational system.

What should it cost to educate a student/ What is Y? The following table indicates the cost per student per class for instruction, assuming that you pay professors $100,000 a year.*

The yellow boxes indicate what I think are the most typical combinations of classes and students per class. Let’s say that professors teach six classes per year, and that the class size is 30. If a student takes 10 classes a year (15 hours a semester, more than the 12 hours that is typically considered full time), the amount spent to pay the professors for that student for the year is $5,560. If class sizes are 20, the amount spent is $8,330. Even if the class size drops to 15, the amount spent is only $11,110.

In other words, given current light teaching loads (typically six classes per year), fairly generous compensation of $100,000 per nine month year for professors, and a generous estimate of 20 students per class, the instructional costs per student per year should be around $8,330.

Compare this $8,330 to the current fund expenditures reported by the Digest of Education Statistics, which were $32,613 in 2000-2001 for 4-year public schools, and $37,768 in 1995-1996 for 4-year private schools. While there are certainly other legitimate costs for a university than paying the professors that teach, this would indicate that schools are spending around three dollars outside the classroom for every dollar they spend in it.

Where is all the money going?

At a 4-year school, realistic “instructional costs”** for educating a full time student (10 courses a year) are in the range of $3,130 (assuming professors teach 8 classes of 40 students a year) to $16,670 (assuming professors teach 4 classes of 15 students a year). And this is assuming all classes are taught by professors making $100,000 a year, not low paid adjuncts or graduate assistants. The actual price to most students falls in that range as well. The fact that schools spend multiples of these amounts is indicative of endemic wastefulness.

To sum up, saying that students are only paying X while it costs 3X to educate them, and trying to draw anything meaningful out of that is ridiculous when 3X bears no relation to the actual costs of providing instruction. In fact, the amount that students pay, X, is close to Y, the amount that it should cost to educate them in a more rational world. That’s a shame given the massive subsides that are given to try and make the price for students lower than the costs of educating them (to make X smaller than Y).

* The average salary for “full-time instructional faculty and staff” was $73,940 in 2003-2004, so a figure of $100,000 is fairly accurate once benefits are taken into account.

** "Instructional costs" include quite a bit of research. Light teaching loads inflate these figures by classifying non-sponsored research costs as instructional costs. For instance, for a professor without a research grant and with a common 3-3 teaching load (6 courses a year), the entire salary is thought of as an instructional expense, even though they only spend 9 hours a week in the classroom.


Cowboy said...


Now, why are Band-Aids $300 in the hospital? Is it because hospital people are inherently greedy? Because at the end of the day we hear how they're losing money, do we not? With $600 a bed overnight, $300 Band-Aids, doctors doing every conceivable test on you because they're worried you're going to sue them if they miss something when you go in for a sore throat, the cost of getting sick here when you have to go to the hospital is ridiculous, it's absurd. And yet the people charging all this and being paid for it themselves are losing money. They gotta go out to rich people and ask for endowments and donations to build wings in the hospital or certain rooms in the hospital in order to keep going. They have to run around with their hands out. They've become charities. Universities have become charities. Harvard, with an endowment in the double-figure billions still runs around with its hands out. University presidents these days don't know diddly-squat about education. They are fundraisers. So $300 for a Band-Aid because hospitals are trying to cover the uncovered costs imposed on them by government. They have to, as a matter of law, provide care for people who can't pay, such as illegal aliens. That's just one example.

They have to cover insurance against lawsuits, just as doctors do, with medical malpractice. These lawsuits, by the way, are filed by another liberal group, tort lawyers, trial lawyers. It is liberals who are out there trying to get coverage for all of the illegal people in the country, people that are not genuine American citizens. There is no free lunch. There's a house of cards out there. Now, consider this. If Americans did not have to give around 40% of their income to government at all levels each and every year, they wouldn't necessarily have to go into debt to the extent they do for homes and cars and colleges. Why in the world, when you start talking about college, liberals, when they start raising hell about the cost of things, be it oil, or what have you, they never target tuition, they never target Big Education and say, "You greedy SOBs, lower tuition costs." No, what they do is come up with even more ridiculous student loan programs, more debt, while creating the illusion that you have no chance in this country unless you go to college. You have to go to college.

So we're farming all these people into college, but then lower education levels, high school, half the people that get out of there it seems can't read the diploma that they are given. So when they get to college they're not prepared for it. So we've got all of these illusions, you have to do this to succeed, you have to do that, you have to do this, you gotta have a car, you gotta have a house, you gotta have this, gotta have that. And at every level here, you will find liberals in government who have created all of these things. Stop and think.

capeman said...

This "analysis" is hilariously awful. To begin with, it assumes the entire "instructional" cost is made up of professor salary. But anyone who knows anything knows that professor salaries make up something like a third of the total budget (including only "central functions" and excluding things like research grants, dorms, athletics. The rest is mostly stuff you wouldn't want to give up if you thought about it a little -- things like student labs, computer facilities, libraries, administration, capital maintenance aka janitors, heat, etc. and things like student health. Oh, throw in diversity, sustainability, and the like. You might say this is garbage. But you'd find a lot of it is driven by student demand.

Maybe Mr. Vedder should have his wonderboy sit in on a college budget committee and really learn something about higher education budgets and finance.

OldeWhig said...
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