Are you curious about how colleges make money? Then you’ve come to the right place.
Colleges are becoming expensive every year. And considering how expensive they have become, it is not surprising that you are curious if the tuition fees you pay is the only way they earn money and if that is the reason why the tuition fees seem to be going up rapidly.
Well, tuition fees paid by the students is just one of the ways colleges make money. There are several other ways in which they generate revenue. And an important factor that affects a college’s revenue generation is its enrollment rate. If the enrollment rate falls, generating revenue can be difficult.
Now, if you want to know the various ways in which colleges make money, read on. In this article, we will look at some of the sources of income for colleges.
Ways Colleges Make Money
Colleges earn money in a lot of ways. While many assume that tuition fees is the only way colleges earn money, that is not true. Following is a list of the multiple sources of income for colleges:
As mentioned earlier, a huge chunk of colleges’ revenue comes from the tuition fees paid by students. Private colleges charge higher amount of tuition fees than public colleges because public colleges receive government funding too. As most of the income of colleges comes from tuition fees, they have begun to charge a lot. So a lot of students end up t making student loans and are pushed into the long and endless cycle of repaying debt.
As Canada has now emerged as one of the most popular countries to pursue higher education among international students, colleges in Canada that are DLIs, also depend on international students to generate revenue. International students pay a lot more than domestic students for the same program.
Different kinds of funding are available to colleges. We know that tuition fees is a major income generator for colleges. But only 29.4 percent of total postsecondary education revenue was from students’ fees. According to Statistics Canada, around 45.8 percent of postsecondary institutions’ funding in 2018-19 came from government funding which makes it the largest source of revenue for colleges.
Endowments are another source of income for colleges. A fund made up of donations that support the activities of colleges, and nonprofit organizations is known as an endowment. The revenue generated from endowments can be utilized to fund research projects or jumboize aid packages meant for students who are eligible. Both private and public colleges receive endowments.
Endowments are usually used to fund academic projects and scholarships. Colleges that receive huge endowments can offer better scholarships compared to colleges with low endowments.
Why do you think colleges, the providers of education, give so much importance to sports? Why are college tournaments a big thing? Well, the simple answer is sports bring in a lot of money for colleges. Yes, you heard it right!
When a college team wins or when a college athlete does something marvellous, it brings more exposure to the college. It catches the attention of students, investors, etc., which in turn results in more applications and enrollments and investments. Amazing, isn’t it?
Now, this brings us to a phenomenon known as the Flutie Effect. You might be thinking, “what does flute have to do with the revenue generation by colleges?” Well, you’re right. It has nothing to do with flutes or any other musical instruments, for that matter. Let me tell you a story.
The year was 1984. The University of Miami’s renowned football team was in a head-to-head match against the underdog, Boston College. The stakes were high, and students from both institutions were cheering for their respective teams. Everyone thought that Boston College would be crushed. But the quarterback Doug Flutie, who led the team, had a Hail Mary pass in the fourth quarter that changed the course of the game. This was a game changer for the college, and it saw a 30 percent increase in the number of applications it received. From that time onwards, the phenomenon of a rise in the number of applications received by a college after experiencing a huge success in sports came to be known as the Flutie Effect.
Why are college fees so high?
College fees are increasing at a rapid rate, and this is causing a lot of stress among students. A lot of students have to turn to student loans to be able to afford a college education. Now, there might be three reasons why a college increases its tuition fees. The high tuition fees might be a result of demand and supply. Colleges might also increase their fees to keep up with the inflation. When a college’s enrollment rate falls, the college loses out on a lot of money. The loss of even one student results in the loss of a huge amount of money. So when the enrollment rate falls, colleges might increase the tuition fees to make up for their loss.
What are some of the major ways colleges make money?
Colleges don’t just rely on one source of income. A lot of people have a misconception that colleges rely only on tuition fees paid by the students to generate revenue. But after reading the article, you also know now that that is not the case. Apart from tuition fees, colleges also make money through endowments, sports, funding, etc. An endowment is a fund made up of donations. It is used to promote the vision of the institution. Endowments are used to fund research projects or expand the financial aid kids that are given to eligible students. Government funding makes up a huge chunk of the income of colleges. Sports also is a means of income for colleges. When a college wins in a sports tournament, it catches the attention of the students as well as investors. It leads to an increase in the enrollment rate, and more investors are willing to invest in an institution with promising athletes.