One of my personal enduring mysteries was why do the top 100 private colleges charge about the same amount of money for tuition.
Given their wide variance in size, location, and endowments, you would expect to see a wide variance in price.
Except you don’t. The list price for a college education is about the same.
And then I spoke to someone who is deep in the bowels of Stanford’s budget and figured out how exactly Stanford is screwing the middle class.
Let’s begin with the following startling observation. Stanford has two sources of revenue. The first is a draw on their endowment. The second is their ability to issue bonds to borrow to build (check out http://bondholder-information.stanford.edu/home.html) Tuition, is a drop in the proverbial budget, a rounding error.
Just to make it real, the draw on endowment is about 5% a year so
21.4 billion * 5% = 1.07 billion
Student tuition = 14k * 3 quarters * 7k = 294 million
Ah you say, look! it’s 30% of the budget… except. about 4679 get some kind of tuition reduction, so let’s cut that number in half so it’s about 150 million dollars or about 15% … A drop in the proverbial bucket in a billion dollar budget.
Let me think about this for a moment. Stanford benefits from tax exemptions from gifts and simultaneously benefits from tax benefits while borrowing money while demanding money it doesn’t need from parents after tax income.
Let me repeat, the tuition that basically destroys a college graduate’s ability to buy a house or devastates a parents retirement is a rounding error in Stanford’s budget and comes from your taxable income.
Is this about Stanford? Certainly not, it’s about Harvard and Yale and Brown and by implication every institution of higher learning that is charging more money because they can.
Why does your college education destroy your life and your parents retirement? Because we’re stupid enough to pay for it.