Episode 6

How Much Do Intercollegiate Athletics Cost Students?

Intercollegiate athletics are entertaining and build loyalty but how much does all this fun cost?  We’ll answer this question on today’s episode.  I am Larry Bernstein and welcome to Charging U.

Where would this college be without football?  Have we got a stadium?  Have we got a college?  Well, we can’t support both.  Tomorrow, we start tearing down the college.”

“But, Professor, where will the students sleep?”

“Where they always sleep, in the classroom.”

That was Grouch Marx in the movie Horse Feathers

The Saturday morning of a home football game is a time of great anticipation on campus.  It is one of the few times during the weekend that college students get up before noon and for those wanting to be on College GameDay, probably the only time they are out and about by 9 AM (6 AM Pacific time) on a Saturday. The college town is a hive of activity with families dressed in school colors arriving on campus.  Alumni are meeting old friends to relive college exploits and to catch up on their personal lives. There is plenty of good cheer at the tailgate parties.  And everyone knows that wonderful Our U. is going to defeat evil Rival U.  

The birth of sports on the American college campus was natural given the residential model on which higher education was based and the competitive nature of those who lived there.  It was inevitable that what began as intramural games evolved into intercollegiate matches between rivals.  Those who organized the events also made the rules.  At the beginning, there was no supervising authority.  The first intercollegiate event was a regatta in 1852 between the crews of Yale and Harvard.  The first football game took place in 1868 between what is now Rutgers and Princeton.

With competitiveness intensifying, these clashes became particularly brutal with over a dozen football-related deaths and countless injuries in 1904.  This led President Theodore Roosevelt to push for an organization to reform playing rules for football in order to make it safer and to adopt an agreement on who was eligible to play.  The organization which resulted was the Intercollegiate Athletic Association of the United States.  In 1910, it was renamed the National Collegiate Athletic Association or NCAA.

Subsequently, the NCAA began to get involved in establishing eligibility and scholarship requirements, as schools were paying non-students to compete.  It established national collegiate tournaments in various sports.  In 1973, the NCAA divided college sports into three divisions based on competitiveness and provision of scholarships.  Division I contains the most competitive programs and offers athletic scholarships.  Colleges and universities which want to offer athletic scholarships but are less competitive are part of Division II.  Division III schools compete in sports but do not offer athletic scholarships.  Today, the NCAA includes 1098 member colleges and universities, with just under 20,000 teams vying for 90 championships in 24 sports across the three divisions. 

So, how much does all this fun cost?  Do sports programs increase the cost of college?  It depends… on the size of the school and the success of its football team. Successful FBS (Football Bowl Subdivision, the most competitive level of college football in Division I) Successful FBS teams at schools like University of Alabama, Pennsylvania State University, and University of Oregon spend on the order of $30 million-$60 million each year on their football teams but they generate enough revenue for a $45-$50 million profit.  Penn State generates $40 million in ticket sales, $30 million in donations, and more than $50 million from television, conference, and NCAA revenue. This is enough to pay for the entire men’s and women’s sports program at Penn State, without a penny from student fees or institutional funds. There are only about 20 of these football power houses.  The combined sports programs of all of the other more than one thousand colleges lose money and need to be subsidized.

Many successful football programs, especially successful big-time FBS football programs, make money and support a part of the remaining athletic budget. A small number of men's basketball programs also turn a profit. All other men's sports and all women's sports lose money. An FBS football program which generates a profit offsets some of the losses of other sports and reduces the amount of money from student fees and other institutional support needed to pay for the sports programs. Also, large football programs are usually at large public flagship universities with enrollments of 20,000 to 40,000 students or more, so the cost of subsidizing sports is spread out over tens of thousands of students, thereby costing each student less.

We will examine public universities in Virginia because the commonwealth has provided the public with very good, transparent data on spending.  The trend seen in Virginia is not unique to Virginia, though; it is ubiquitous.

For example, the University of Virginia and Virginia Tech are two large public universities which compete in the Division I Atlantic Coast Conference against teams from schools such as University of North Carolina, Chapel Hill, Duke University, and University of Miami.  The football programs at Virginia and Virginia Tech turn a small profit, but not enough to pay for the entire athletic budget. The athletic budgets of the schools are subsidized by money from student fees but, because there are 16,000 students at University of Virginia and 28,000 students at Virginia Tech to spread the cost, $720 of the student fees at the University of Virginia and $384 at Virginia Tech are directed each year to intercollegiate athletics.

Compare that to a school like the College of William and Mary, which is in Division I FCS (Football Championship Subdivision, the second level of competitiveness)  and participates in the Coastal Athletic Association along with University of Richmond, University of Delaware, and Monmouth University.  William and Mary receives less than $1 million in ticket sales and slightly more than $1 million from NCAA television and conference revenues.  Its sports programs have a cost of $30 million, of which nearly $17 million comes from student fees and school funds.  William and Mary students each pay $2177 per year in student fees just to subsidize intercollegiate athletics. The school contributes another $250 per FTE student as well. That comes to almost $10,000 per student over four years just for small-time intercollegiate sports with 487 athletes. The average debt of a William and Mary graduate is $35,500, so just over a quarter of that is due to intercollegiate athletics.

