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Comment by mattigames | Hacker News Reader

Is there any in-deep analysis about university finances? It seems that getting around $150.000 from each new student they should have more than enough to sustain and profit.

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My understanding is they are demand inelastic so their costs naturally go up, and there's been an arms race in the past 20 years to build very nice new buildings, housing, etc to compete on look, prestige and features for students. Reputation of the school is one of the biggest differentiators, so now that they're being run as a business rather than the state costs have no incentive whatsoever to decrease. Now of course, even if the states wanted to be more equitable to their citizens by going back to a more state-funded model, the cost to maintain all of those new features is massively increased. Its like an asset bubble more or less.

They are not getting $150k per student. That's the nameplate price, which is not the actual price paid by most students. The students who do pay nameplate price see much of their tuition going to fund financial aid for less well-off students.

Net tuition and fees for students at private 4-year colleges is about $14,600 in 2018-2019. That results in a total of $58k/student in revenue, not $150k. https://trends.collegeboard.org/college-pricing/figures-tabl...

As public institutions, UC campuses see even less: https://trends.collegeboard.org/college-pricing/figures-tabl...

The arms race issue is real, though, and students are less price-sensitive than you might otherwise expect because so many of them are paying for all of it with debt, and the dollar figure looks so obscene everywhere that I suspect lots of students just choose not to think about it. One school's dining hall being fancier is immediately appreciable on a college tour. One school's ridiculous high number that you won't have to pay for years vs. a slightly different ridiculous number at a different one feels less concrete, even though that difference is what paid for the fancier dining hall. Given that, there are big incentives for schools to go ahead and invest in the fancy things and win the students.

It is quite real, this reddit thread shreds some light on the issue: https://www.reddit.com/r/AskAnAmerican/comments/7qesj9/why_i...

I think it is real, but I don't think expenditures drive it all that much. What does drive it is the perceived value through pricing. If the going rate for public schools is $5k/yr, the private colleges put their nameplate rate at $25-30k/yr. Significantly more, but that higher price sends a quality signal, and the students they want don't actually pay it, so they aren't negatively impacted by the high cost.

When the state school price increases to $10k/yr or even $15k/yr, the private schools can move up their nameplate price to $40k/yr or $50k/yr and it doesn't seem ridiculous anymore, and still retains the signaling value.

There has been some increase in student services costs based on the expenditures numbers I posted (about 4%/yr real increase), but that's not enough to explain the 50-100% increases in nameplate tuition at both public and private schools. That is driven by de-investment in post-secondary education by state legislatures, which directly results in tuition increases by public schools to balance the books, and then the similar increases by private schools to maintain their relative cost.

There's plenty.

The college board has good data on the cost side: https://trends.collegeboard.org/college-pricing

And the department of education has good data on the expenditures side:

Private: https://nces.ed.gov/programs/digest/d17/tables/dt17_334.30.a...

Public: https://nces.ed.gov/programs/digest/d17/tables/dt17_334.10.a...

For one they don't get remotely close to $150,000 from each student. The average public 4-year university gets $6,100 per student per school year. That's tuition and fees minus financial aid coming from the school. It covers about half of the cost of educating students, with the other half coming from state funding and federal financial aid.

The average is $9,970 [0], for private ones is 34,740

[0] https://www.topuniversities.com/student-info/student-finance...

"Published tuition fees" is a very different figure from what the average student actually pays.

Universities in the UC system are definitely not getting $150k from each student. Tuition doesn't even cover the cost of educating each student.

You can see UCLA's financials here: https://ucla.app.box.com/v/acct-pdf-AFR-16-17

Tuition and fees netted $833MM in 2017. The cost of the undergraduate schools alone was well over a billion dollars.

Some of those "costs" are self-imposed such as administrative salaries increases, as investigated by the LATimes[0]

[0] https://www.latimes.com/local/education/la-me-uc-spending-20...

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