How Money Goes In And Out Of A College [FLOW CHART]

So, how exactly does the business of higher education work?

Michael Zezas, a municipal bond analyst for Morgan Stanley offers this interesting flow chart to show a rough breakdown of the cash inflows and outflows.

Zezas breaks down the sources of revenue for public and private institutions.

“As shown in Exhibit 6, tuition is the biggest revenue driver for both public and private higher education institutions (at 33% and 38%, respectively),” he writes. “However, state appropriations make up a larger share of public institutional revenues (20% vs. 1%) while investment income and gifts is more important for private institutions (15% vs. 3%).”

One source of business the average person probably doesn’t realise is affiliated hospitals, which are used to train med students and conduct research, while generating revenue for the institution.

Zezas employs a debt weighting to the above chart as his research is targeted to investors of higher education municipal bonds.

“Public and private universities issue muni bonds to finance the construction of academic buildings, student housing, and other capital projects,” he writes.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.