Miserly Colleges

Lynne Munson of the Center for College Affordability and Productivity turns in a thought-provoking op-ed at Inside Higher Ed today. She takes colleges to task for hoarding vast sums of money in endowments while still charging students high tuition rates:

Stanford University spends $76 million on undergraduate financial aid, a sum that sounds generous but amounts to a mere 0.5 percent of the value of its endowment. The university spends just 4 percent of its $14 billion endowment toward operating expenses. If the 5 percent payout rule required Stanford to spend another 1 percent of its endowment, and that money was directed toward financial aid, students would enjoy $211 million in additional support. That is precisely the cost of letting all 6,600 Stanford undergraduates attend tuition-free.

With all the talk in Congress about how much money loan companies (including “non-profit” loan companies) are making off of student loans, it might be worth also taking a look at how colleges spend their endowments. As Munson points out, taxpayers are helping to fund the federal grants and subsidized loans that allow many students to afford the high tuitions at these institutions (and allow these institutions to charge such high tuitions). Meanwhile, donors receive tax breaks for adding to these large endowments. It’s worth asking what the public is really getting out of this deal.