October 22, 2010

Why do American Universities Cost More than Canadian Universities?

University Tuition in the US has gone up a lot.   Our neighbors to the North up in Canada may look at us and wonder why our rates are going up so fast or why our tuition costs so much compared to theirs.   Lets take a quick look at tuition rates in U.S. versus Canada and see why they might differ.

Note:   I'm ONLY looking at public universities in U.S. and Canada.  Private universities and their costs and funding are a different matter.

Universities versus Colleges in US & Canada
First of all a quick explanation the Universities and Colleges in the USA are basically equivalent in many ways.  The two names are often used mostly interchangeably to refer to an institution that grants 4 year degrees.   From Wikipedia in the USA "Stand-alone institutions that call themselves colleges are universities in the international sense of the term."    In Canada however there is more of a hard distinction From Wikipedia : "Generally speaking, universities grant degrees (e.g., bachelor's, master's or doctorate degrees) while colleges, which typically offer vocationally-oriented programs, grant diplomas and certificates."    What Canadians consider a college seems to be equivalent to what Americans would call a "community college".   A "community college" or "junior college" in the USA offers mostly vocational training and grants 2 year Associates degrees.   So one explanation if someone in the US says that "college is costing me $20,000" a year then that is not the same as what a "college" is in Canada.  This difference in nomenclature should be kept in mind so that you're making a clear apples to apples comparison between US and Canada as far as higher education and its costs.

 Canadian University Tuition Rates and % of Revenue 
The Statistics Canada site says that "On average, undergraduate students paid $5,138 in tuition fees".   If you look at the revenue and spending of Canadian Universities we can find out how much tuition is as a % of the total.  In 2009 total revenue was $37.4B and the tuition was $7.68B.  Thats about 20.5% of the total funding for Canadian higher education

University of B.C.
I wanted to take a closer look at a specific university just to get a little more detailed example.  I chose University of British Columbia mostly randomly.  Lets look at the 2009 / 2010 budget for the University of British Columbia.   On page 6 we see that 'student fees' totals $332M.  The total revenue is $1.897B.    Therefore 17.5% of the funding comes from students.   Tuition at UBC is $150 per credit hour or in the ballpark of $5,400 for a year.  However the rate will depend on the program you are in as they have differing course loads.   

U.S. Public University tuition rates and % of revenue

Now lets look at public US universities.    In my previous discussion of why college costs have increased I had found data on spending for public US universities.   In the US in 2009 the state spending was $75B and net tuition was $44.5B.   So tuition in US schools accounted for 37% of funding.   The average tuition rate was $7,020.

Comparing Canada to U.S.

U. B.C. =    Tuition is 17% of funding and costs $5,400
Canadian Universities = Tuition is 20% of funding and costs $5,138
U.S.A. public universities = Tuition is 37% of funding and costs $7,020

As you can see the tuition income represents a much higher % of the revenue for U.S. universities than in Canada.  If the tuition for Canadian  universities accounted for as high of a % of the revenue as it does in the U.S. then tuition would be much higher in Canada.

If tuition at U.B.C. was 37% of their revenue then it would be 2.2 times as high as it is and would cost about $11,880 per student.   If Canadian Universities on average had tuition paying 37% of the whole then the tuition bill would go up to $9,505.  

Bottom Line:  Tuition pays for a lower % of the total cost of education at Canadian Universities than in the U.S.   Because other funding pays more in Canada the tuition bills are lower than in the U.S.

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