How Colleges Make Money

College is a public good with a luxury price tag.

Tuition has risen by an astronomical rate at nearly every university in America since the 1980s (Source). What’s surprising, then, is how small of a role tuition plays in the overall funding structure for most colleges. The tens of thousands of dollars you pay to attend college often accounts for as little as 15% of their total budget.

Most universities don’t make the majority of their money by teaching students. Rather, they fund their institutions through government appropriations, donor gifts, and auxiliary…