Case study — Services · 13 min read · 5 questions
Why college is so expensive in America
The thesis
America's elite universities are luxury houses, and they are run like them. Demand has multiplied by orders of magnitude and enrollment has not moved — Harvard's freshman class went from 1,660 in 2005 to 1,675 in 2025 — because the scarcity is the product. They measure themselves on how many people they turn away, and they have never produced evidence that their teaching or job outcomes are materially better. The diploma is the same piece of paper everyone else gets.
Tuition is not the business. Princeton's endowment covers 70% of its academic operating costs and hands students $1,847 million against $142 million of net tuition — thirteen dollars in for every dollar out. The business is a donation harvest with a fifty-year lag: the undergraduate years are the most formative of a life, so the school inserts itself into them, subsidizes housing and athletics that lose money on purpose, engineers tribal bonds, and spends the next half-century collecting. Classes of 1974 and earlier still supply 37.3% of alumni donations nationally; the classes of 2020–2025 supply 0.6%.
Every apparent contradiction resolves once you see that. They are non-profits holding more cash than Boeing, Nike, Coca-Cola, McDonald's and Disney combined. They pay endowment managers three times what they pay presidents, because the endowment is the business and the president's job is closing nine-figure donors — which is why no student meets one. And the endowments have been beaten by an index fund, 8.2% at Harvard against 15.4% for VOO. The real return is the oldest one: Harvard has had 390 years of harvests and Stanford has had 141.
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The statistics
By the numbers — swipe or use arrows
Endowment values, operating margins, endowment distributions, net tuition revenue, payout ratios, restricted and unrestricted balances, staff salary costs and depreciation from each university's audited financial statements and endowment reports, FY2025; president and endowment manager compensation from IRS Form 990; class size, enrollment, on-campus housing and yield from the Common Data Set and IPEDS Fall 2024; alumni giving participation from U.S. News & World Report; donation share by class year from the CASE Voluntary Support of Education survey; athletics revenue and team counts from the NCAA Equity in Athletics Data Analysis, 2024; research spending by department and funding source from the NSF HERD survey; faculty composition from the American Association of University Professors; degrees awarded from the NCES Digest of Education Statistics
Key takeaways
The sticker price is a cartel price. Annual cost of attendance runs $98,900 at Yale, $97,545 at Stanford, $95,612 at Penn, $93,417 at Columbia, $90,574 at Princeton, $89,334 at MIT and $82,866 at Harvard — a spread of $16,000 across seven independent institutions.
And the supply has not moved in twenty years. Freshman classes went from 1,660 to 1,675 at Harvard, 1,635 to 1,840 at Stanford, 1,230 to 1,410 at Princeton and 2,410 to 2,395 at Penn — while applications multiplied. The scarcity is the product.
These are non-profits with more cash than the S&P. Harvard holds $56.9B, Yale $44.1B, Stanford $40.8B, Princeton $35.7B — against $29.4B at Boeing, $13.9B at Coca-Cola, $9.2B at Nike, $5.7B at Disney and $0.8B at McDonald's.
The endowments have quadrupled in fifteen years: Harvard $28B to $57B, Yale $17B to $44B, Stanford $14B to $41B, MIT $8B to $28B, Penn $6B to $25B. They are charities that get richer every year.
They also run like businesses. Operating margins in 2025: 6% at Columbia and Yale, 5% at MIT and Penn, 4% at Princeton — and −2% at Harvard and −1% at Stanford, the two that spent hardest.
Tuition is not what pays for it. In 2025 endowment distributions ran $2,498M at Harvard, $2,080M at Yale, $1,946M at Stanford and $1,847M at Princeton — against net tuition revenue of $1,438M, $498M, $845M and $142M. Princeton's endowment gives students thirteen dollars for every dollar of tuition it keeps.
