Where does your money go when you pay for college?

Answer 1

The answer to this question would surprise most people. The number one expenditure of most colleges is insurance. Having thousands of moron undergraduates and hundreds of "genius" graduate students wondering around campus playing with Bunsen burners and bongs all day long tends to cause serious bodily injury on a fairly regular basis. Insurance covers anything the school gets sued for -- and they get sued by everyone. For some reason, people seem to think that sending their prissy-little kids to a University for four years is like putting them in a plastic bubble where if they even get a cold it's an actionable event.

Beyond that, the order usually goes Admissions (gotta spend money to make money), building or repairing facilities, and stocking said buildings with desks, air conditioning, and electricity.

Salaries are way down the list.

Now, notice I said expenditures. No school ever spends all of the tuition money. The remainder is placed into "endowments" (read slush funds) from which schools may draw emergency cash when necessary. However, most of these funds are simply there to impress richy-rich types. Endowment envy is quite common among universities. The endowments are placed into mutual funds and things like that to make them even bigger. In 2008, the single most effected industry by the Wall Street fiasco was the education industry.