Analyses/Reports

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Delta Cost Project Data

The Delta Cost Project makes data available in a number of different formats. The database that AIR uses to analyze trends and to produce reports and briefs can be accessed from the National Center for Education Statistics at http://nces.ed.gov/ipeds/deltacostproject/.

In addition, AIR, along with Xcalibur, provides an interactive web-based data system that gives higher education stakeholders easy access to information on finance, performance, and enrollments for individual institutions, groups of institutions, or the nation. This can be accessed at http://www.tcs-online.org/Home.aspx.

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Frequently Asked Questions

What is the source for the data?

The Delta Cost Project (DCP) has built a database that captures nearly 20 years of institutional finance data from the U.S. Department of Education’s Integrated Postsecondary Education Data System (IPEDS).  Colleges and universities that participate in the federal student aid programs are required to annually submit data on institutional characteristics, human resources, enrollment, degree and certificate completions, graduation rates, and finances to IPEDS.  For its analyses, the Delta Cost Project uses data from the enrollment, completions, and finance databases.

How did the Delta Cost Project analyze the data?

Using IPEDS data from 2002, 2005, and 2006, DCP created a set of 1,944 institutions that provided complete data for all three years.  The set includes:

  • 386 public four-year institutions
  • 715 public two-year institutions
  • 843 private four-year institutions

These institutions collectively represent more than three-quarters of the total enrollment in American higher education.

After checking for technical errors and data discrepancies, DCP analysts merged the enrollment, completions, and finance data to create the metrics presented in the report.

Why does the report break the analysis into two periods (2002-2005 and 2005-2006)?

The report focuses on the data over a five-year period and for the most recent year to gauge whether there are any single-year departures from recent trends.  The 2002-2006 period was chosen because the data are most consistent over this time span, although longer term trends (i.e. from 1995) are also reported to provide a broader context.

Why is 2006 the most recent year reported?

The U.S. Department of Education performs a multi-stage review of all data submitted to IPEDS to check for data entry errors and discrepancies.  As a result, there is a lag of at least one year between data submission and public release.

Why aren’t for-profit institutions included in the analyses of revenue and spending?

DCP decided not to include finance and completions data for for-profit institutions in the report due to unresolved discrepancies in the finance data for this sector, and because of the low number of institutions reporting data for some years.  Because the for-profit sector is becoming a larger part of the higher education market, DCP hopes to resolve the data issues and include for-profit institutions in future analyses.

Is it possible to separate spending on undergraduate and graduate education?

No. Institutional accounting and reporting systems are typically not set up to make this separation.  All metrics are presented in aggregate averages, which means that cross-subsidies from undergraduate to graduate education or from low-cost to high-cost disciplines are not shown.  It is possible, though, to compare spending trends across institutions that have a similar split between undergraduate and graduate enrollments and degree completions.  DCP hopes to focus more on issues of trends in cross-subsidies in subsequent research, working with samples of states and institutions.

Why does the report only cover operating expenditures?  Don’t institutions spend a lot of money on capital outlay (building and renovating facilities)?

Colleges and universities do spend a significant amount on capital, but because of inconsistencies in how capital spending is accounted for across different types of institutions, it is not possible to do a reliable analysis that includes both capital and operating expenses.  Including capital spending, even with consistent data, would not significantly alter the patterns identified in the report.

Why does the inflation adjustment use the Consumer Price Index-Urban Consumers (CPI-U) rather than the Higher Education Price Index (HEPI) or another index that better reflects spending patterns in higher education?

CPI-U is a readily accepted measure of inflation, and sidesteps the criticism that higher education institutions use self-referential indices (like HEPI) to justify spending increases.  Since CPI-U and HEPI actually track one another very closely, inflation adjustments using CPI-U are quite close to those using HEPI.  The DCP database gives users the option to use HEPI for their own analyses.

Is it possible to look at data for states?  Institutions and systems?

State-level data on key metrics are available on the DCP website, as are data for individual institutions and university systems. DCP is currently developing a web-based tool that will permit institution-level comparisons and analyses, which is scheduled for release in 2009.  Please contact DCP directly for more information on data availability.

What are the major sources of revenue for higher education?

Colleges and universities draw their income from four primary sources:

  1. Government
    • State and local appropriations
    • State and local grants and contracts
    • Federal appropriations, grants, and contracts
  2. Students
    • Tuition
  3. Private and Institutional Sources (PIE)
    • Private gifts
    • Investment earnings
    • Endowment earnings
  4. Sales and Services
    • Auxiliary enterprises (e.g. residence halls, food services, student health services, intercollegiate athletics)
    • Hospitals, independent operations, and other sources

Where do colleges and universities spend their money?

