Gross Tuition and Net Cost of Attendance in Higher Education: Does the Type of University Expenditure Matter?

Institutions of higher education are under pressure to keep costs under control. This paper tests determinants of gross tuition and net cost of attendance using a panel data set of 1,864 institutions from 2009 to 2022. Results show a strong positive relationship between institutions’ administrative overhead and tuition. Instructional expenditures have a much weaker relationship with tuition, suggesting that tuition increases are not being fueled by spending on faculty salaries. Interestedly, public, but not private, institutions’ spending on research is strongly related to higher tuition, which suggests varying returns to research expenditures. There are mixed results for grants and loans. In terms of institutional decisions, the results encourage college administrations to be careful about adding more non-teaching employees to the ranks of administration. This is found to be particularly relevant for increased costs in the areas of Academic Affairs and Student Affairs.