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There has been some flack in Congress lately about the cost of tuition as the famous private universities. The primary senator behind the movement is Charles Grassley, a Republican of Iowa.
Tuition, room, board and fees at a university like Harvard are now hovering around $50,000. In a recent press release, Grassley writes that:
Luckily, according to Grassley, there is: make schools spend more of their endowments. He notes that endowments are an awful lot like the funds of private foundations:
"In the 1960s, Congressman Wright Patman issued a series of reports, one of which included recommendations to limit foundation life to 25 years..."
So, colleges should only last for 25 years?
I'll give Grassley the benefit of the doubt and assume that's not where he was going with that quote (though there is no evidence to the contrary in the original document). In any case, he has a bigger problem: most schools don't have large endowments. Just 75 universities control 71% of all endowment assets. So that means the other 29% must cover the remaining 2,543 accredited four-year institutions in the US.
It's not clear just how well that will work.
Grassley also has a big conceptual problem. Universities invest their endowments and use the interest for operating costs. Costs go up each year. Inflation is one reason. Increasing numbers of students is another. Libraries must expand to incorporate new books. New departments (microbiology, ecological studies, Arabic, etc.) must be founded, and rarely are old ones (history, physics, literature) abandoned. A stagnant endowment is death to such a university.
Again, if your university has an endowment. So what about the rest?
What about the University of Iowa?
The flagship public university in Grassley's state is the University of Iowa. As a relatively wealthy public university, it has an endowment of almost $1,000,000,000. That seems like a lot, but it also has over 30,000 students, which gives the university an endowment of just over $32,000 per student.
That sounds like a lot, only if the university spends it all this year, after which there won't be any money for next year. Grassley wants universities to spend at least 5% of their endowment each year -- even in bad years in which they get less than 5% interest on the endowment.
That comes out to $1,615 per student per year. The in-state tuition this year (not counting room and board) appears to be $6,554. So that kind of spending will make a dent.
Except that schools already rely heavily on their endowments. That's why they have them. I couldn't find numbers for the University of Iowa, but I have heard that many school already spend over 4% of their endowment yearly. So let's assume the University of Iowa spends 4%. That means Grassley is calling for his home state university to spend an extra $323 per year from its endowment -- or, about the cost of 3-4 college textbooks.
And remember, this is one of the country's richest universities. The vast majority of schools have far, far smaller endowments, if they have one at all.
Right on the fact. Wrong on the reason.
Governments have been steadily cutting funding for publicly-funded universities. I'm fortunate to be at an endowment-rich university, but my father is at a public institution in Michigan. The budget crisis there has caused steep cutbacks in funding ... and thus steep increases in tuition.
This is a story I've heard repeated at many universities across the country.
It's nice to be able to go to Harvard. But only about 2,000 students each year are accepted. I'm sure they'd appreciate the help with tuition, but it's not going to affect most Americans. The university tuition crisis is in the public universities, which have small endowments, if any.
But I suppose Grassley doesn't want to talk about that.
Tuition, room, board and fees at a university like Harvard are now hovering around $50,000. In a recent press release, Grassley writes that:
"The Congressional Research Service reports that, on the basis of mean household income of a household in the bottom fifth of the population, the price of college in 2005 was over 70 percent of the household's income."Is there an easy solution that won't cost me anything?
Luckily, according to Grassley, there is: make schools spend more of their endowments. He notes that endowments are an awful lot like the funds of private foundations:
"In the 1960s, Congressman Wright Patman issued a series of reports, one of which included recommendations to limit foundation life to 25 years..."
So, colleges should only last for 25 years?
I'll give Grassley the benefit of the doubt and assume that's not where he was going with that quote (though there is no evidence to the contrary in the original document). In any case, he has a bigger problem: most schools don't have large endowments. Just 75 universities control 71% of all endowment assets. So that means the other 29% must cover the remaining 2,543 accredited four-year institutions in the US.
It's not clear just how well that will work.
Grassley also has a big conceptual problem. Universities invest their endowments and use the interest for operating costs. Costs go up each year. Inflation is one reason. Increasing numbers of students is another. Libraries must expand to incorporate new books. New departments (microbiology, ecological studies, Arabic, etc.) must be founded, and rarely are old ones (history, physics, literature) abandoned. A stagnant endowment is death to such a university.
Again, if your university has an endowment. So what about the rest?
What about the University of Iowa?
The flagship public university in Grassley's state is the University of Iowa. As a relatively wealthy public university, it has an endowment of almost $1,000,000,000. That seems like a lot, but it also has over 30,000 students, which gives the university an endowment of just over $32,000 per student.
That sounds like a lot, only if the university spends it all this year, after which there won't be any money for next year. Grassley wants universities to spend at least 5% of their endowment each year -- even in bad years in which they get less than 5% interest on the endowment.
That comes out to $1,615 per student per year. The in-state tuition this year (not counting room and board) appears to be $6,554. So that kind of spending will make a dent.
Except that schools already rely heavily on their endowments. That's why they have them. I couldn't find numbers for the University of Iowa, but I have heard that many school already spend over 4% of their endowment yearly. So let's assume the University of Iowa spends 4%. That means Grassley is calling for his home state university to spend an extra $323 per year from its endowment -- or, about the cost of 3-4 college textbooks.
And remember, this is one of the country's richest universities. The vast majority of schools have far, far smaller endowments, if they have one at all.
Right on the fact. Wrong on the reason.
Governments have been steadily cutting funding for publicly-funded universities. I'm fortunate to be at an endowment-rich university, but my father is at a public institution in Michigan. The budget crisis there has caused steep cutbacks in funding ... and thus steep increases in tuition.
This is a story I've heard repeated at many universities across the country.
It's nice to be able to go to Harvard. But only about 2,000 students each year are accepted. I'm sure they'd appreciate the help with tuition, but it's not going to affect most Americans. The university tuition crisis is in the public universities, which have small endowments, if any.
But I suppose Grassley doesn't want to talk about that.
2 comments:
Thanks for writing this post. Politicians who have been beating the drum on this issue have been pointing to the big research universities as the problem when their situation applies to only a small fraction of students in higher education in America.
(BTW: Do you happen to have the stats for the fraction of students in say, USNEWS top 100 out of all college students? ) To simply take the politicians proposals at face value would be making a rule based on a minority for the majority, which would result in an upside-down allocation of higher-education resources. Do they really think a small college spending 5% of their small endowment is really going to make a difference in ballooning tuition costs?
Here's an alternative solution: increase public loans available to students attending accredited universities, and crack down on those for-profit universities that soak up public funds. So many of them saddle their students with debt without a real degree of job opportunities. Where's the outrage about that?
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