One of the major complaints of the Occupy Wall Street crowd, many of whom have taken on significant student debt, is that the cost of college is too darn high. And they're right, but not because of greedy corporate fat cats. No, the real guilty party here is federal politicians, who for decades have been fueling high profits — and prices — at both for-profit and nonprofit schools.
Wait. Big profits at nonprofit colleges? Yes, money has been piling up even at schools you thought had no interest in profit. And Washington, D.C., is the biggest hand feeding the beast.
Thanks to recent congressional hearings and battling over new regulations for for-profit schools, most people — including many college-aged, profit-disdaining Wall Street squatters — are probably at least vaguely aware that for-profit colleges are making good money.
But not just openly profit-seeking schools are making big bucks. If we define profit simply as revenue derived from providing a service exceeding costs, putatively nonprofit colleges actually have much higher margins than for-profit schools.
How do we know that? It's tough, because nonprofit schools typically report all their profits as expenses. Basically, they take excess revenues coming from undergraduate education and distribute them throughout the college in subsidies for research, graduate education, low-demand majors, low faculty teaching loads, excess compensation or featherbedding. In other words, rather than rewarding investors, colleges pay themselves.
Given this surplus-into-costs alchemy, there are just a few ways to get at schools' real costs. One is the buildup method, in which you calculate all the inputs required to educate undergrads, from market-rate professors' salaries to photocopying costs. The second is to get the best internal accounting of actual college expenditures you can, which a few states furnish, and estimate costs from that.
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More: http://www.cato.org/publications/commentary/dc-drove-student-debt
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