Tuition is not the sole, nor even the primary, source of revenue for many universities. I cannot speak for all, but at the University of Texas, tuition comprises approximately 25% of the university’s budget. State appropriations covered about 14%. The remaining, majority of the funds, comes from things like distributions from the University’s endowments, donations, grants, etc. Obviously this is just one University and every situation is unique. Texas is certainly one of the largest and most well funded of the public universities. They have for decades now dealt with reductions in state appropriations (as a %) and increases in tuition. It gets a lot of attention and the University spends considerable effort attempting to justify tuition increases. I think a few things are clearly worth discussing on this subject.
What percentage of budgets are administrative costs? (Texas is about 5%)
How are capital projects funded? (Texas does not allocate any tuition toward capital projects)
How are athletics funded? (Texas athletics are self sustaining and actually make distributions to the academic side of the University)
How are professors allocating their time between teaching and research? (There is a big controversy at Texas now over whether Texas should focus more on teaching and less on research)
How efficient are Universities at keeping kids in school and on track to complete a degree in 4 years? (Texas needs quite a bit of improvement in this area)
The portion of university funding from tuition is irrelevant, though. Tuition is the charge for attending the school and can be boiled down to “the price you pay in exchange for instructional hours.” Universities spend money on lots of things other than instructional hours and also receive revenues to pay for lots of things other than instructional hours. But the trillion dollar student loan bubble and the plague of student indebtedness is 100% associated with tuition costs increasing. It’s not particularly notable if the tuition is 10% of operating budget or 85% of operating budget, for the student it is northward of 90% of what they pay directly to the school if they live off-campus (with fees making up the rest.)
Since Federal lending practices have subsidized the purchaser’s ability to pay, it has thus subsidized the increase in the purchase price.
I think it is really different discussions. You said earlier that the schools were using tuition dollars to pay for all of these non-teaching things: buildings, equipment, etc. However, tuition doesn’t even cover the cost to teach the students. In fact, it doesn’t even really come close at a lot of schools. A big part of the reason (at least for public schools) that tuition is rising is the declining state support. As states are paying for less, the dollars have to come from somewhere. However, it isn’t right to say that tuition is subsidizing the other things that a school does.
Now from the student borrower’s perspective, you are right that it doesn’t matter if tuition is covering the cost of their learning; it only matters the amount they have to borrow and their ability to pay it back.
Well you mention one public university, which is considered one of the “public Ivies” and has a huge endowment and a large number of very wealthy and successful alumni. Harvard or Yale could give away tuition for free because of massive endowments and non-tuition revenue streams–and in fact for promising students that those prestigious schools want as part of their campus who come from poor backgrounds they often do basically give the education away for free.
For every University of Texas or Harvard there are probably 20 schools that follow a very different model. Particularly many of the for-profit schools do not engage in research and are solely charging for tuition. Most small liberal arts colleges (which have some of the highest tuition bills in the country) also are basically exclusively using tuition to cover teaching and it’s all but certain they would not charge so much if not for subsidized Federal loans. Some professors at small liberal arts colleges make over $100,000/yr for teaching only duties and that’s probably not a rate of compensation that would be seen in a truly unsubsidized free market.
I’m also not really sure where you get the idea even most big public schools don’t generate enough in tuition to cover “teaching expenses.” The expenses of actually providing the education are relatively meager.