College and university spending can be organized into five major categories:

  1. Education and related services
    • Instruction
    • Student services
    • Share of administration, academic support, and operations and maintenance related to this area
  2. Sponsored research and related services
    • Research activities
    • Share of administration, academic support, and operations and maintenance related to this area
  3. Public service and related activity
    • Public service activities
    • Share of administration, academic support, and operations and maintenance related to this area
  4. Auxiliary enterprises and hospitals
  5. Scholarships and fellowships
    IMPORTANT NOTE: Data presented for this category provide an incomplete picture of the full cost of institutional aid to students because of accounting standards related to this area. DCP recommends using data on tuition discounts as a measure of changes in spending on institutional aid, even though they are not considered expenditures under accounting standards.

What does the report tell us about college revenues, spending, and results?

Trends in College Spending provides a good deal of new information about where higher education’s money comes from, where it goes, and what it buys.  While the numbers tell slightly different stories for different types of institutions, they come together around some basic conclusions:

  • More students are attending the institutions that have the least to invest in their success.  The richest institutions are getting richer, and the rest are getting squeezed.
  • Revenue drives institutional activity. Outside of revenue from tuition increases, the new money in higher education is restricted for special functions like research and public service, rather than for activities like instruction.
  • At most institutions, students are paying more of the total cost of their education, and less of that money is going into the classroom. (The exception is private research institutions, where additional money for education is coming from other sources.)
  • Student tuition increases are only partially making up for lower state funding at public institutions and are fueling increased spending at private institutions.
  • The relationship between how much institutions spend and how many certificates and degrees they produce has changed little in recent years, though there is evidence of lower cost per certificate/degree for several types of institutions. Without measures of outcomes or quality, though, it is not possible to conclude that these changes represent evidence of increased productivity.

What are the core metrics of college revenues, spending, and results?  How are they calculated?  What do they tell us?   

  1. Operating Revenues per Full-Time Equivalent (FTE) Student (by source)

    How it's calculated:
    Divide total operating revenues [broken down into: a) net student tuition; b) state and local appropriations; c) private gifts, investment returns, and endowment income; d) federal appropriations and federal, state, and local grants and contracts; and e) auxiliary enterprises, hospitals, independent operations, and other sources] by the number of full-time equivalent students enrolled for a particular year.  For trend analyses, use the Consumer Price Index (Urban Consumers) to adjust for inflation.

    What it tells us:
    This metric provides a snapshot of where an institution or system’s money is coming from, and how much of that money is available for the core educational program.  For example, revenues from tuition and appropriations are generally available for core educational activities, while revenues from other sources are largely (if not entirely) restricted to other activities.

  2. Education and Related Spending per Full-Time Equivalent (FTE) Student

    How it's calculated:
    Divide spending on instruction, student services, and the educational share of academic and institutional support (including administration as well as computing services and libraries) by the number of full-time equivalent students enrolled for a particular year.  For trend analyses, use the Consumer Price Index (Urban Consumers) to adjust for inflation.

    What it tells us:
    This metric provides a gauge of how much an institution is spending on its core educational mission. This includes the cost of departmental research but excludes contracted research, public service, and auxiliary enterprises. This indicator can be tracked over time, compared with similar institutions and systems, and compared with per student spending in other areas.

  3. Student and Subsidy Share of Education and Related Spending

    Student Share
    How it's calculated:
    Divide net tuition revenue (total tuition revenue minus tuition revenue recycled as student financial aid) by institutional spending on education and related services for a particular year.

    What it tells us:
    This metric tracks how much of the institution’s core academic costs are being borne by students through tuition.  It is an extremely useful metric for guiding policy conversations about who pays—and how much they should pay—for educating students.

    Subsidy Share
    How it's calculated:
    Subtract net tuition revenue from institutional spending on education and related services to get the subsidy amount, and then divide the subsidy by education and related spending.

    What it tells us:
    This metric tracks how much of the institution’s core academic costs are being borne by the institutions through public support, private giving, and investments.  It is the complement of Student Share of Education and Related Spending (i.e. adding the two together equals 100 percent), and is useful for guiding policy conversations about who pays—and how much they should pay—for educating students.

