2009 6
How do American universities lose so much money?
Published by MartinVarsavsky.net in General with No Comments
I don´t get it. I am in NYC having dinner with my eldest daughter, Alexa, a freshman at Columbia University. She is telling me about her “History of the Middle East” class and, in passing, she says that there are 300 students in her class. 300 students? Alexa´s tuition is $25K per year and she takes 10 classes. Therefore each class is $2500, so here there are 300 kids each paying $2500 or the crazy amount of $750K for a class that has 28 sessions of an hour and 15 minutes. The professor who teaches that class can´t possibly be making more than $50K just for teaching that class as he must do a lot else, and professor salaries, I estimate, cannot be much more than $200K per year. So the gross profit on that class is $700K. Now how can an institution that can make $700K on one course lose so much money and constantly be asking all of us ex-alumni to contribute to it? I haven´t studied the university income statement in detail but it sounds to me that these large courses must be cash cows. Of course Columbia has tons of expenses, administrators, teaching assistants, grants and so on, but still it seems to have an amazing top line and a terrible bottom line.
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Johannes on May 6, 2009 ·
Having studied in European and American institutions, I can say that in either of them introductory undergrad classes are usually extremely demotivating, as you sit in a class of the size of a football arena and whether you attend or not remains mostly unnoticed. To me it has always been more of a social event to go to class…The good news is though that it gets a lot better once you move up to grad courses. Professors are usually also more motivated to teach grad students (although they shouldn’t!), since these students already have some background in the field.
As to where the money goes: Check the balance sheet of the Harvard Management Company (manages the Harvard endowment). I assume that Columbia has also heavily invested in assets that have now depreciated quite a lot, thus the need for cash.
wicho on May 6, 2009 ·
Hi Martin, (finally..,first time writing here,).
that is the 1M question!, where all the money goes in private universities.? ’cause they also work with
the industry (financial, technology..) and that is not for cheap!.
anyways, I guess you didnt ask that question when you were student? 😉 . in the end it worth it, isn’t? 😉
Johannes on May 6, 2009 ·
They spend a lot of money on Grad courses, which also tend to be a lot better. This is sad though, as I find that good teaching (which needs classes with smaller sizes) is particularly required in the first years, when shaping a student’s academic interests.
Look at the Harvard Management Company’s balance sheet (manages the Harvard endowment). I assume that Columbia has also invested quite heavily in assets that are now depreciating. Thus the need for cash.
Prem on May 6, 2009 ·
Cierto, es mucho dinero, los costes de las fees de las universidades no-publicas son enormes.
Aprovecho la ocasion para pedirte que escribas un post sobre las fees del IE – creo que ahora rondan los 50 mil euros – llevo un par de anyos queriendo hacerlo, pero el gasto es muy elevado, y sobre todo no tengo muy claro el valor real que aporta y donde va ese dinero realmente.
Un saludo.
Vanesa Burlando on May 6, 2009 ·
Creo que generalmente las clases de los 1ros anos son mas numerosas que las de los ultimos anos de la carrera. Entonces el beneficio de una clase de 1er ano es mayor al de los beneficios de los ultimos anos y se equilibran los costos-beneficios. De todas maneras, si todos los alumnos pagan lo mismo que Alexa, a simple vista parece que algo raro paso con los fondos.
Francisco on May 6, 2009 ·
Martin,
FYI, when I was at University of Chicago I heard that one of my proffesors was making more than USD 500k a year from teaching and researching at the school.
Francisco
Antoin O Lachtnain on May 7, 2009 ·
Here is a funny article on ‘subsidized’ tuition.
Martin Varsavsky on May 7, 2009 ·
Thanks Antoin, very interesting article. Personally I think that top universities are surprisingly, inefficiently managed and do indeed behave like a cartel.
David on May 9, 2009 ·
Alas, you still pay the bill – so, there must be a reason and value. The money goes, as mentioned, in part to pay for scholarships and graduate students. This, not the undergrad, is what brings the university prestige, grants, and it’s place in the top universities. Can you image a university with only kids of the rich and alumni? Bush would have surely gone there 😉
Hans on May 13, 2009 ·
Hi Martin,
During my EE time here in Holland, I also spend some time at Stanford. What was immediately apparent to me was that although the students at Stanford are not per se much more intelligent, they are way more motivated individuals and all of them are like that. This seems to lead to a much higher standard for all (you feel bad when you have only a A- when all your friends have a A+).
It seems like it works as with real estate: cheap houses attract a different public the expensive ones. And exactly for that reason, people want to move to the more expensive areas.
BR, Hans
Antoin O Lachtnain on May 14, 2009 ·
I daresay the reason Martin pays up is not just because he believes it represents great value for money, but because he feels he has been put in a position where he has little enough choice.
Dave Lerner on May 15, 2009 ·
Martin, You might find Prof. Mark Taylor’s recent NY Times op-ed critique of “the academy” interesting. It registered perhaps a 7 on the ivory tower richter scale: http://bit.ly/Wdqp5
Dave
Tom on May 20, 2009 ·
Large comprehensive and research universities subsidize their graduate and research programs by reallocating revenues from undergraduate programs. Their goal is to increase their prestige and research funding. This is also why the professors who teach the most earn the least and those who teach the least, and do the most research and publishing, are paid the most. Check it out.
Rebeca on May 20, 2009 ·
University is not only about giving classes to students. A good university should be focused on research too. And research is expensive. It requires prepared scientists, librarians, laboratories, etc.
If you only expect your daughter just to be taught about some well-known disciplines and techniques (e.g.: business management, physics, web development and any discipline with tradition) you should have sent her to “Formación Profesional” (something similar in Spain to superior technitian).
University is not for learning just proven facts. It was created for guessing nature of facts. University must help students to think by themselves, not to repeat old strategies. That aim is very expensive.
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Greg on May 6, 2009 ·
A lot of students get financial help, at any ivy league school if parents joint income is below 60k tuition is free!