That distribution covers 70% of academic operating costs at Princeton, 60% at Yale, 50% at Harvard and MIT, 45% at Dartmouth, 38% at Stanford, 32% at Brown and 25% at Columbia. The school is the endowment. The classroom is the storefront.
The endowment is also the job that pays. Endowment managers earn $7.8M at Penn, $6.6M at Princeton, $6.4M at Harvard and $6.3M at Stanford — against presidents on $2.6M, $1.4M, $1.6M and $1.1M. The president's actual job is closing whales, which is why no undergraduate ever meets one.
And the whales are worth meeting: $2,000M from Phil Knight in 2025, $1,100M from John Doerr in 2022, $1,000M from Mike Bloomberg in 2024, $550M anonymous in 2021, $500M from Mark Zuckerberg in 2021, $372M from David Duffield and $300M from Ken Griffin.
But the reliable money is old money. The classes of 1974 and earlier supply 37.3% of all alumni donations nationally, 1975–1984 supply 22.0% and 1985–1994 21.4% — while the classes of 2020–2025 supply 0.6%. The harvest runs on a fifty-year lag, which is why age is the moat: 390 years at Harvard against 141 at Stanford.
Participation is the other half. 44% of Princeton undergraduate alumni donate, 37% at Dartmouth, 33% at Harvard, 26% at Yale — against a 8% national average. Princeton's advancement runs on unpaid alumni volunteers soliciting their own classmates, so the cost of collection is near zero.
The bond is manufactured deliberately, and it is expensive. 97% of Harvard undergrads live on campus, 96% at Stanford, 95% at Princeton, 92% at MIT — against 36% at USC, 25% at Wisconsin, 18% at Texas A&M and 12% at UCF.
So are the sports. MIT fields one varsity team per 137 undergrads, Princeton per 157, Harvard per 168 — against 3,730 at UCF and 3,040 at Texas A&M. Athletic scholarships have been banned in the Ivy League for over 70 years and the departments run at a loss on purpose: $43M of revenue at Harvard and $10M at Columbia against $236M at Texas A&M and $234M at USC.
None of it works at scale, which is why the classes stay small. Harvard has 6,738 undergraduates and Princeton 5,916, against 61,442 at Texas A&M, 59,649 at UCF and 41,234 at Michigan State. The Ivy League average is 8,092.
For all the sophistication, an index fund beat them. Ten-year annualized returns net of fees: 11.4% at Brown, 10.7% at MIT, 9.7% at Dartmouth, 9.4% at Stanford and Yale, 9.0% at Princeton, 8.2% at Harvard and 7.4% at Columbia — against 15.4% for $VOO and 14.9% for $VTI.
And most of the pile cannot be touched. Of Harvard's endowment, $47B is restricted and $10B is not; $36B against $8B at Yale, $23B against $18B at Stanford. The one flexible dollar comes from annual giving — $70M of unrestricted money at Harvard against $1,059M of restricted gifts.
Common questions
Why is Harvard so rich?
Because it has been harvesting donations for 390 years and never spends the principal. Its endowment is $56.9 billion — more cash than Boeing, Coca-Cola, Nike, Disney and McDonald's hold between them — and it grew from $28 billion in 2010. The money comes from alumni giving compounded across generations, not from tuition: the classes of 1974 and earlier still supply 37.3% of all alumni donations nationally. Harvard pays out roughly 5% of the endowment a year, which covers about half of its academic operating costs, and as a non-profit it pays little to no tax on the rest. Age is the actual advantage — Stanford, founded 249 years later, holds $40.8 billion.
Do elite universities make money on tuition?
No, and several lose heavily on it by design. In 2025 Princeton's endowment distributed $1,847 million to support students while net tuition revenue was $142 million — thirteen dollars given for every dollar collected. Harvard distributed $2,498 million against $1,438 million, Yale $2,080 million against $498 million, Stanford $1,946 million against $845 million. The endowment payout covers 70% of academic operating costs at Princeton, 60% at Yale, 50% at Harvard and MIT. Tuition is a filter and a signal, not a revenue line. The revenue line is the endowment and the advancement office.
