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Comment by SkipperCat | Hacker News Reader

I've always wondered why the family that pays full price for tuition does not get the tax credit for their charitable contribution to some other student whom they subsidize.

If I donated $20k to a university, I'd get to write that off as a charitable contribution in my taxes. If I pay full tuition and 1/3 of that goes to a student needing aid, I get no deduction.

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It's typically the opposite of what you say - the true expenses/student that a private university pays is much higher than even the richest kid pays (difference made up for by the endowment's income)

So the better question is why they don't raise prices such that the rich kids have to pay the true full price & have more money for aid for the less-rich.

No that's not the better question.

If private universities are truly spending so irresponsibly and profligately that their sticker price isn't covering their expenses, then their entire administration should be thrown out and replaced. It's only incompetence or corruption that could excuse such costs.

Throwing out the entire administration and then only replacing a small fraction of it would work even better!

I have a hard time believing this. Every course I took in college had at least 15 people and usually 30-50 people. Large classes like Calculus 1-2, Linear Algebra, and Differential Equations had at least 300 people. There is no way you cannot pay the salary + legitimate overhead for 1 profess, and 1-10 TAs with these class sizes. My guess is a lot of the money does not go to instruction but goes to administration, sports palaces (stadiums), luxury dorms, etc. Colleges used to be MUCH cheaper in the 1950s, 1960s, and 1970s. The education was just as good but cost far less.

The big problem with colleges today is they are "non-profit" in name only. Instead, of giving profits to shareholders, they are giving them to employees and insiders. This hurts students and the United States. However, colleges do not care because they, their employees, and friends benefit.

Sports more or less pays for itself in most cases and even brings in profits. That's why even public colleges have active sports programs. You are right about other luxury amenities. But even basic facilities cost pretty serious money, even if they are only built every 50-100 years or so. If I had to estimate, I'd say no school currently pays more than 25% of tuition on actual teaching. Administrators and luxury facilities account for most of the other spending.

The real cause of these escalating costs is easy credit for tuition. There would simply be no big market for the current overpriced programs if people couldn't get loans regardless of outcomes. I would like creditors to have to prove how the students will pay for the median salary of a person with the same degree before loaning the money. You should not be able to borrow hundreds of thousands of dollars for stupid stuff that will never pay off.

sports only pays for itself in a minority of highly successful schools, and even then typically only Football or Basketball. So sure Penn State and Auburn football pull a profit, but the vast majority do not. Last I checked on these, the number of schools was <20 that were profitable.

You're wrong about that. See this for example: https://sports.usatoday.com/ncaa/finances

Not only is sports usually profitable on the surface but it draws donations and new students. Administrators aren't as stupid as you think.

There is exactly 1 college sport that typically pays for itself and every other sport at the university, with the slight possibility of a second sport contributing to the coffers ONLY if the college is a D1 school and competes regularly in March Madness.

For those unfamiliar with American college athletics, American Football is the money maker via shared revenue from broadcasting rights and Men's Basketball can be a net cash flow positive also via broadcasting if they're an elite team. Every other sport is a net cost for the school because nobody watches all the other sports shown on ESPN Ocho.

Football is the most profitable and most colleges do make money on it. https://sports.usatoday.com/ncaa/finances Not only is sports usually profitable on the surface but it draws donations and new students. Administrators aren't as stupid as you think. Sports need not cost a huge amount of money. Stadiums used for one sport can easily be used for other purposes instead of letting it lay fallow in the time between football games.

It always amazes me that people simultaneously say that colleges are sharks when it comes to maximizing tuition and minimizing expenses, while also saying that sports are objectively a waste of money. They aren't stupid. If sports wasn't a desirable thing to invest in, they wouldn't do it. We could make the same complaint about luxury amenities too. The fact is that colleges have to compete with each other, and they charge enough to pay for everything.

Could tuition be lower if not for all of these luxuries? Maybe so. Should core education get more money? Perhaps. It certainly used to bother me that sports got more money than academics. But I really get that it's a legitimate business decision to allocate some money to sports. I don't even like sports much but I would not cut it out if I were them.

> If I had to estimate, I'd say no school currently pays more than 25% of tuition on actual teaching.

Is this based on anything at all? Any direct experience you have, any sources?

I don’t mean to be rude, and I don’t expect everyone to have expertise on something just to talk about it - but when people start using numbers as evidence for their claims, I think a higher standard is warranted.

I had the same reaction you did, so I looked up the state university budget breakdown [1] for my home state of Florida. In 2021-2022, the most recent year for which they have final numbers, 35.6% of expenditures went to "E&G". That's "Education & General", which according to them is defined as:

"The Education and General budget funds the general instruction, research, and public service operations of the universities. A large portion of the system’s 2022-2023 beginning fund balance reserves ($420.8 million) is dedicated to meeting the 7% reserve requirement set forth in Section 1011.45(1) of the Florida Statutes. Additionally, millions of dollars have been reserved by the SUS to cover the costs associated with the hiring of faculty, maintenance of facilities and equipment, the maintenance of each university’s financial software system, various research enhancement programs and initiatives, and the potential for budget reduction shortfalls."

So this includes both the "actual teaching" and research and other related spending.

We can get more information on page 45, which provides a breakdown of that 35%: 61% of it (~22% of total) is "instruction and research", i.e., at most 22% of the total budget (and probably much less, since FL's public university sector is fairly research-heavy) is spent directly on instruction.

That's probably a little unfair, since instruction needs things like facilities and other admin expenses even in a system that isn't bloated, but the previous poster's 25% number passes a sanity check at least to my eye.

