For many people, what college they attend is one of the most important decisions in their life. Whether it’s deciding on a major, getting the skills required for a profession, or simply getting a degree, different colleges offer different options and experiences. Additionally, there is no lack of options, with over 6,000 different colleges or universities in the U.S. alone. It follows then, that most people consider many factors when deciding a college. One of the most important requirements for colleges, and one that is often overlooked, is the financial situation of a college or university.
Colleges are split into 3 different categories, each with its own goals and funders: public colleges, private for-profit colleges, and private-nonprofit colleges. Most colleges are private, with a near 50 percent split between for profit and non-profit private colleges.
While all colleges are a little different, most colleges are funded by tuition and fees paid for by students. Of the different types of colleges, public colleges have the simplest business model. Public colleges are funded and controlled by the local state government, who run the college in order to educate students.
Public colleges can be cheap, as discounts to tuition cost are widely available because public colleges do not rely completely on tuition for funding. Most public colleges are 4-year institutions, although all states have public 2-year colleges (commonly known as community colleges) that exist to provide a more affordable way to get a college education.
The most well known college type is private nonprofit colleges. Private nonprofit colleges are majority funded by tuition, with many of the larger colleges also relying on donations from rich alumni in order to fund themselves. Private nonprofits can be expensive schools to attend, with some of the lowest acceptance rates among colleges.
The final type of college, private for-profit colleges operate like businesses, with shareholders trying to maximise profits from the college. These colleges are some of the most expensive to attend, but also give some of the lowest quality education, considering the goal of maximizing profit for the shareholders.
Regardless of how colleges finance themselves, having a stable financial situation is universally beneficial. Both current students and future alumni benefit greatly from having a degree from a school that is not infamous for financial troubles.
In recent years, especially post-Covid, colleges have been facing more and more financial issues. While the direct reasons for the financial issues are purely speculative, several factors have pointed towards large administrative teams, decreasing applicant rates to smaller colleges, and the value of a degree lowering more and more as they become a societal norm.
Aside from ivy-league schools, most colleges have seen less and less people enrolling, forcing colleges to raise tuition prices, and causing less people to enroll because of the increase in price. This, in combination with other factors, has contributed to a financial crisis for colleges that doesn’t seem to be getting any better.
Going to a college that is facing financial failures can be largely detrimental to both students and alumni, as demonstrated by the recent budget cuts at Sonoma State University (SSU), where a budget deficit caused SSU to cut entire programs including all athletics and many majors. Students are now owed compensation, and have to spend time transferring to new schools. This also devalues the education from programs, as the degrees have bad associations though they are still valid.
For all these reasons, for someone applying to or choosing a college, it might be worth it to not only look at the value of the education at each college, but also the financial situation, a metric that only seems to be increasing in relevance in recent years.
