The cost to attend college has risen steadily over time. But what do you know about where your tuition dollars go once you hand them over? The answer lies within publicly available data collected annually by the U.S. Department of Education. Recent reports from TCF highlight the potential for using this data to inform students and taxpayers about how colleges use their tuition dollars, including funds that schools receive through federal student loan program, as well as the impact of state subsidies on keeping public colleges and universities affordable.
TCF’s new interactive tool draws on this data to allow students and taxpayers to see what a college spends on teaching for every tuition dollar collected.
1. Students can use the tool to know what to expect out of a school. This is increasingly important, given the current U.S. Department of Education’s deregulatory agenda in higher education, particularly regarding for for-profit schools and distance education in general.
The Department of Education recently wrapped up negotiations on a wide range of regulations affecting college quality and accountability. While the negotiating committee found technical consensus on the full list of issues under review, the process and outcome of the negotiations remain contentious, because student and consumer representation was minimal. In particular, the committee delivered a major blow to college oversight by creating a faster, less-transparent route for accreditors to gain federal recognition. Accreditation is not usually on the minds of students as they go through the college search process, but this issue directly affects them, because the public generally assumes an accredited college is one that can be trusted. Recent accreditation scandals have left much to be desired as far as federal oversight is concerned. Because the Department of Education seems to be drawing back on their responsibility to hold colleges accountable, students need to have access to more information to help them determine whether the college they want to attend provides a quality education. Students can get an indication of this quality through examining how schools spend their tuition dollars.
2. Taxpayers provide public support to higher education through a number of ways, including through state subsidies of public colleges, but also through the federal student loan program. Taxpayers can use the metrics provided in this calculator to understand if their tax dollars are being invested safely in high quality education programs.
Public colleges and universities typically have a significant portion of their budgets subsidized with state funds. While the relative size of this subsidy varies from state to state, and while many public institutions occasionally raise tuition in the face of smaller public budgets, these subsidies—which consist of taxpayer dollars—still help keep the cost of public college tuition substantially lower than tuition for private schools.
Furthermore, all colleges and universities—public, private, nonprofit, or for-profit—receive another type of state support: tuition paid for by the federally run student loan program and other need-based programs that use taxpayer dollars.
While public colleges are under tight rein in how they can use their public subsidies, controlled through state administered governance structures, there is currently no requirement that a school receiving public funds through student loan or other need-based support programs must spend them in any particular way. Unlike other industries that are highly dependent on a pipeline of public funding—for example, health care, where there are caps on how much institutions can spend on certain activities, such as the cap on marketing and administrative overhead at 20 percent of patient premiums—there are no controls on what a university or college does with this “covert” public support that comes to a school through financial aid to students. While most students eventually repay a significant portion of their loans, when these funds arrive at the schools, they essentially are still taxpayers dollars, and so it only makes sense that taxpayers should be able to determine if these funds are being spent on instruction, or on other activities.
Absent any regulations from the U.S. Department of Education on how colleges and universities can use this “covert” public support, schools will continue to spend these funds however they see fit. Therefore, for the time being, taxpayers and consumers of higher education will need more data in order to make informed decisions on whether schools are spending in ways that lead to better outcomes for students. In particular, students and taxpayers should be concerned about the nonprofit sector, as some for-profit education companies increasingly convert to nonprofit status, often in name only while continuing to offer low-quality instruction with questionable governance and financial models, while others close down their operations entirely, leaving students stranded. The Department of Education could more effectively safeguard students and taxpayers by using instructional spending proportions in conjunction with other accountability metrics to better guarantee the quality of all educational programs. Because schools already report annual expenditure data, this requirement would not create an additional burden.
Students trying to decide which college to attend have so much to consider already—How much does a school cost? How do its graduates fare? How good a school is it?—but in making this critical decision, they lack insight into the black box of institutional spending. How a school spends its tuition revenue can tell us much about its intention, as its financial habits can reveal its institutional priorities. Does your prospective college intend on providing a high-quality classroom experience, or does the school intend on focusing on growing in size, increasing its endowment, or enriching its investors? Students should use this calculator to help find out!