In case you're wondering, the other two big categories of expenses are C&G ("contracts and grants" - so more research expenditures mostly) and "local funds" (a weird mix that includes things like student activities, athletics, and financial aid).

[1] https://www.flbog.edu/wp-content/uploads/2022/12/2022-23-OB-...

Thanks for the numbers. It was honestly a lucky guess. I have thought about my own school when estimating it though. I once looked up salaries and tuition numbers and did a rough estimate.

Most undergraduate degrees don’t really require much in the way of infrastructure.

I went to school as an English major. I struggle to see why the cost of tuition has gone from 6k per semester when I attended to 35k now 20 years later.

Did salaries grow 6x?

No but the dollar is worth about a third of what it was 20 years ago, at best.

You might not even realize the infrastructure that the school uses. Those big buildings are expensive and use tens of thousands of dollars in electricity every month. If your school has shuttles to take people back and forth to the dorms or parking, that is also a constant expense. The library has to pay tens of thousands of dollars for access to academic databases. Computer labs, printing, internet, security, and so on. It all adds up quick.

https://www.usinflationcalculator.com/ tells me the dollar is worth 60% of what it was worth in 2004, that’s a lot more than a third. Where did you get that figure from?

The real rate of inflation is higher than what they say it is. Some products have gotten cheaper due to outsourcing but almost everything that matters (education, health care, housing) has exploded in price over the last 20 years. So has the money supply.

If you want more honest numbers, try https://www.shadowstats.com/alternate_data/inflation-charts

Realistically, prices are up 40% since the pandemic alone. That's a lot less than 20 years.

Not to be an ass, but if you weren't an adult in 2004, your opinion on this is going to be unduely skewed by propaganda I'm afraid. Not every old person has such a clear view of things either but having lived back then sure makes a big difference in perspective. Idk how anyone with basic number sense who has shopped for anything like a normal person can think inflation is less than 10% per year.

I don’t think your link is saying that.

It lists cumulative inflation at 64.x% for that year range.

For what I could buy for $1 in 2004

It would now cost me $1.64 in 2024.

Yes, now divide 1 by 1.64 to get the value of one 2024 dollar in 2004 and you get 60.98 cents.

Apologies,

I misunderstood your comment.

When I originally read it, I for some reason thought you were saying that… well essentially the opposite of what you are saying.

How much has state aid changed in 40 years? That’s also big

You not liking how the money is spent doesn't mean the money's not spent on the product being sold to you. Tuition grants you access to the campus resources.

I don't like the CEO of global corp making a billion dollars, but it's still part of the price of the globowidgets that I buy.

At expensive schools, those large classes are usually much smaller.

Given a typical professor's salary, it is... difficult to imagine that this is true, at least not without fantastically bloated administrative and overhead costs.

> fantastically bloated administrative and overhead costs

Indeed. Go check the trends on the ratio of non-teaching staff to students at these major name colleges.

“non-teaching staff” includes all the research scientists, postdoc, and techs that help make the research happen. These universities are not especially good at teaching compared to SLACs. They are exceptionally good at research.

That’s not what most of these people are doing.

https://www.mindingthecampus.org/2023/01/05/more-employees-t...

Those people are paid for out of research grants, not tuition.

I don't know -- MIT's tuition and educational expenditures roughly match (it's a slight loss). Of course it's also a minor percentage of the budget.

Tuition at my partner's New York private high school (she graduated 35 years ago) just hit $61K. OTOH my own high school (also private) spends over 70K/student and charges 20K tuition, though tuition revenue/student is under 10K. This might be an example of the subsidy.

That’s the only thing that bothers you? :) How about we outlaw the price discrimination described in the parent comment? I think everything else just pushed the conversation deeper in the weeds and does us all a disservice.

So no more youth ticket prices, senior discounts, etc.? Price discrimination is a very commonly-used tactic, and it goes by many different names.

Nuance can be introduced. Allow aged based price discrimination but not descrimination that is based on actual income numbers?

Senior discounts: When the median US senior citizen is significantly wealthier than younger adults, absolutely yes. https://www.cnbc.com/2023/10/28/americans-median-net-worth-b...

France grants free museum admission to adults under 26, which strikes me as a better policy than charging the highest price to access cultural works to the people who (a) have the least earned wealth, (b) the least lifetime exposure to those things.

Yep, I think senior discounts are partly/largely about willingness to pay, not ability to pay. For example, senior citizens aren't the target demographic for most movies. Theaters get full freight from the 18-45 crowd, who want to see the movies the most. Then they entice senior citizens to come watch movies that they don't love by giving them better pricing.

Same applies for theme parks, where the target audience is young adults and families with small kids.

I'm not defending any of this — just pointing out that price discrimination is sometimes about ATP, and sometimes about WTP.

Senior discounts are also used to smooth out/move usage.

"Seniors pay 20% less for movie tickets at Tuesday at 1 pm" sells tickets that few people with jobs would buy, regardless of price.

The deal with being a senior, your net worth is falling, not rising. You basically have whatever you earned and saved before 65 plus some social security. Somebody who is only worth only $300k at 70 and is pretty healthy is in a lot of trouble if they live to be 85. Some better social safety nets would make this less of a concern, but we really don’t have those.

Demand for university degrees is relatively inelastic, though, so people will do what they have to do (pay exorbitant tuition for their kids, take on exorbitant loans for themselves) to get access to the kind of life opportunities that elite degrees provide. That, in my mind, makes it more unseemly - especially since many of these schools don’t actually need the money.

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