Over at MajorGiftsGuru.com,
fundraiser Tom Wilson takes a stand in favor of requiring universities
to spend 5% of their endowment annually to maintain their tax-exempt
status. The Nonprofiteer isn’t sure about applying a foundation-oid rule to one particular type of operating charity: if the goal is to require universities to hold tuition down, or spend more on scholarships, will this random-if-familiar percentage accomplish that the most effectively? Or should we just make institutions with tuitions over $40,000 a year and endowments over $1 billion (to pick an equally random-if-familiar number) ineligible to participate in the Federal student loan program?
That’s a genuine question, not a recommendation. But it’s a question reflecting the Nonprofiteer’s suspicion that two parallel stories dominating the recent press about higher education are about to merge: the story of wealthy institutions with enormous endowments which grow faster than their financial aid budgets (and the possibility of legislative action thereon), and the story of growing defaults and corruption in the student loan program.
Even supporters of the program (of which she has long been one) can’t fail to grasp the loans’ role as the de facto floor under tuition calculations. If universities couldn’t transfer x thousand dollars of their enormous operating expenses each year to the backs of liberal-arts majors and their parents, they’d have to find those x thousand dollars someplace else, or risk pricing themselves out of the market. Where else?–well, my goodness, will you just look at the size of that endowment?
Now that we seem to be facing a meltdown in the student-loan market comparable to the collapse of sub-prime residential lending, we should also be facing the consequence of such a meltdown: a collapse in prices. If that collapse in prices comes dressed as increased financial aid drawn from endowment, that’s fine; but why wouldn’t it be even better if the universities stopped waving around enormous price tags to begin with? The
fact that Harvard’s tuition is $50,000 keeps poor kids from applying,
and the fact that it isn’t really $50,000 never gets
If a university’s endowment income would pay its nominal tuition for its entire freshman class, why should the university charge tuition at all? Imagine how our society would be transformed if every high school student in America knew that Harvard was free.
THAT would be a major gift.