Episode 8

How Much Are College Students Paying for Research?

Did you know that students pay for some of the research done at universities?  How much does it cost?  We will answer this question on today’s episode.  I am Larry Bernstein and welcome to Charging U.

“… research has become central. It also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of the federal government. Today, the solitary inventor tinkering in his shop has been overshadowed by task forces of scientists in laboratories and testing fields.  In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research.  Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity.”  President Dwight D. Eisenhower in his Farewell Address in January, 1961.

In this episode we look at research costs and their impact on the price of tuition.  In the first episode, I said that some of the reasons for the high cost of college surprised me.  Research is one of those areas.  It is a topic that I didn’t even consider looking in to.  So, how did it come on the radar, so to speak?  When I was looking into how to assess how external research funding paid a part of some professors’ salaries, which is something we talked about in the previous episode, I came across a chart showing the enormous amount that universities, themselves, contribute of their own money to research.  This led me to investigate more and produce an episode entirely devoted to research.

The launching of Sputnik in October, 1957 upset Americans’ confidence in their technological superiority and their sense of security.  A response to this was to greatly increase the amount of federal funding of scientific education and research.  Over the next decade, federal appropriations increased over 600% to bring it to the point where it has become an integral part of university budgets.  In 2021, Duke University, a leading research university, received a total of $1.084 billion from all external sources to do sponsored research, of which, $776 million, or more than $44,000 per student, came just from the federal government.  That same year, it took in a total of $836 million in tuition, or just 7.7% more than it received in federal grants and 23% less than it received from all external sources of research funding.  So the university took in more money from research grants than it did from tuition.

This example introduces us to the huge financial impact of research funding on higher education. As we will see, research may be one of the most important factors in answering the question, “Why does it cost so much to attend college?” 

Research is considered one of the primary missions of a university, along with teaching and community service.  Research is defined by the National Center for Education Statistics as “activities specifically organized to produce research outcomes and commissioned by an agency either external to the institution or separately budgeted by an organizational unit within the institution.” We will refer to research which is funded as “sponsored research.”  

Colleges see research as being especially important to increasing or maintaining their reputation, which is a primary factor in their ratings.   Prestige makes it more likely to get even more external research funding and charitable donations.  Prestige makes a university more attractive to the best faculty and most highly prepared students, which empowers them to charge and collect higher tuition.  Faculty members know research is essential to their ability to gain tenure and status.  It also improves their compensation and work conditions, including reduced teaching loads.

A little bit of history first.  The colonial colleges in the United States were founded by the predominant local Christian denomination to educate their clergy, and to provide instruction in the classics and basic math and astronomy to the ruling class.  The curriculum was not deep so one professor could teach multiple subjects.  There were no costly labs needed and no oversight of accreditation so there were no significant barriers to entry to the formation of new colleges.  

A common theme we see is that the response to wars has had a tremendous influence on universities.  In this case, an earlier war on another continent led to a profound change in the function and mission of colleges and universities across the globe. This war took place in Europe in the early 1800s but its effects did not reach the United States until after our Civil War.

In 1806, Prussia had lost another war to Napoleon. King Friedrich Wilhelm III, the King of Prussia, wanted to effect changes in the educational system in order to improve the outcomes of future wars. So, in 1809, he asked Wilhelm von Humboldt to redesign the country’s educational system. Von Humboldt envisioned a system independent of political or religious influences which taught students general empirical knowledge and how to think logically. Part of that structure included the creation of a university which would do original research-The University of Berlin, known today as Humboldt University of Berlin. In exchange for the freedom to search for and discover new knowledge wherever it may lead, the faculty would be expected to disseminate that new knowledge to the university students and to society, in general. This is the basis upon which the modern research university is based.

The University of Berlin educated future notable Germans such as Karl Marx, Friedrich Engels, Max Planck, and Max Weber. It was successful in attracting Albert Einstein to its faculty. More important for our discussion is the fact that many Americans in the nineteenth century went to German universities to study for advanced degrees. They came back to United States with technical knowledge as well as with new notions of the role of the university. Not only was it to pass on existing knowledge, it was to seek and discover new knowledge.

