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Who Subsidizes Whom? An Analysis of Educational Costs and Revenues

Gillen, A., Denhart, M., & Robe, J. Who Subsidizes Whom? An Analysis of Educational Costs and Revenues. Center for College Affordability and Productivity, Washington, 2011. Pages: 21.

The Center for College Affordability and Productivity, a Washington D.C.-based research organisation, has recently published a policy paper that asks two key questions: how much are colleges paid and how much do colleges spend to educate students? The study uses three estimates of per student educational costs to attempt to answer the aforementioned questions: (1) education and related spending, (2) adjusted education and related spending and (3) achievable education and related spending.

The authors make note of three fundamental problems in the US Department of Education’s Integrated Postsecondary Education Data System (IPEDS) variable “Instruction Expenses”, which is widely used in educational revenue literature:

  • it fails to include miscellaneous expenditures such as student support services, financial aid and registration administration and building maintenance;
  • it uses two different accounting structures to formulate guidelines for public and private higher education institutions, thereby making any such comparison between the different types of institutions unclear, inconclusive and incomplete; and
  • it accounts for research that is not funded by external grants as a cost of instruction rather than research.


To determine a more accurate picture of educational spending by universities, the Delta method, created by the Delta Cost Project, should be used alongside the IPEDS “Instruction Expenses” variable in order to calculate a more accurate cost and include activities that are indirectly related to the cost of admitting students to universities.  Based on the authors’ findings, every type of higher education institution – with the exception of the public two-year institution – receives more money (i.e. from total tuition) than what it costs to provide an education. Notably, research-intensive universities (i.e. institutions that were categorised as “Doctoral/Research Universities—Intensive” in the 2000 Carnegie Basic Classification System) account for the greatest discrepancies between “education and related spending”, and “adjusted education and related spending” (i.e. the estimate used to adjust for IPEDS allocation bias toward non-external grants categorised as instructional spending).

Center for College Affordability and Productivity