The Cost of Undergraduate Education at a Research University II


by Charles Schwartz. Professor Emeritus, University of California, Berkeley
schwartz@physics.berkeley.edu                            December 18, 2005
>> This series is available on the internet at   http://ocf.berkeley.edu/~schwrtz


It’s Not Just a UC Problem – Other Universities are Caught Up

The previous calculation – disaggregating the cost of undergraduate education from other missions at the University of California – is now extended to other top rank research universities. The comparable public institutions (Illinois, Michigan, SUNY, Virginia) appear much like UC, where undergraduate student fees are now around 100% of the actual cost of their education.  At the comparable privates (Harvard, M.I.T., Stanford, Yale) it appears that their undergraduate students are grossly overcharged for what the institution actually spends on their education.


     Our universities have a marvelous trick for calculating the Cost of Instruction, which goes like this: From the total of all operating expenditures over the last year, subtract those that are paid for by specific external contracts – such as sponsored research, medical services, dormitories and meals, etc. – and then divide the remaining expenditure by the number of students enrolled to get the cost-per-student.  This is, in brief, the formula promulgated a few years ago by NACUBO, the National Association of College and University Business Officers. (See http://www.nacubo.org/x376.xml )   It was designed as a way to answer public complaints about the rising rates of tuition and fees, since the published “costs”, following their method, invariably exceed the amounts charged to undergraduates. (“You are not being overcharged; you are being subsidized.”)

     If your college is only in the business of undergraduate education, that is probably reasonable; but if you are a research university, you are close to committing fraud.  Professors at a top research university spend about half of their work-time at research, and another quarter of their work-time at graduate, rather than undergraduate teaching. To be honest, one should disaggregate the costs.

     The top budget officer of my school, the University of California, says that the current annual Cost of Instruction is about $16,000 per student.  I have done a detailed calculation, using official accounting reports and an official faculty time-use study, to conclude that, averaging over all UC programs, undergraduate education costs this institution just under $7,000 per student per year. (See the details of this calculation at  http://ocf.berkeley.edu/~schwrtz/UndergradCost.html )
Thus, current levels of undergraduate student fees now cover the full actual cost of their education at UC!  That is shocking. Various experts have said that my result must be wrong; and a few have manufactured rather hilarious reasons to discredit it.  (See  http://ocf.berkeley.edu/~schwrtz/ExpertsRespond.html )  None have given any objective basis for faulting my analysis, although I continue to seek that sort of academic dialogue. I have a list of many small details in the calculation where better data, discussion or analysis could lead to a more precise answer.


Extending the Calculation to Other Universities

     In one earlier attempt to get this issue before a larger audience, I was rebuffed by an editor because my calculation was limited to this one university, thus lacked national significance.  I have now found a way to extend my results, at least approximately, to other leading research universities; and this I will describe below.  (Of course, if I had access to their detailed internal accounting reports, as I do at UC, then I could do the same calculation more exactly; but this will be a beginning.)

     First I say that the total cost for undergraduate education at any university may be fairly well represented by two contributions: one proportional to the number of Faculty and the other proportional to the number of Students. C = aF + bS.  The coefficient a (the cost component per faculty) should be approximately the same for all comparable universities – I am considering here top rank research universities that compete with one another to hire the best research professors in each field.  

     The coefficient b has two parts: b = b1 + b2.   The first part, b1, comes from the Academic Support category of expenditures and is probably constant at about $1,000. per student for Library and Computer Support expenditures.  The second part, b2, is likely to vary (especially between private and public universities) because of institutional choice on how much out-of-class services are provided to their students.  But, that datum  (coefficient b2) is available from IPEDS (the U.S. Department of Education’s Integrated Postsecondary Education Data System), where one can look up the annual expenditure for Student Services per FTE student enrolled at any individual university.  The coefficient a is then deduced from my detailed calculation for UC; and the answer is a = $71,000.

     For any other comparable research university, one then estimates the Cost-per-Student of undergraduate education as follows:
C/S = a/R + b , where R is the undergraduate student-to-faculty (FTE) ratio for that university. The values for R may be obtained, for example, from the Common Data Set (provided on most universities’ websites); this ratio is supposed to count undergraduate programs only, and one should be careful to check that.

     Well, then, here are some results, where I also give the amount charged for tuition & fees (but excluding room and board and excluding nonresident fees). These are the eight “comparison” universities that UC measures itself against. I have rounded the cost estimates and the fees to the nearest thousand dollars.

