the school will eschew all federal funding, to which he attributes much of the runaway cost of universities. The compliance cost of taking federal financial aid is about $1,000 per student—a tenth of Minerva's tuition—and the aid wouldn't be of any use to the majority of Minerva's students, who will likely come from overseas.
Subsidies, Nelson says, encourage universities to enroll even students who aren't likely to thrive, and to raise tuition, since federal money is pegged to costs. These effects pervade higher education, he says, but they have nothing to do with teaching students. He believes Minerva would end up hungering after federal money, too, if it ever allowed itself to be tempted. Instead, like Ulysses, it will tie itself to the mast and work with private-sector funding only. "If you put a drug"—federal funds—"into a system, the system changes itself to fit the drug.
Federal Aid Compliance Costs