This content has been archived. It may no longer be relevant
College is a major investment for students and their families. With it comes the burning question: Where does all the money go? While students expect that their money aids in their progress toward receiving a degree, there is so much more than just a title and a piece of paper that goes into higher education. Because college is a life-changing investment, it is important to understand why tuition is what it is.
“The net tuition paid, which is tuition billed [minus] scholarships and grants, goes to support the general operations of the college – salaries, benefits, utilities, etc. Net tuition, room and board amounted to $6.3 million, which included $1.6 million in student loans to be paid over the next 10 years,” explained Doug Gibbs, Principia’s chief financial officer. He added that this amount is used to help support the College’s $22.6 million budget. However, the tuition itself covers the direct costs of operating the college and “does not include support costs of accounting, advancement, capital projects, human resources, marketing and technology.” Gibbs showed that there is a clear line between what Principia students pay for and what they do not. In addition, he provided a breakdown of the numbers themselves, available in the inset table.
It turns out that because Principia has such a wide range of opportunities for such a small student body, tuition has to compensate for this disparity to some degree. Howard Berner, Principia’s chief investment officer, commented that “there are a lot of fixed costs which drives up the cost per student” and mentioned that with these costs alone, the price per student would be closer to $70,000. If the cost for a year at Principia were actually that high, many students would not be able to afford to attend. It seems the more important question to ask is, if we aren’t paying for college, then who or what is?
“The funding for our operations comes from net tuition, room and board (TRB), other income, the endowment and current giving, ” Gibbs explained. He mentioned that “around 75 percent of the required funding for Principia is from the endowment and gifts, and the remainder from net TRB and other income.” As seen in the breakdown of average expenses, $22.6 million is the total annual operating cost of the College, leaving $16.95 million to be paid by the endowment each year.
Berner explained that the endowment is chiefly made of about 80 or 90 different funds, which are regulated by investment overseers who seek to maximize the value of these assets. He also said that the changing economy has had an impact on the endowment over the years, chiefly in the investment choices between bonds and the stock market. “Bonds are no longer an acceptable way to protect your assets,” Berner said. He explained that these assets have lower payouts due to changes in the economy. “This requires us to put more into riskier assets than once was the case.” Essentially, the safest route is not always the most effective one to pay for the high costs of the College’s upkeep. “Historically, the stock market has provided the highest return,” Berner said. That diversification of assets is often an important strategy that guarantees financial success in investments.
Although an elite team constantly works to maximize the value of these assets in the Principia College endowment, the costs to run the College have meant an increased draw on the endowment. “In 2013-14, we used 6.96 percent of the endowment to balance the budget. This rate of endowment use is substantially higher than the 5 percent expected industry draw rate from an endowment,” Gibbs said. Reliance on the endowment is important, he clarified, but it must be managed so that it does not diminish. The endowment insures the education of Christian Scientists at Principia, but it does have limits.
With a new understanding of Principia finances comes a greater understanding of the concerted effort of individuals to guarantee the education for Christian Scientists. “To accomplish this diverse educational mission, from day care through college on two distinct campuses, requires substantial resources,” Gibbs said. “Principia has been blessed by the generosity of alumni and friends over many decades to support this mission, and we need the current generations to continue to accept this responsibility as well.”
Principia College Expenses
Academics $12,200,000; Facilities $5,300,000; Athletics $1,600,000; Other $1,500,000; Admissions $1,100,000; Student Life $900,000 = Total $22,600,000