Two reports published today by The Century Foundation shed new light on how much colleges and universities are spending on student instruction, revealing significant differences in the educational value provided by public, nonprofit, and for-profit schools. The TCF project is a first-of-its-kind attempt to estimate instructional spending as a percentage of revenue collected at every higher education institution in the country, nearly 5,500 in total.
The first paper, authored by Penn State associate professor Dr. John Cheslock, uses 2014-15 data from the IPEDS Finance Survey to compile four different ratios of instruction-per-tuition-dollar spending at each school, in addition to calculating nationwide averages and breakdowns by ownership control. The second paper, authored by TCF fellow Dr. Stephanie Hall, explores the technical results of Cheslock’s study, including the implications for students and policymakers, as well as the limitations and recommendations for improving the data.
Most notably, the TCF study finds that public institutions report significantly higher ratios of instructional spending than private nonprofit institutions, with private for-profit institutions reporting the lowest spending on student instruction. The table below includes top-line findings for two of four of Cheslock’s calculations, using a conservative lower-bound estimate for instructional spending in “Ratio A” and a more generous definition (including institutional spending on student services and academic support) in “Ratio B.”
||Ratio A (Instructional spending / tuition revenue)
||Ratio B (Instructional + education-related spending / tuition revenue)
|National aggregate average
|Public, 4-year average
|Nonprofit, 4-year average
|For-profit, 4-year average
“Until now, figuring out how much a college spends on instruction has been like a black box: students know how much they pay in tuition, but have no way of knowing what that tuition is actually buying,” says Stephanie Hall, PhD, fellow at The Century Foundation. “Our findings make it clear: while the majority of students at public and nonprofit colleges are getting good value for their tuition dollars, students in the for-profit and online education sector are being sold lemons left and right. These schools are funneling tuition dollars into large-scale marketing and advertising efforts, leaving little money behind to spend on meaningful student instruction.”
TCF found that for-profit colleges spend the least on instruction, generally less than half of overall tuition revenue. Some of the lowest instructional spending levels were found at colleges with large online enrollments. Of the 12 schools with 70 percent or more online students and total enrollment of over 20,000, Colorado Technical University spends the smallest proportion of its tuition money, 9 percent, educating students, followed by Capella University, at 10 percent. Rounding out the list are: Kaplan University (18 percent); Liberty University (24 percent); University of Phoenix-Arizona (21 percent); Walden University (31 percent); Grand Canyon University (17 percent); Ashford University (19 percent); Western Governors University (38 percent); American Public University System (27 percent); Southern New Hampshire University (18 percent); University of Maryland-University College (32 percent).
Public colleges and universities, on the other hand, spend more on instruction than they received in tuition revenue on average—sometimes much more, due to additional support from state and local taxpayers. Even after accounting for state and local subsidies, however, the vast majority of public colleges still spend more than half of their combined tuition and taxpayer support on instruction. This high-value spending pattern occurs at institutions enrolling nine out of every ten public college students.
“Instructional spending matters: Research shows that across institutions, the more money that a school devotes to instruction and student support, the greater the likelihood that students complete their degrees, have higher post-graduation earnings, and are able to repay their student loans,” said Hall. “While instructional spending data aren’t perfect, they are an incredibly useful—and underutilized—tool, both to enhance consumer information, as well as to provide policymakers with effective metrics to hold colleges accountable.”
Moreover, TCF’s analysis found that Instructional spending by nonprofit colleges varies enormously, with many spending more than $20,000 per student on instruction—even when they charge some students less than that in tuition—because of access to donated funds and other revenue. At the same time, many more-tuition-dependent institutions spend less in absolute dollars than some public institutions, and less as a proportion of tuition revenue.
“At a time of ballooning student loan debt, state and federal policymakers should start paying more attention to how colleges are using tuition revenue, including looking at ways to improve data collection on institutional spending,” said Hall. “Greater transparency and accountability will help students make better choices, and ensure that taxpayer dollars aren’t being used to prop up low-quality schools.”