It is interesting that von Humboldt’s model did not include housing students on campus but that was already a key facet of colonial and post colonial American college life because American universities were modeled on the British university (Oxford and Cambridge), which were residential, and the American system has remained so despite other changes to American higher education.

In 1876, Johns Hopkins, an unmarried man with no heirs who had made a fortune investing in the Baltimore and Ohio railroad, left $7 million to fund a hospital and a university in Baltimore. This was unusual for a few reasons. It was privately funded and independent of political control. It was free from religious affiliation and oversight. This allowed the board to pursue its own course. It chose the model of the German research university expanding its graduate education.  Since one professor could not be expected to have a deep enough fund of knowledge to teach several technical fields, Johns Hopkins University recruited outstanding academics in different fields while supporting their research.

This was the beginning of specialization in American higher education. While Cornell was already teaching some technical subjects (its motto was “any person can find instruction in any study”) and Rensselaer Institute (now Rensselaer Polytechnic Institute) and the United States Military Academy at West Point trained the vast majority of engineers in the country, the emergence of Johns Hopkins as a research university took specialization to a higher level.  This entailed a specialization of faculty without respect to religion or geography.  Professors were then able to move to other parts of the country to take advantage of the best opportunities available to them. This led to a hierarchical sorting based on the talent of the faculty members.  Later, it led to a hierarchical sorting of students, too.

Existing American colleges in the late 19th century, such as Harvard, Columbia, and others quickly realized that this new model of the university was the wave of the future and their administrations were able to pivot quickly to adopt the new university organization and mission.  With the faculty now concentrating on research, the universities had to bring in administrators to manage the growing organization. 

At the time, in late 19th century America, individuals were still responsible for most of the technological breakthroughs. Thomas Edison built a laboratory in Menlo Park, New Jersey. His research there led to over 1000 patents including that of the lightbulb. The inventions of Edison, Alexander Graham Bell, Nikola Tesla, and other individual inventors were mass marketed by industrial giants such as General Electric, American Telephone and Telegraph, and Westinghouse, companies which also created their own labs to improve and implement the technologies. 

Meanwhile, departments within the federal government began to establish their own research units such as the US Department of Agriculture, Bureau of Mines, and Weather Bureau.

But in the early 20th century, private foundations funded by industrial giants, including Carnegie and Rockefeller, supported the establishment of research centers across university campuses. Concurrent with this, corporations such as DuPont and RCA expanded their own research capabilities, so that an infrastructure was in place when the imperatives imposed by World War II needed to be addressed. President Franklin Roosevelt established the National Defense Research Committee to coordinate the effort of academic institutions and private industry to develop technologies to give the United States an edge on the battlefield. This included the Manhattan Project. Funds flowed to the most established universities and corporations, creating competition between institutions, and solidifying the elevated rank of the winners.

After the end of World War II, the government did not want to lose the momentum of basic science research and it established, in 1950, the National Science Foundation as an agency to oversee the federal research initiative.  This involved associating academic research departments with the federal government, private industry, and private foundations in order to develop new technologies. Its importance was quickly recognized by the federal government  after the Soviet Union launched Sputnik on October 4, 1957.  The United States responded to the Arms Race and Space Race by dramatically increasing spending on science education and basic research.  During that time, funds and effort were directed to the fields of defense, aerospace, and communications. This resulted in discoveries leading to satellite technology, computer chips, the internet, lasers, and GPS.

As the Cold War wound down, the focus of federally funded research shifted to health and life sciences, so that the $27 billion spent annually by the Department of Health and Human Services, which includes the National Institutes of Health, accounts for 55% of all government-funded university research.  This has led to sequencing the human genome, CRISPR technology, and the basic science that enabled the rapid development of COVID vaccines, among other advances.  In 2021, the Department of Defense also spent $7.3 billion on research; the National Science Foundation spent $5.4 billion; the Department of Energy spent $2.2 billion; and NASA spent $1.7 billion for research.  There are many who feel that the discoveries financed by this research are responsible for our nation’s economic, technological, and military preeminence.

