How Much Money Do Universities Waste?

Students and the general public apply significant scrutiny to universities, primarily because of the profound impact they have on society. The ideas they espouse often find their way into politics, economic policy, and even your local coffee shop. 

For that reason, the topic of how much money universities waste comes up quite often. People want to know where student debt is going and whether it’s really necessary. 

What Do The Numbers Say?

According to the National Center for Education Statistics (NCES), the average annual tuition and fees for a four-year public university in the US were $10,560 in 2019-2020. For a four-year private university, it was $37,650. That’s a lot of money for most people, especially considering that many students also have to pay for housing, food, books, transportation, and other living expenses.

To many people, especially those in business, that sounds reasonable. But where does all this cash go? Well, according to a report by the American Institutes for Research (AIR), only about half of the revenue from tuition and fees goes to instruction. The rest goes to other categories that have nothing to do with training. 

You might think that’s okay. After all, universities need cash for research, academic support, diversity, and basic maintenance of their facilities. 

However, other categories are more questionable. For instance, the amount of money universities spend on institutional support (which includes administration and management), is often extremely high. They can also spend a lot of money on the operation and maintenance of plant (which includes buildings and grounds), particularly if they want to remain “prestigious” in the eyes of business and society. 

According to the AIR report, institutional support accounted for 13% of the total spending by public universities in 2017-2018. That means that for every $100 of tuition and fees paid by students, $13 went to administration and management. Private institutions registered a figure of 15% percent, making the case for ERP application management services even stronger. 

Another category that raises eyebrows is the operation and maintenance of facilities. According to the NCES data, public universities spent an average of $2,790 per full-time equivalent student in this category in 2018-2019. For private universities, that number is around 20 percent higher. 

Why Do Universities Spend So Much?

Well, part of it comes down to the need to provide a comfortable and attractive environment for students and faculty. Professors in particular expect a nice place to work with all the facilities and amenities they want. (If they don’t get them, they might switch universities, which could affect the institution’s reputation). After all, who doesn’t like to see shiny new facilities and impressive architecture when visiting campus?

This phenomenon is more widespread than you might think. For instance, the University of California Merced (UCM), which opened in 2005 as the newest campus of the UC system, spent $1.3 billion on its initial construction phase, which included 101 buildings on 815 acres of land. The investment clearly wasn’t just to attract students, either. It was all about status.