How do universities actually make money from students?
By treating them as seeds rather than customers. The years from eighteen to twenty-two are the most formative of a person's life, so the school inserts itself into that window and spends heavily to make the experience intense and tribal — 97% of Harvard undergrads live on campus for four years, MIT fields a varsity team for every 137 students, and residential colleges, houses and eating clubs fragment already small classes into smaller ones. All of that loses money now, and pays back decades later: 44% of Princeton undergraduate alumni donate against an 8% national average. Graduate alumni, whose relationship with the school is transactional, donate substantially less.
Why do universities pay endowment managers more than presidents?
Because the endowment is the business. Penn pays its endowment manager $7.8 million against $2.6 million for its president; Princeton pays $6.6 million against $1.4 million; Harvard $6.4 million against $1.6 million; Stanford $6.3 million against $1.1 million. The president's role is not academic administration in any sense a student would recognize — it is closing eight- and nine-figure donors, which is why every president's time goes to trustees and whales rather than undergraduates who are decades away from writing a check. In exchange, the children and relatives of the largest donors get guaranteed admission.
Are university endowments well managed?
By the only test that matters, no. Over ten years, net of fees, Harvard returned 8.2% annually and Columbia 7.4%, against 15.4% for Vanguard's S&P 500 fund and 14.9% for its total market fund. Brown at 11.4% and MIT at 10.7% did best among the elites and still trailed the index badly. These are portfolios heavy in private equity and hedge funds — Princeton runs 39% private equity, Harvard 33% hedge funds — which carry high fees and long lock-ups for returns an index fund beat. The endowments still grow because the inflows are enormous and the payout is capped at around 5% a year.
Why compare elite universities to strategy games?
Because the contradictions resolve once you read the university as a player in a long game rather than a school selling classes. In StarCraft, Civilization and Age of Empires you win by massing units, compounding an economy, raising wonders, and planting seeds that pay off many turns later — while paying maintenance on every decision already made. The units are celebrated researchers, whose discoveries are given away free because the prestige returned is worth more than the licensing. The economy is the endowment: Harvard's $56.9 billion, and at Princeton enough to cover 70% of academic operating costs, which is what makes tuition a rounding error. The seeds are undergraduates on a fifty-year lag — classes of 1974 and earlier still supply 37.3% of alumni donations against 0.6% from 2020–2025. The maintenance runs 390 years deep. Quarter to quarter none of it makes sense; measured in generations, all of it does.
Why don't elite colleges just admit more students?
Because enrollment is the scarcity that the entire brand rests on, and because the model does not scale. Harvard's freshman class went from 1,660 in 2005 to 1,675 in 2025 while applications multiplied — the school measures itself on how many people it turns away. The deeper reason is economic: the donation harvest depends on manufacturing a tight tribal bond with each student, which requires housing almost all of them for four years, fielding a varsity team per 150 undergrads, and fragmenting classes into residential colleges and eating clubs. A public flagship enrolling 40,000 to 60,000 cannot do that, which is why its alumni participation looks nothing like Princeton's 44%.
Discussion
Harvard's freshman class went from 1,660 in 2005 to 1,675 in 2025 while demand multiplied by orders of magnitude, because the scarcity is the product. What other institutions measure success by how many people they refuse?
No answers yet — be the firstThey have never produced evidence that teaching or job outcomes are materially better, and the diploma is the same paper everyone else gets. What is actually being purchased?
No answers yet — be the firstPrinceton's endowment covers 70% of academic operating costs. If tuition is not the business, what is — and who is the customer?
No answers yet — be the firstThese institutions are described as luxury houses run like luxury houses. Push that comparison: where does it hold, and where does it break?
No answers yet — be the firstYou are asked to expand access without damaging the brand. Is that possible, and what would you have to give up to try?
No answers yet — be the first
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