The federal government pays for $49 billion of the total $89 billion of all sponsored university research, or a little over half. The sheer size of research appropriations influences who wins and who loses the competition for financial and academic success. The result is a competitive hierarchy based on resources with a disproportionate amount of funding going to more wealthy institutions and institutions with researchers who have the most prestige and students with the highest credentials.

Not only do universities benefit from the money received from the federal government to do research, but, thanks to the Bayh-Dole Act of 1980, universities and businesses are able to reap the financial benefits of patenting and commercializing inventions developed while doing federally-funded research. This provides additional financial rewards to those who have already won the research funding competition, further solidifying their hierarchical rank.  For the most part, these rewards are relatively modest.  In 2017, the median gross license revenue for the highest level research universities was $4.6M.  From that, money was spent to obtain patents and commercialize the technology. A portion went to the scientist and his or her department.  The scientists themselves can go on to form private corporations to further develop and market their discoveries.

Let's take a look closer look at how federal funding works.  The process of obtaining federal grant money is not easy.  Researchers propose a study regarding a specific topic to a government agency review panel.  It is a very competitive process with only one in four grant applications submitted to the National Science Foundation being approved.  A significant amount of time is put in to applying for the funding and those hours are frequently spent without any tangible reward.

A grant that is approved covers two aspects of the research: direct costs and indirect costs. Direct costs cover the staff’s salaries for the time it is devoting to the project, supplies, and equipment. Faculty members that secure external sources of funding may have their teaching or administrative loads reduced. The university does not have to dip into general funds to pay the salary of researchers during the time they are not teaching, so a portion of their compensation should not be attributed or charged to the students. A side effect of having the salary of faculty paid from sources other than the university is that the university can hire more faculty. This improves the student:faculty ratio without necessarily improving teaching or creating smaller class size.  Since student:faculty ratio is a component of rankings, the institution’s ranking is improved without adding much cost to the university itself.

In addition to paying for the direct costs, the government reimburses a certain percent of that amount to cover indirect costs such as facilities, utilities, housekeeping, library support, IT support, and administrative reporting.   Again, this covers the salary of some administrators and a portion of the technology infrastructure and library costs. Students should not be burdened with these costs.  The rate at which the federal government reimburses universities for these costs is negotiated individually by each institution.  It may not cover 100% of those indirect costs and the university is responsible for the difference.

We previously mentioned that the federal government pays for a little over half of academic sponsored research. Business and industry, states, and private foundations pay for about 20% of sponsored research. The remaining 25%, which does not include “capital projects, ie. construction or renovation of research facilities,” is paid for by the universities themselves.  This is up from 8% in 1964.  It may include funds to pay a new faculty member and equip a lab so she can do research before obtaining external grants.   In 2019, university support of sponsored research totaled $21 billion.  This is up from $35 million in 1953. Certainly, the number of students in universities has also gone up during that time, so we will look at the amount spent per student.  In 1953, approximately 17 and a half institutional dollars per student were spent on research.  In 2019, that number was $1800 per student.  That is a 7.3% annual rate of increase for 66 years.  The average rate of inflation over that time was less than half at 3.5%.  There have been some changes in reporting methods over time, but it is unlikely to alter the conclusion that the amount of per student institutional funding for research has grown much faster than inflation and compounded over many, many decades. 

Of course, that is an average across all institutions.  Major research institutions spend much more and regional public universities and liberal arts colleges spend much less.  Nonetheless, what began as a minor expenditure has now become a significant cost and most of that is passed on to students.

The University of North Carolina, Chapel Hill notes in its 2022-2023 Operating Budget that 19% of its sponsored research funding came from the general fund. Given that it spent over a billion dollars total on all sponsored research, that means that state appropriations and tuition and fees contributed about $200 million, or $6,787 per student, toward that expense.  Given the fact that many graduate students are supported by external research grants and don’t pay tuition, actual per-student costs are probably higher than $6,787.  Since the school reported to the National Science Foundation that, overall, it spent $293 million, or approximately $10,000 per student, of institutional funds for sponsored research, an additional $90 million came from other university sources including the endowment.  I use the University of North Carolina-Chapel Hill as an example because their budget is more transparent.  The use of general funds to pay for research is certainly not unique to that institution.

