What distinguishes a higher education campaign proposal is the extent to which it goes beyond aid, into the quality and conduct of higher ed itself. And there are a number of smart ideas here, including money to help colleges boost graduation rates (which are terrible at many public universities, particularly for low-income and minority students) and create incentives for community colleges and 4-year institutions to collaborate on improving course articulation (also a huge and under-recognized problem) and increasing transfer and graduation rates. Sen. Clinton also wants to prod the U.S. Department of Education to gather and release more consumer information on graduation and employment outcomes, putting her on the side of transparency and accountability.
She also somewhat gently suggests that the elite universities now in the process of amassing vast hoards of money might want to use a little more of it to help their students:
Hillary is challenging some of the most selective schools in the U.S. to further expand access for low-income and minority students by spending a greater percentage of their endowment annually on recruiting more low-income students and students of color, supporting them so that they graduate and growing the pipeline of students that are prepared to compete for admission to the most selective schools. The endowments of the 12 wealthiest universities total $155 billion and in recent years and have gotten tax-free returns of almost 20%. These elite institutions benefit tremendously from their tax-exempt status as well as from federal student financial aid and research grants
This brings to mind Wednesday's front-page Post story about the University of Virginia's current $3 billion fundraising campaign, which dwarfs the amount of money UVA tried to raise just 10 or 15 years ago. UVA is not alone in this; all the elite universities are headed down the same road, even as their financial advisers are using the existing endowment to earn billions more in the stock market.
Essentially, we're seeing our increasingly unequal, winner-takes-all society reflected in our higher education system. Take, for example, this from the end of today's Post article about J. Christopher Flowers, a Harvard graduate and financier who recently made and then withdrew a $25 billion offer to buy student loan giant Sallie Mae:
He has given Harvard about $25 million, including the endowment of a professorship in honor of his parents.
Now, $25 million is an awful lot of money--unless you're Chris Flowers, who's worth $2 billion, or Harvard, which has an endowment worth $35 billion. The endowment's investment earnings alone last year--$5.7 billion--were bigger than the total endowment at all but a handful of other universities. Yet the U.S. taxpayers dutifully subsidized Flowers' $25 million drop in Harvard's very large bucket, with tax deductability on one end and exemption on the other.
What are elite universities going to do with all that money? I don't think they really know. The head fundraiser at UVA said "he has heard talk that $3 billion 'isn't enough to get us where we need to go.'" That is, obviously, absurd. UVA, Harvard and the rest were elite institutions with bright students, beautiful campuses, and esteemed professors long before they embarked on the project of accumulating huge piles of cash. They're raising money simply because they can, and if you can, why wouldn't you?
The question is: when do you have so much money that it starts to warp your public mission, or raise uncomfortable questions about your tax status and spending decisions? The Clinton proposal suggests that time may be fast approaching. As Robert Reich recently said :
"I'm all in favor of supporting the arts and our universities, but let's face it: These aren't really charitable contributions.... I see why a contribution to, say, the Salvation Army should be eligible for a charitable deduction. It helps the poor. But why, exactly, should a contribution to the already extraordinarily wealthy Guggenheim Museum or to Harvard University (which already has an endowment of more than $30 billion)?"
And lest you think only redistributionist liberals think this way, this from conservative economist and AEI fellow Richard Vedder:
I looked at three schools --Harvard, Yale, and the University of Virginia. At all three schools, less than four percent the average daily endowment base in the 2006-7 school year was spent. If Harvard and Yale had spent 5 percent and dedicated the increased spending to tuition reduction, they could have eliminated undergraduate tuition charges altogether --easily. If Virginia, which is a less well endowed public school, spent 5 percent and dedicated the added spending to tuition reduction for all students from families with less than $100,000 annual income, I would guesstimate that tuition could have been reduced well over $5,000 on average per student --an amount equal to about 60 percent of the in state tuition charges.
What this means is this: rich schools have chosen to charge students high tuition and then use the funds to increase the size of their endowments (especially so at Harvard, Yale, and, I believe, Princeton) rather than relieve financial pain for parents. The IRS requires non-university charities to spend 5 percent out of their endowments if they want to keep tax exempt status. There is a reason for that. Donors making new gifts and universities with investment income are getting a tax break for helping defray the cost of higher education. As Wick Sloane reminds us constantly, these tax breaks can be expressed in "Pell Grant equivalents." Tax policy currently favors the “Harvards” of the world relative to the poor kid needing a Pell Grant.
All of which is to say, I'm glad Sen. Clinton is putting this issue on the table, and I expect we'll hear more about it in the future.
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