This is an article on how again with lesson number five, how colleges work. providing quality education to a large population is not easy. Nor is it cheap. Colleges need to buy land and construct buildings to hold classes, the labs parking lots libraries, certain facilities like cafeterias, computer centers, gyms, dormitories, build offices for professors and administrators and do all this before a single student enrolls. Recognizing that land is expensive, the US government passed the moral acts of 1862 and 1890, giving away federal land to states to endow colleges to beach practical agriculture, science, military science Engineering. These are called land grant institutions and are scattered all over the country.

And then there are ongoing costs expenses to maintain the vast infrastructure of a college salaries to pay college faculty and staff administrative expenses related to recruiting new students and transfer candidates utilities, expenses and investments in research that can attract right professors to join the institution in the first place. So where do colleges get the money from to operate, to survive and to grow? There are four primary sources of funding for a higher education, institution, tax dollars, tuition fees, endowments and contributions, research grants and awards. All us colleges charge tuition fees to recover some of the costs for providing an education. These are never enough though. So they get help from state's public institutions especially depend heavily on the states to help finance their budgets.

The Center on Budget and Policy Priorities estimates that state and local governments provide 53% of a public colleges budget. And this money does not include funds received by these institutions from the US government or other companies for research another program. private colleges cannot turn to states obviously. So how do they make up the difference between tuition fees and operating expenses? They depend on the largest of alumni to help build endowment funds a pot of money collected from alumni and friends through expanded funding drives. You may have answered phone calls at home from your parents or siblings colleges requesting money.

These funds are used to buy financial assets which generate high returns and are often managed by talented and experienced alumni. The returns from these assets interest dividends, capital gains are pumped back to support school activities. Stanford's endowment funds that are nearly 7000 of them are worth $21 billion, and returns from the funds investments kicked in nearly 21% of the school's operating budget of nearly 5 billion. Our has gone so far as to establish its own company to manage its massive 35.7 billion portfolio distributions from the endowment contributed almost a third of the university's operating budget. Schools also actively pursue lavish gifts by large benefactors to fund college construction projects, research and even financially programs. What benefactors get in return is the unending gratitude of the institution and this is displayed prominently on college property.

For example, former New York City Mayor Michael Bloomberg disclosed in 2013 that the total value of his contributions to Johns Hopkins University where he earned his first college degree exceeded $1.1 billion. It's no surprise that the University's School of Public Health is now named for him. In 2004, David Tepper, an alumnus donated $55 million to Carnegie Mellon University to have its entire business school named after him, which is now called the Tepper School of Business. And at Baylor, the University spent 260 $6 million just to build its brand new football stadium in Waco. Its name was changed from Baylor stadium to McLean stadium to honor alumnus Drayton McLean Jr, who helped fund its construction at all that tuition place No matter whether college is public or private revenue from tuition fees is still an important part of its budget. tuition fees are generally based on credit hours, such as $180 per credit hour.

But what is a credit hour. College a credit hour represents one hour of class per week for a term or semester, a three semester credit hours class means that for 16 weeks in a semester, you will meet your professor in class lecture or lab for three hours a week. The idea is that you will receive 16 times 348 hours of instruction for that class throughout the semester. For a two years associate's degree, which typically requires 60 credit hours, this means you take 20 courses for a four year bachelor's degree which typically requires 120 credit hours, this means you take 40 courses Because tuition fees are generally based on credit hours, such as 180 per credit hour simple arithmetic shows that the total tuition costs for a 60 credit hour associate's degree is simply 180 times 60 $10,800. For 120, credit hour four year degree the cost is double 180 times 120 $21,600.

To make it easy on students schools provide a lower fixed rate for an entire semester of classes 15 credit hours of study this is almost like a painting a discount when you buy more credits rather than the three credits you need for a single class. Let us consider cost of attendance at a big public school, Texas a&m University in College Station, Texas. Notice that all costs are included in this table. Dushan is Generally the largest component of the total cost of attendance. Texas a&m spend thousand and $30 cost for tuition is for the entire year, two semesters. It assumes that a student takes 30 hours per year, or 10 courses.

Like we said tuition is based on 15 credit hours per semester that is five courses per semester. Texas a&m institution also varies according to a rate code. This simply means that the college charges you different tuition rates based on what you're studying. For example, tuition costs for classic French literature will likely be less than a class in chemistry. public schools provide a discount in fees to state residents sometimes of nearly 50%. In this case, the $10,000 tuition for a state of Texas resident is nearly 67% lower than for a non resident of Texas.

Lower resident tuition charges are a way for state governments to give something back to residents who have been paying hefty taxes to the state. Nearly all states discriminate in this fashion. Most public schools have extremely strict rules to figure out if a student qualifies for the special discounted rate, but the intent is clear. If a student is normally domiciled in the state and she or her parents have been paying taxes to the state, the student generally qualifies for the discounted rate by which schools do not discriminate in their fees at all, all students resident or non resident or international, they pay the same fees. Somebody is that no matter whether college is public or private revenue from tuition fees is still an important part of its budget. And so tuition should be an important consideration for Your own financial planning.

Clearly, it makes little sense to go to an out of state public school because you will be paying a premium as a non resident of that state. Sometimes it may be better to go to a private school than a public school out of state. One more thing, all the fees we discussed are published rates on college websites. But the net price estimate, a technical term for the fees you pay is dependent upon your financial situation and may often be less than published rates. We will learn about NPS in subsequent lessons. If you have any questions or comments, please let us know.

Thank you.