How do colleges and universities spend their money? To most, it’s a black box. The public looks at tuitions, states look at appropriations, trustees look at the endowment, and department managers look at their budgets. How colleges actually spend their money is barely understood by the general public and even many policy makers. In the current economic environment, opacity about college spending has to give way to greater transparency about spending, and an understanding of the relationship between spending and performance.

Trends in College Spending: Where Does the Money Come From? Where Does It Go? provides a look inside the black box of higher education finance, highlighting financial trends in operating budgets at public and private nonprofit higher education institutions.

Using data that all higher education institutions report annually to the U.S. Department of Education, this report updates earlier work by the Delta Cost Project, focusing on the period from 2002 to 2006, the latest year in which spending information is available. The fiscal data presented in this report include operating revenues and expenditures per full-time equivalent (FTE) student and adjusted for inflation using the Consumer Price Index (CPI); all data are presented in 2006 dollars.

Understanding spending requires knowledge of the interaction between enrollment patterns, revenues, spending, and results. This report moves sequentially through each of these, to show:

• Enrollment patterns: Are enrollments growing or declining? Where are students going to school, and have enrollment patterns by institutional type changed over time?
• Revenue trends: Where does the money come from? Do changing revenue structures influence how the money is spent?
• Spending for education: How much of the money supports education and related expenses? How has spending for education changed over time and why has it changed?
• Spending increases: Where is spending increasing most rapidly? Is there any evidence of cost cutting?
• Spending and tuition: What portion of tuition increases can be attributed to increased spending?
• Spending and subsidies: What portion of the costs of education do students themselves pay? What portion do institutions or states subsidize?
• Spending and results: What can be said about the relationship between spending and educational outcomes?

The Delta Cost Project aims to make higher education more affordable by improving the management of costs. A basic premise underlying the Delta Cost Project and this report is that college spending can indeed be contained without sacrificing access or quality. But before costs can be contained, they must be understood and tracked.

Visit Trends in College Spending: Where Does the Money Come From? Where Does It Go? Download Page

You can download full report in PDF format.

Delta Cost Project: Jane V. Wellman, Donna M. Desrochers, Colleen M. Lenihan
American Institutes for Research: Rita J. Kirshstein, Steve Hurlburt, Steve Honegger

A report of the Delta Cost Project
Supported by Making Opportunity Affordable, an initiative of Lumina Foundation for Education

FORWARD
It’s time to get serious about cost accountability in higher education
By Jane Wellman, Executive Director of the Delta Cost Project

Our country’s system of higher education — long extolled as the best in the world — is showing serious fault lines that threaten capacity to meet future needs for an educated citizenry. There are many causes for concern, but chief among them is a system of finance that will be hard to sustain in the current economic environment.

To be sure, higher education has gone through hard times before. But looking at the economic and political horizon in January of 2009, only the rosiest of optimists can believe that what lies ahead is going to be similar to what we have seen before.

The shock waves from the international upheaval in credit markets are just now beginning to be felt — in greater demand for student aid, tightening loan availability, dips in endowment assets and earnings, rising costs of debt payments, and deep state budget cuts. Families are going to find it harder to find the resources to pay for the almost‑automatic increases in student tuitions that have been the fuel for higher education in the past decade. Even with increases in tuition, most institutions will still face deficits that require deep spending cuts. ...

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