  4. Education and Related Spending per Student Completion

    How it's calculated:
    Divide institutional spending on education and related services by the number of student completions (certificates and degrees) for a particular year.  For trend analyses, use the Consumer Price Index (Urban Consumers) to adjust for inflation.

    What it tells us:
    This metric gauges output (certificates and degrees) in relation to input (spending).  This indicator should be used with caution, for two reasons:

    • Completion data do not account for successful transfers to four-year institutions and completion of non-credit workforce training programs.  This particularly impacts community colleges.
    • There are currently no comparative measures of student learning outcomes available, which means that this indicator cannot account for the quality of the certificates and degrees awarded.
  5. Tuition-Spending Comparison

    How its calculated:

    1. Apply the growth rate for education and general spending per FTE over a period of time (e.g. 2002-2006) to the in-state average for tuition and fees (“sticker price”) for the base year (e.g. 2002) to calculate what tuition would have been in the most recent year had it grown at the same rate as spending.
    2. Calculate the difference between the actual base year sticker price and the estimated sticker price for the most recent year, and divide that by the actual difference between the sticker price in the base year and the most recent year.

    What it tells us:
    This metric shows the proportion of tuition increases that are attributable to spending increases (and, alternatively, revenue- or cost-shifting).   For instance, a result of 0.25 indicates that 25 percent of the increase in sticker price tuition between 2002 and 2006 can be attributed to increased spending, and 75 percent from cost-shifting to make up for revenues lost from elsewhere.  In some instances, where education and general spending per FTE student is declining, all of the increase in sticker price tuition is attributable to cost shifting rather than spending increases.  This occurred between 2002 and 2006 at public master’s institutions and community colleges.

  6. Enrollment-Spending Comparison

    How it's calculated:
    Add the total enrollment for each type of institution within a state or system and compare to the average education and related spending per student for that institutional type.

    What it tells us:
    This metric provides a gauge of where money is relative to where students are within a state or university system.  It is not meant to be used as a tool for judging whether a particular distribution of money and students is "good" or "bad," but instead to stimulate a policy conversation about whether a particular distribution makes sense in light of a state or system's goals for student access and completion.   

Why these metrics?  How are they useful to policymakers and higher education leaders?

The metrics used by DCP offer two distinct advantages in policy conversations about college spending and results.  First, the metrics expand the focus from revenues alone to revenues, spending, and results, which provides a more comprehensive view of institutional performance.  Second, the metrics draw on comparable, annually reported national data, which permits trend analyses and comparisons across states, university systems, and institutions.  It is important to note, though, that these metrics are not intended to serve as a substitute for the more in-depth analyses of costs performed by many institutions and university systems.

Using these metrics, state policymakers, governing boards, and campus and system leaders can address critical issues related to money and priorities.  For example:

  • Looking at changes in sources of revenue helps to answer questions about institutional activities and priorities.  How much of the money coming into institutions can be used for expanding and improving the educational program, and how much is restricted for other activities?  How does that affect priorities for seeking new revenues? 
  • Analyzing patterns in education and related spending raises essential questions about priorities within the educational program.  Why are institutions spending less on instruction relative to other educational activities?  Is that a bad thing?
  • Examining the student share of educational costs sets up a discussion about who pays and for what.  How much of the full cost of educating students should be borne by students?  What are student dollars paying for?

How is this report different from The Growing Imbalance, released by the Delta Cost Project in 2008?

Trends in College Spending builds on the analysis presented in The Growing Imbalance, adding several elements:

  • Updated trend analyses through 2006, making Trends the most up-to-date and comprehensive analysis of higher education spending in the nation.
  • Presentation of trends for education and related (E&R) spending as a share of total spending, as well as the share of E&R spending represented by instruction, student services, academic support, administration, and maintenance.
  • Measures that show the relationship between tuition and spending increases.
  • Core metrics for gauging college spending and results.
  • State-level analyses of core metrics.
  • Essential questions for state, system, and institutional leaders to consider in reviewing the trend data.

The metrics presented in Trends have been refined from those presented in The Growing Imbalance, to reflect suggestions from researchers and policy experts.  DCP no longer attempts to distinguish between restricted and unrestricted revenues, but instead presents revenues by major source.  Additionally, DCP has abandoned efforts to distinguish between spending on institutional scholarships and tuition discounts because of data limitations in IPEDS.  Instead, DCP focuses on the difference between gross and net tuition revenues as a proxy for tuition discounting.

Finally, DCP has refined the measurement of E&R spending to better reflect the cost of student services, and to correct for changes in accounting rules related to operations and maintenance costs.