Longwood University is another public institution in Farmville, Virginia. It is a Division I school with no football program. It is part of the Big South Conference.  Its teams, the Lancers, compete against the likes of Charleston Southern University and High Point University.  There are 265 athletes in the school of 3500 undergraduates. The annual student fee for intercollegiate athletics, exclusive of institutional support, is $3197. The average amount of loans taken out by first year students at Longwood University is $7262, 44 percent of which is directly attributable to the fee for intercollegiate athletics.  And that's for Longwood University sports. Look, no one enjoys watching college basketball more than I do but I don’t think millions of students should each be forced to pay thousands of dollars to entertain me.  I said in the first episode that I would try to remain objective unless there were some egregious spending of money.  Well, here it is.  This is criminal.

With all due respect to Longwood athletes who work hard and compete and to Allen Iverson who was a warrior who gave his all every minute he was on the court, We’re talking Longwood.  We're not talking about Gonzaga basketball or Alabama football. We're talking Longwood, and we're talking about students being charged well over $12,000 over 4 years for Longwood intercollegiate sports. Call 911 and have these people arrested!

Division III athletic costs are harder to obtain because many institutions are private and are not required to disclose finances in the same way as public institutions. Even though there are no athletic scholarships awarded by Division III schools, intercollegiate athletic expenses for the most part range from $500 to $1500 per student per year.  That does not include the cost of financial aid to athletes.  In these schools, 10 to 25% of the student body participates in intercollegiate athletics. The athletic expenses may be even significantly higher in small, well-endowed colleges where sports are an important part of the schools’ culture and are subsidized by the endowment. For example, at Amherst College, 31% of students participate in intercollegiate athletics.  The athletic expenses total $7.5 million per year, or a little more than $4000 per undergraduate. 

Recently, we have seen a realignment of college athletic programs with a concentration of successful football schools in a few power conferences which receive the most television revenue.  It has created an athletic hierarchy similar to the academic sorting we have previously discussed.  

What happens when the board of a college, that is not part of the college athletics elite, attempts to upgrade its status and fails?  This is exactly what Rutgers University did in 2014 when it joined The Big 10.  It committed to building $150 million of new sports facilities and improving the competitiveness of its athletic teams.  The result has been a financial disaster.  

First, the university had to pay $11.5 million, or $230 per student across all campuses, just to leave its previous conference.  The promise of a $50 million per year payout from the Big 10 was an enticement which made this seem like a wise investment.  Unfortunately, that has not panned out.  The athletic program has had to increase dramatically its spending to upgrade all aspects, including coaching and facilities.  In addition to tens of millions of dollars of annual support in the way of state aid, university subsidies, and student fees, Rutgers’ athletic program has borrowed over $250 million, including $48 million from the Big 10 and $84 million from the university.  Just the debt service, or annual repayment of interest and principal for the sports program’s loans, is estimated to average over $25 million per year for at least the next seven years.  That comes to $500 per student per year and does not include the regular expenses involved with running the intercollegiate sports program or the construction of additional facilities.  So even if the move to the Big 10 eventually pays dividends, and it is not certain that it will in the next decade, present students and those in the near future will be spending thousands of dollars for a scheme that may never come to full fruition and certainly won’t during their time at the university.

How and how much colleges spend on intercollegiate athletics as well as their sources of revenue can be found at the Office of Postsecondary Education website under Equity In Athletics: https://ope.ed.gov/athletics.  (Don’t worry, this is listed in the episode notes and transcript.) You can also find information at the Knight-Newhouse College Athletics Database website which is: https://knightnewhousedata.org, also listed in the episode notes and transcript.  

No discussion about college sports is complete without mentioning Title IX.  A little background is needed first.  In 1965, Congress passed the Higher Education Act, which set rules for institutions that administer federal aid programs. There were eight areas, or titles, covered. In 1972, Congress amended the Higher Education Act and added a ninth area, hence the term Title IX.  The amendment said: 

"No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.”

There is no mention of sports and there is no indication that its intention was to impact college sports.

The NCAA has interpreted this law as saying that there cannot be an economic justification for gender inequalities, so while men's football and sometimes basketball programs are the economic engines that drive the train, they cannot get preferential treatment with respect to programs that are less lucrative.

Compliance with Title IX is measured in three ways:

1. Participation should be proportional to student body gender ratios.

2. Scholarships should be proportional to participation.

3. General support, equipment, and facilities should be equal for men and women.

In the 1971–1972, the academic year before Title IX was passed, there were 170,000 male college athletes and 30,000 female college athletes.  In 2020, there were 281,000 male athletes and 223,000 female athletes. 111,000 male athletes and 193,000 female athletes have been added. It has cost money.

