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New reports on the cost of four year colleges show that things are only getting worse.

The Chronicle of Higher Education released an  new report on the long-term costs of attending college.  This chart traces tuition increases from 1998 to 2014.  Unsurprisingly, the trend is as dramatic as it is disturbing.


At the most expensive four year undergraduate colleges, which are Sarah Lawrence, Harvey Mudd, Columbia, NYU and U.Chicago, tuition has increased at a rate of around $1000 per year ABOVE the rate of inflation.  Looked at another way, if you are earning the median income in America, $50,000/year, and you have gotten inflation-appropriate raises every year (a generous assumption) you would still be paying an additional ~ 1/3rd of your yearly salary, every year, on college tuition alone.

Schools claim they need this extra money, that they cannot manage without it.  The numbers tell a different story.  Students are, of course, only one source of University revenue.  At small liberal arts colleges, they account for a much higher percentage of total revenues.  But at top research Universities, tuition is a small slice of the pie indeed.  The top five most expensive colleges had an average endowment of 6.6 billion dollars in 2013 (note that the range is extreme — a mere $74 million for Sarah Lawrence, a whopping $8 billion for Columbia), and earned anywhere from 6 percent to 17.5 percent on those endowments.  Research universities also make a lot of money from their attached hospitals, and from private gifts.

Take U. Chicago, for example.  This past calendar year, U. Chicago earned 6.6 percent on its endowment for a $447.15 million profit.  According to its website, that accounts for approximately 12% of its operating budget.  

Assuming all students paid full tuition last year, and all students paid the undergraduate tuition rate, (both fo which are obviously optimistic assumptions), U. Chicago earned $943 million in tuition last year, which would account for around 25% of its operating budget.  (An interesting aside -- this also means that U. Chicago is earning billions of dollars from its hospital, land, private gifts and other sources.)

According again to its own web reports, Chicago’s assets were valued at $371.3 million more than last year, and it also showed an operating budget profit of $6.1 million.  Combined, these numbers mean U. Chicago became $378.4 million dollars RICHER last year.

If tuition was suddenly returned to 1998 levels, would that still be the case?

U. Chicago would make $737 million from students …

and would STILL be $172 million dollars richer than last year.  So yes, it would.

Colleges aren’t charging more because they have to.  They’re charging more because they CAN.  We have placed private colleges at the epicenter of American life, and they are profiting handsomely from it.  Food for thought for employers and students who are still obsessed with ‘brand names’ in education.  You are paying for it.