How universities make money through research

[Llewlyn]

Hi there,

I am interested in understanding how the money process works for an University.
I guess that the main income comes from student fees (I am referring to private-or-almost ones), then why would an university do research?

I can figure out a naive mechanism: research brings prestige -> prestige attracts students, but surely there is more than this (there is?). For example, what happens when a professor gets a grant? Do the university have some advantage from that money (directly, such as taking a percentage or indirectly, such as having a potential large amount of money available)?

I am confident that you long sight life experts will sort out my concern,

Ll.

 

[Vanadium 50]

The university takes a cut of every grant.

 

[phinds]

also, research prestige is what leads to some huge endowments although I think that's likely to be more often cases of grads endowing their own schools.

 

[eri]

Professors will apply for money to fund projects, travel to conferences, pay their summer salaries, buy equipment, and pay students to work with them. The colleges often take half or even more of that money and use it to help fund their programs. One of my former professors just got a 2 million dollar NSF grant - and the university was very happy to take a million bucks.

 

[Andy Resnick]

Hi there,

I am interested in understanding how the money process works for an University.
I guess that the main income comes from student fees (I am referring to private-or-almost ones), then why would an university do research?

The flow of money in any large institution is very difficult to trace. Broadly speaking, Universities have least three main streams of revenue- student tuition/fees, "fund raising" (alumni donations, corporate sponsorships, research awards, etc), investment dividends, and possibly state government funds (public schools). The mix of funds is different for every university.

How the money flows down to departments (in the case of tuition and investment returns) is very complex and contentious. It's easier to think about how the money flows up- for example, research funds awards to individual principal investigators or research centers.

My grant dollars are broadly split into 'direct' and 'indirect' funds. Indirect funds (around 40% of the total funding) go directly to the university and are distributed all over the place- of the total amount of indirect funds, 15% goes to the school of science and 5% to my department. The remaining 80% goes elsewhere- other schools, administration, etc. Those percentages are unique to where I work and vary from place to place.

Note- about 70% of my direct funds (money I personally have spending authority for) pays for students- tuition and stipend.

At the top level, the total income for academic programs goes through the Provost, who funnels down to the Deans, who give it out to Departments. Tracking tuition money is really confusing- there's something called a "Dean's tax" on Departments and I still can't understand it. Dollars are usually apportioned based on student credit hours of enrollment, and a lot more. Plus there's internal financial aid for students and tuition dollars generated from direct funds. There are also internal research grants.

There are a lot of non-academic expenses as well: infrastructure, parking, capital improvements, etc. That money has to come from somewhere.

Finally, "universities" don't do research- I do. Faculty members and students apply for grants and perform research activities. That's another source of conflict in university life...

 

[twofish-quant]

I guess that the main income comes from student fees (I am referring to private-or-almost ones), then why would an university do research?

Every university is different, but the big research universities (i.e. MIT and Harvard) are heavily funded by the government and private industry to do research. Also research generates money in indirect ways. University funds research project, undergraduate works on project, becomes big gazilllionaire, gets phone calls asking for donations.

Also a lot of colleges and universities choose *not* to do research.

For example, what happens when a professor gets a grant? Do the university have some advantage from that money (directly, such as taking a percentage or indirectly, such as having a potential large amount of money available)?

University typically gets a "tax" from grant money. It's usually something like 40%.