If you are at a university that has graduate students, you have probably heard about whether your university is an R1 or R2 or R-whatever research institution. Universities tout their position in this ranking system, awarded by the Carnegie Foundation, to denote how “prestigious” they are in terms of research. From 1994, the ranking used to be given according to how much federal research funding they were awarded.
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Because of this, all the ranking told you was how much federal money a particular university received. This system is incredibly flawed. For example, if you have faculty more dedicated to writing grants and less dedicated to teaching, mentoring graduate students, publishing articles or doing other activities that are supposed to be the mainstay of academia, then certainly you will get more money. However, this will be at the expense of teaching, mentoring, publishing, etc.