College Guide


January 25, 2013 10:00 AM What Colleges Spend, and What They Charge

By Daniel Luzer

One of the big problems when trying to talk about the cost of college is that “cost” is sort of ambiguous. Everyone knows that college costs more than it used to but there’s a difference between the sticker price, what colleges say they change, and the net price, what the average student actually pays. In addition, over time states have provided less and less money to public college, which they say forces them to hike tuition, while at the same time they’re building fancy gyms and employing thousands more highly paid “administrators” who don’t teach, or often interact, with at all with real students.

So what does it really “cost” to run a university, and how much of that (or how much more than that) do struggling students and their parents provide?

It’s complicated, but this graph, by Derek Thompson at The Atlantic, reveals some of what’s going on.


For poor students, basically, the less selective the college, the more they pay, and the less the school provides. For low-income students attending the most competitive colleges, the institution provides most of the cost. Once we get out of the “highly competitive” range (schools like Clemson University, Northeastern University, or Grinnell College), however, something shifts. Low-income students pay a lot more to go to college. Once we get to for-profit colleges (on the right) the institutions spend a lot less, and the students pay a lot more. Low-income students, in fact, spend almost 200 percent more to go to a for-profit institution like those run by Corinthian Colleges than they would to attend a very competitive institution like Middlebury College.

Of course for-profit colleges have to charge more in tuition than they spend to educate students (that’s how they make a profit) but as a system as a whole this is interesting. It’s expensive to be poor. The only way for low-income students to get an affordable education, it appears, is to attend to the country’s most selective institutions.

[Note that this graph a little misleading since the schools are generally categorized according to their selectivity, except for “public-2-year” colleges. Community colleges are, of course, much cheaper for students since they’re funded by the states. This makes the funding differences look really dramatic but a more honest look would simply merge private and public 2-year colleges, much as the graph didn’t separate out “most competitive” and “very competitive” institutions out by public or private status. Still, the trend holds, the more selective the institution the less the low-income student pays.]

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer


  • Robert Kelchen on January 25, 2013 11:46 AM:

    The Atlantic's analysis suggests that students from low-income families are paying a lot more to colleges than the colleges spend in instructional expenditures. This analysis (coming from Hoxby and Avery's recent NBER working paper) compares apples to oranges since room and board is included in the cost side but not in instructional expenditures. If room and board are excluded, then the comparison between out-of-pocket instructional costs and instructional expenditures seems more reasonable.

    Additionally, the instructional expenditures values seem low. It looks like Hoxby and Avery might have used per-student expenditures instead of per-FTE expenditures, an important concern because the cost to students is for full-time students.

  • john d'oh on January 26, 2013 8:17 AM:

    I wonder to what extent the numbers are skewed by the few highly selective colleges that completely waive tuition for students under a certain income level. Places like Yale, Harvard and I believe Princeton do this. If you take these schools with the enormous endowments out, I wonder how the graph would look for the other 'most competitive' schools.