Sharing the Wealth to Widen College Access

Crabby takes on Mr. Burns…

UnknownAn article in today’s Chronicle of Higher Education documents a banner year for college endowments and also features a report about the $101 million gift to Northwestern University from Warren Buffet’s sister, a 1954 alumna, the largest gift in its history. This comes on top of reports of other record-setting gifts from individuals to other colleges and universities around the country.

The article leads with this encouraging news about returns on college investments:

The improving economy contributed to a second strong year in a row for colleges’ endowment returns, according to an annual study released on Thursday. Colleges’ endowments returned an average of 15.5 percent in the 2014 fiscal year, up from 11.7 percent in 2013, and far above 2012’s investment returns of negative 0.3 percent.

A survey of over 800 institutions revealed exceptional results for endowments at every financial category:

The study divides the 832 institutions into six cohorts, categorized by the size of their endowments. The colleges with the highest-valued endowments were all familiar names: Harvard University, at $35.9-billion; the University of Texas system, at $25.4-billion; Yale University, at $23.9-billion; Stanford University, at $21.4-billion; and Princeton University, at $21-billion.

Later in the article, John D. Walda, president of the National Association of College and University Business Officers says

…that 74 percent of the study’s respondents reported increasing spending from their endowments. Participating institutions reported that an average of 9.2 percent of their operating budgets came from their endowments, up from 8.8 percent last year. That means more money is being spent on the institution and the students in it, he said.

So let’s face it, this is great news for colleges and universities after years of belt-tightening and concern about the performance of investments, some of which plunged frighteningly during the financial crisis. But the rebound has been remarkable, and you can see the sortable table listing all study participants here. To whet your appetite, here’s a screen grab from the table. Note that all figures are in billions, and that the increases from the previous years are in double digits:

Top Endowments 2014

Top Endowments 2014

The report says that every asset class did well for the colleges and universities, and with record contributions from wealthy individuals also increasing, it would seem that higher education is doing quite well financially.

That makes it an ideal moment to repeat my call for a “share the wealth” movement that would have a direct impact on the ability of low-income, first generation-college students to attend institutions that are less able to support them despite their desire to do so. It’s easy for Harvard and other well-endowed schools to offer free educations to bright students from poor backgrounds, but not so easy for most other schools. Despite calls for top schools to enroll more of them, that’s unlikely unless the number of seats expands.

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But there are plenty of seats available beyond the spotlight. Colleges with modest endowments are more than willing to recruit and enroll poor students but don’t have the resources to maintain them there financially. The solution, made possible by all this financial success, is to create a national fund for the support of poor students at more modestly-endowed schools. A fraction of a percentage of earnings from the top 100 or so colleges and universities contributed to a common fund for poor students from which small colleges could draw would greatly expand the number of seats available for them around the country.

Once the initial fund was established, it would become a nationally-based endowment and would do its own investing, thereby becoming self-sustaining. Colleges would be freer to enroll students with great financial need if they could draw on that fund to support them. Those students would have the opportunity to attend college, and wealthy colleges would not only lose very little of their wealth but would also reap the benefits that come with substantively addressing the issue of college access.