Penn subsidizes 28 percent of education

While Penn students bemoan the latest yearly round of tuition increases, they may be surprised to learn that the University actually ends up shouldering much of the cost of teaching its students.

Tuition and other fees made up 72 percent of the total cost of educating Penn's undergraduate and graduate populations last fiscal year, according to the University's financial statements.

This means that Penn covered 28 percent of the costs of education itself - around $315 million - a number that Bonnie Gibson, vice president of budget and management analysis, said has been fairly constant over the past five years.

Even the new financial aid initiative, which will eliminate student loans from all aid packages by 2009, is only expected to increase Penn's total subsidy by about 1 percent a year.

"If we charged what it really cost, it would be very difficult" for students to afford a Penn education, she explained.

Penn fills this hole each year with proceeds from its endowment and outside donations.

"It's overwhelmingly philanthropy," Gibson said.

Though some donations are made toward specific items like faculty research, which isn't included in the cost of education, the $173 million in gift revenue and $270 million in investments Penn expects to receive this fiscal year will more than cover the gap left by tuition and other fees.

And the University isn't alone. Financial-aid experts say that top-tier schools like Penn that have large endowments can afford to subsidize these costs.

"That's one of the great differences of going to an elite institution," said Ralph Bradburd, an economics professor at Williams College and a researcher at the Williams Project on the Economics of Higher Education.

This can be seen by a basic indicator: the amount of money a school spends to educate an undergraduate student.

Cornell University, which is comparable financially to Penn, spends about $97,210 per student, while Penn State, a public school spends about $53,410 per student, according to an analysis provided by Mike Rizzo, a senior economist at the American Institute for Economic Research.

The numbers change drastically, though, when looking at a school like Princeton University, which has an endowment of about $16 billion, dwarfing that of Penn, which measures around $6.6 billion. Princeton can thus afford to spend about $158,000 per undergraduate.

Penn doesn't break these numbers down on a per-student basis because of the way it divides service charges.

On the other end of the spectrum, smaller, poorer schools can only afford to spend a fraction of that money. York College, for instance, located in South-central Pennsylvania, only spends about $8,000 per student.

For a small school like York, which has about 5,400 students, "you can't spread the costs . over tends of thousands of kids," Rizzo said.

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