I am not rendering a judgment as to whether Title IX is good or bad. Airbags have made cars much safer but they have added to the cost of the car. Adding women's sports, none of which turns a profit, means that somehow the institution has to come up with millions of dollars to pay for them.

We have already talked about how in most large Division I schools, football is king. Successful programs generate a lot of revenue, a surplus, which subsidizes other men's and women's sports.

In order to run a Division I FBS team, remember that’s Football Bowl Subdivision, the most competitive tier, by NCAA rules, a college must field 76 to 85 football scholarships. To be compliant with Title IX, a school must have 76 to 85 scholarships for women's sports. If a school didn't have those before Title IX was initiated in 1972, then it had to add those scholarships, and it has cost a lot of money to do so. In addition, the university must field at least 16 varsity teams, of which at least six are men's or coed teams, and at least eight are all-female teams. They must offer a minimum of a total of 200 athletic scholarships, or at least $4 million in athletic scholarships.

Immediately after 1972, women’s sports were added and very few men's sports were dropped, leading to an increase in the total cost of athletics. Since 1994 there has been the equivalent of an arms race in college football.  Competitive programs have been spending more and more. By law, they have to increase the same amount given to women's sports.  But if they decrease spending on other men’s  sports, they don’t have to increase spending on women’s sports as much.  For instance, if a program increases football spending by $2 million, it can either increase spending on women sports by $2 million for a total increase of $4 million, or it can cut $1 million from the other men's programs and spend only $1 million more on women's programs, for a total increase of $2 million. Over the last few decades, the latter has been an increasingly more common route, so that there are fewer men's sports.  But the bottom line is that spending is up and may go up further.  In 2018, the University of Idaho’s Athletic Director estimated that the cost to bring them into perfect Title IX compliance by upgrading fields and women’s programs was between $800,000 and $2.5 million, and that was in 2018, 46 years after the enactment of the law.  

So Title IX compliance in sports has definitely added cost to institutions. Again, it may have been the right thing to do but it has made intercollegiate athletics more expensive. This cost has been passed on to students in the form of higher mandatory fees. 

There are claims of other possible fringe benefits of a successful sports program. Some are hard to quantify.

One is that the sports program brings increased prestige to a university. A school with a successful FBS football team tends to get higher peer ratings on US News and World Report rankings.  It is not possible to determine how much income this generates.

A second possible benefit is that there is less perceived elitism and improved popular appeal of public universities. The schools are able to maintain public funding and encounter less opposition from those in the state who didn’t attend that specific college or any college, for that matter.

Intercollegiate athletics attracts students.  If a football program is successful, the number of applications to the school and SAT scores of those entering go up slightly for one to two years but neither a successful basketball program nor the program of any other sport has a similar effect.

A good sports program may generate improved loyalty and donations. Villanova University fortuitously started a capital campaign in October 2013. It won national basketball championships in 2016 and 2018. This, undoubtedly, helped it surpass by $159 million its capital campaign fundraising goal of $600 million. More than half of the donors were first-time donors and nearly twice as many undergraduate alumni gave compared to ten years earlier. However, at many institutions sports programs generate donations dedicated to the sports programs themselves, so the university as a whole does not necessarily see much benefit.

City College of New York.  California State University-Los Angeles.  University of Texas, Pan American.  What do all these institutions have in common?  They are among the universities which are rated highest for enabling large numbers of students to climb the economic ladder. Have you seen any of them in a College Football Bowl game or Final Four Basketball game?  No.  They do not spend large sums of money on athletic programs.  City College of New York spends $57 per student on intercollegiate sports.  Low student spending on intercollegiate sports is not the prime reason for improved social mobility but, in many cases, it is a necessary condition which must be present for it to take place.  So, let’s hear it for the students at the University of New Orleans, who, in 2022, voted by a greater than two to one margin to turn down a proposal to start a Division I football team at the school.  This would have entailed adding a new $300 per student per semester fee in addition to any institutional funds which would have been diverted to football. 

With rare exceptions spending on college athletics adds significantly to the cost of a college education, even though it is not one of the stated missions of the institutions.  It is a luxury which is imposed upon students, many of whom are struggling to be able to afford a college education and others who are either not interested in sports or are looking for an economical way to obtain a degree.

Thank you for listening to Charging U.  In this episode, we saw that spending on intercollegiate athletics can add thousands of dollars to the cost of college, especially at smaller schools without big-time football teams.  Title IX compliance has also required colleges to spend more on sports.

In the next episode, we look at the compensation of professors, their teaching loads, and whether Baumol Cost Disease really causes tuition to go up.

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Until next time, be well and be safe.