College endowment hoarding, pay up parents! Options

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Many Senators seemed shocked to learn the sums colleges and universities had accumulated.


Dr. Gravelle has addressed the issue of how little additional endowment spending would be required to halt tuition hikes. I will not add to those remarks except to say that stopping tuition increases now is not enough.

Tuition has been going up so rapidly for so long it has reached nearly ungraspable levels. So let me put today’s tuition cost in concrete terms. Senators, what would your constituents say if gasoline cost $9.15 a gallon? Or if the price of milk was over $15? That is how much those items would cost if their price had gone up at the same rate that tuition has since 1980.

I believe that skyrocketing tuition is undoubtedly the biggest “access” problem in higher education. What can possibly be more discouraging to a capable student whose parents are not wealthy than a school with a $45,000 price tag on the door?

Here’s another concrete comparison. The total worth of the top 25 college and university endowments is $11 billion greater than the combined assets of the 25 largest private foundations — including the Gates Foundation, Ford, and Rockefeller.
Private foundations have fewer assets and, in part because they give away more of their money, are growing far less. Yet they are spending more—their payout averaged 7% in 2005 even though they are legally required to spend just 5%.

Yale law professor Henry Hansmann has said that “A stranger from Mars who looks at private universities would probably say they are institutions whose business is to manage large pools of investment assets and that they run educational institutions on the side…to act as buffers for the investment pools.”

Senators, our colleges and universities need to be reminded that they are education institutions first and foremost—and that that is why they receive the enormous tax breaks they do. Their practices, including their handling of endowment monies, should reflect their priorities as educators.

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