Estimated Actual Cost-per-Student for Undergraduate Education

    b($)
 R=S/F ratio*
 Cost-per-Student
 Tuition & Fees
U. California
 2,913 (1)
  18
   $7,000
   $7,000
Harvard U.
 7,801
   7.0
 $18,000
 $32,000
M. I. T.
 5,874
   3.5 (?)
 $26,000
 $32,000
Stanford U.
 5,394
   6.4
 $16,000
 $31,000
Yale U.
   ---   (2)
   6.6
 $19,000
 $31,000
U. Illinois
 2,166
  14
   $7,000
   $9,000
U. Michigan
 2,347
  15
   $7,000
   $9,000
SUNY-Buffalo
 1,676
  17
   $6,000
   $5,000
U. Virginia
 1,801
  15
   $7,000
   $7,000
(1) This comes from my detailed calculation for UC (averaged over all campuses).
(2) Yale’s published number for Student Services is anomalous ($21,481); so I have used Harvard’s number here.
* For the privates, I use the Common Data Set (CDS) or other online sources; for the publics, I take these ratios from US News, “Best Colleges”, which uses CDS.


     My original criticism was that UC is charging its undergraduate students for the full cost of its actual expenditure on their education (in other words, the state subsidy for undergraduate education has vanished).  How does it look for those other leading research universities? The other public universities are in a similar situation. The comparable private universities are in a much more extreme situation: they are overcharging their undergraduate students by up to 90% of their actual cost.

     I expect to hear plenty of complaints about this. Indeed, this is not exact but only a first approximation.  I would be happy to consult with officials from anyplace listed above, so that we may examine their detailed accounts and arrive at a more accurate answer, using a consistent methodology as described in my paper.

     One might mention that faculty salaries at UC presently lag behind those at the leading private universities, due to state budget difficulties. Then one must also remember that those private universities have large endowments, whose income pays a significant part of their professors’ salaries. Those two asymmetries tend to cancel one another out.  As I said, this is not expected to be the last word on this subject; but I hope it will be the beginning of a more transparent and honest public accounting.

Lingering Debate

     My methodology for disaggregating the cost of undergraduate education from other university missions, while it appears very rational and objective to me, continues to sit poorly with many colleagues and so-called experts on higher education. A lingering line of argument goes like this: Surely the research activity of the professors contributes something of significant value to undergraduate education, and this is left out of Schwartz’ calculation of cost. I tried to deal with this issue in Section IV of my large paper, but let me make another attempt here.

     First, we should note that the words “value” and “cost” have different meanings.  As used here, Value is a subjective calculation performed by the purchaser of some product: Do I want to spend $30,000 for a luxury automobile when I can buy a fine quality car for half that price? It is up to me, the purchaser, to decide if the added features of the luxury car are valuable enough to me to justify the higher price. As used here, Cost is an objective calculation performed by the producer of the product: What did it actually cost me, the manufacturer, to produce that car?

     If I am a manufacturing executive, I rely on my accounting department to tell me about my costs and I rely on my marketing department to hype the value of our products to potential customers. If I am an executive of a research university, shouldn’t I also be clear about the difference between costs and values in speaking about the financial facts of undergraduate education? Let’s be honest about this.

     There is a second question hidden here: Is it true that we professors at a research university bring something better to our undergraduate teaching because of our research expertise?  I am sure most of my colleagues do believe that is true, in part because we ourselves are so thrilled by the beauty of our own intellectual endeavors.  But let us ask some other stakeholders how they view this question.

     The Princeton Review is a private company that collects data and publishes booklets on students’ college choices.  In their “Best 357 Colleges, 2005,” they include the results of a survey of 110,000 undergraduate students at those schools.  One critical evaluation was asking students to respond to the question, “Are your instructors good teachers?” on a scale of 60 to 99 points.  As I first saw this data summarized in an article by Andrew Hacker in The New York Review of Books, November 3, 2005, it showed several Liberal Arts Colleges scoring at the top (96 – 99 points) and several research universities scoring near the bottom (UCLA 61, Texas 65, Michigan 68, Harvard 69, Penn 69, Berkeley 70, Columbia 70, NYU 73).  

     I have carried out a more thorough study of this pertinent data source, with the following results. Among the 60 members of the Association of American Universities (the leading research universities), the average reported score on this “Profs Interesting rating” is 67 ± 4.6 (that ± is the standard deviation) for the public research universities and 74 ± 7.5 for the private ones.  In contrast with these low ratings (on the scale of 60-99) were those for the leading Liberal Arts Colleges (using US News’ list of the top 60): they averaged 94 ± 4.1 in the students’ ratings of how well their “Professors Bring Material to Life.”  Unless there is some major flaw in that data, this seems to debunk the claim that our focus on research makes us better teachers at the undergraduate level.