In 2022, the University of Michigan spent $553,536,000 of its own funds to sponsor research.  A portion of that came from the endowment and its medical school and medical institutions.  $271,620,000 came from the general fund, or $5300 per student was paid by tuition dollars, state appropriations, and other internal sources for sponsored research.

What about regional and small liberal arts colleges which have less of a focus on research and do not spend institutional dollars supporting faculty?  Their cost per student is lower than the cost per student at research universities.  On the other hand, they usually charge and collect less tuition revenue.  Most have small endowments and are less able to assume a portion of the operating costs, which include institutional funding for research and building facilities. Those that are public institutions also tend to receive lower state appropriations than research flagship universities.  The overall effect is to negate a portion of the savings from not spending significant amounts on research.

The National Science Foundation website can be used to look up information regarding funding sources for university research.  This will show how much money comes from the federal government, state and local governments, business and industry, foundations, and the institution itself.   Instructions on how to search for a specific institution are included in the episode notes.  The university’s endowment report or financial report found on their website may indicate how much of the endowment payout went toward research, but those reports are often nebulous as to exactly where the disbursement is going.

The cost of unsponsored research is harder to calculate but may be even higher than the cost of sponsored research.  Unsponsored research is research which has no definite source of funding.  It involves relieving a faculty member of teaching and administrative duties so the faculty member has more time to do research. We have documented earlier that teaching loads have decreased significantly but research production per faculty member has gone up minimally.  The amount of time set aside for research and its cost are difficult to quantify, especially in dollars.  The entire salary of the faculty member is still counted as an instructional expenditure because there is no other cost center to charge for his protected research time.  This method of accounting is currently the industry standard.  There is no individual intent to deceive, but it does make it difficult to determine how much time and money are spent on true instruction of the students.

Charles Schwartz, a professor at University of California, Berkeley, disaggregated the University of California system’s expenditures for 2015, separating out instructional costs including teaching, student services not covered by other fees, and overhead.  An important underlying factor in his formulations was that professors spent one-third of their time on preparation for class, face-to-face contact with undergraduate students, and grading.  The remainder of their time was devoted to other academic commitments.  This was based on an earlier faculty time study done by the university.  He calculated that the system spent less on instruction ($7560 per FTE student) than it did on unsponsored research ($11,120 per FTE student).  This expenditure is in addition to what the system spent on research that was funded by the government, industry, foundations, and the individual campuses themselves.  

Of course, there is research and there is research.  Though humanities faculty members do not bring in much external funding, they are still given time away from teaching to do research.  What do the students get in return for paying for this unsponsored research?  In many, but not all cases, narrowly focused papers on esoteric topics which professors add to their list of publications, 98% of which are never cited, even within their respective field in academia. Mark Bauerlein documented over 22,000 scholarly publications on William Shakespeare written between 1980 and 2007.  How many tens of millions of dollars or more, were spent producing these papers and what groundbreaking insights were discovered to justify the cost?  How much did this affect the undergraduate students who paid for it?  How much did this impact society?  Wouldn’t it be more beneficial to undergraduate college students and society, in general, if these colleges and researchers devoted the time, energy, and resources to face-to-face teaching of undergraduates? Jacques Barzun, the eminent cultural historian wrote, “ To be of any worth, the liberal arts must also be taught as arts, not as scholarly disciplines and that must be done by teachers.”  Roosevelt Montas, author of Rescuing Socrates: How the Great Books Changed My Life and Why They Matter For A New Generation wrote, “But the research ideal remains of limited value in undergraduate general education and its dominance in the university and in the academic career has been detrimental to liberal education.”   

As the product of a Core Curriculum in college, I am a very strong advocate for liberal arts education during the undergraduate years, but when so much faculty time and money is devoted to this type of research, the cost of higher education rises significantly and the education of undergraduates gains little.  Does our society really want to force 18 year-olds into debt to pay for another scholarly publication on Shakespeare?

