GAO Report: Colleges and Universities Increasingly Rely on Tuition and Fees

Public and private nonprofit higher education institutions are increasingly relying on tuition and fees as other sources of revenue like state funding and endowment income shrink, according to a report released yesterday by the Government Accountability Office (GAO). 

The report, Financial Trends in Public and Private Nonprofit Institutions, details higher education revenue trends, expenditure trends, student graduation rates, disclosure of information to students on cost of attendance, graduation rates, and future employment.

Revenues

Net tuition and fees -- revenues received after subtracting institutional aid provided to students -- climbed from 16% of total revenue at public schools in 1999 to 22% of total revenue in 2009. At private nonprofit schools, total revenue from net tuition and fees grew from 29% in 1999 to 40% in 2009. 

The increased reliance on tuition revenue is partly a result of significant decreases in state and local appropriations and other revenue sources (like endowment income), according to four schools GAO interviewed for the report.

Analysis of U.S. Department of Education (ED) data shows nearly all types of public and private nonprofit schools saw decreases in state and local appropriations ranging from 6% to 65%, as well as decreases in other revenues, ranging from 13% to 75%. In response to these declines, schools that GAO visited pursued additional revenue from out-of-state and, in some cases, international students, government funded research, and fund-raising.

Expenditures

Instructional spending consistently made up the largest share of total expenditures at public and private nonprofit schools, about 30% in fiscal years 1999 through 2009, but spending varied across school types when accounting for student enrollment. Faculty compensation and benefits comprised the largest portion of instructional spending -- about 70 percent -- and increased for all school types between 1999 and 2009. The overall number of faculty also rose with a shift toward hiring more part-time and nontenured faculty. Spending on most noninstructional activities also increased, particularly for research and student services. 

Schools GAO interviewed for the report have adopted strategies to contain costs in response to revenue constraints, including centralizing administrative functions, cutting personnel costs, delaying construction projects, and eliminating certain class offerings.

Graduation Rates

According to GAO analysis of recent ED data, about 50% of first-time undergraduate students at public and private nonprofit schools graduated within six years. 

However, graduation rates varied with student characteristics such as gender, race, and income. For example, financially independent students graduated at lower rates than financially dependent students. ED's annual graduation measure provides a limited picture of student outcomes because it does not account for many nontraditional students, such as those who begin on a part-time basis and some transfers. Thus, graduation rates vary considerably depending on a school's student body and mission.

Disclosures

Schools examined by GAO disclosed required information on cost of attendance, graduation rates, and future employment primarily through websites and, in some cases, in printed materials. Nationally, less than 1% of ED's program reviews and independent audits found violations of information disclosure requirements at public and private nonprofit schools.