What else do undergraduate students get in return for paying for this research?

First, let’s consider that more than a third of all research spending goes to medical schools, so the work it underwrites is irrelevant to the education of nearly all undergraduates.

Arguments have been made that researchers make better teachers.  There have been many studies looking at the quality of teaching of researchers vs. other faculty.  Some show the researchers to be mildly better and some show them mildly worse, so the quality of teaching is not a good justification for or against promoting researchers as being better teachers.  

The case that researchers make better teachers was made back in the 1800s when the modern research university was first created. The thinking at the time was that those making the discoveries could then pass the new knowledge to their students.  It may have been relevant then, but times have changed.  New findings are disseminated much more quickly and are more easily accessible now in the Information Age.  Any instructor keeping up-to-date will be aware of advances within weeks or months. 

How critical is it that undergraduates know about the function of a protein involved in the CRISPR process which was discovered last month?  It is probably not that important.  Undergraduates need to receive a good foundation of basic knowledge in introductory courses and some higher level knowledge in more advanced courses.  They don’t need a Nobel Prize winner to cover the basics.  The cutting edge information is more crucial to graduate students and maybe to the handful of undergraduate upperclassmen preparing to do research in the future.  Even if it were important for undergraduates to be exposed to the latest theories, how many of them actually have contact with the big name researchers?

Why are universities able to get away with charging undergraduate students to pay for their research programs?  One reason is that the students don’t have a choice.  They cannot choose only to pay for instruction and not research or athletics.  The universities practice full line forcing, which is defined as “a form of bundling where, in order to obtain an individual product or service, the full range of products or services must be purchased even though there might be demand for only one product or service within the bundle.”  This is defined elsewhere as “an anticompetitive practice.”

Another reason they can get away with this is that research is one of the major determinants of prestige and the prestige of a college leads to higher salaries for its graduates, so it is an investment that, in some cases, may make financial sense for the student given the present system. There is a quid quo pro:  You pay for my research and I will get you a higher paying job; not that one should have anything to do with the other.   The result is that we have a system where students are underwriting part of the cost of sponsored and unsponsored research and they are going into debt to do so.

In the long run, it would be more in the interest of the students and would lead to lower costs if prestige were more related to the amount of learning than the amount spent on research.  It is ironic that the nation’s research institutions have spent so much energy exploring the world outside, while devoting minimal time and resources looking critically at what factors lead to improved outcomes in learning on their own campuses.

Reputation also leads to a positive feedback loop in which increased prestige leads to more federal grants, industry contracts, and increased donations from outside foundations and alumni of the university.  This in turn leads to a further increase in prestige, thus perpetuating the cycle and making it in the university’s interest to see it continue.

In conclusion, sponsored institutional funding of research is extraordinarily expensive, especially at high research universities.  While the federal government and outside businesses and foundations contribute three-quarters of the funds for sponsored research, the universities themselves provide over $21 billion per year, the bulk of which comes from tuition and fees collected from undergraduates.  Depending on the amount of research done at the institution, this may come to many thousands of dollars per full paying student at large universities.

The cost of unsponsored research is hard to quantify but may be even higher than that of sponsored research.  Both sponsored and unsponsored research may be more costly than any of the other expenses commonly thought to be the causes of high college tuition.

Thank you for listening to Charging U.  In this episode we discussed how universities spend millions of their own dollars to fund research, how giving faculty time off to do research may be even more expensive, and how students are footing much of the bill.

In the next episode, we will examine the growth of the administrative state on college campuses and how much it has added to the cost of college.

If Charging U has educated you about why the cost of college has gone up, let others know about the podcast.  Please leave a rating and review.  Send comments or questions to larry@chargingupodcast.com   Until next time be well and be safe.

This National Science Foundation website https://ncsesdata.nsf.gov/profiles/site  can be used to look up information regarding funding sources for university research.  On the left side click on 'Search by institution name.”  Once the institution comes up, click on it and then scroll down to Data Tables.  Under R&D expenditures select “By source of funds and R&D field.”