It is time college endowments were directed to helping students
With all of the discussion lately about the cost of college/university education and our children leaving school with six-figure debt, I became curious and started looking for answers.
Did you know that the top 10 college/university endowment funds have assets of $198-plus billion? This list is topped by Harvard University at $39.23 billion (as of 2018).
Despite all of this money, Harvard still charges tuition of $51,925. Harvard's enrollment in 2019 was 20,739 students, so income from tuition was in the range of $1.07 billion. Harvard earned interest on its endowment (from 2017 to 2018) of $2.13 billion. So, think of it — if Harvard had allowed all of its students to go to school tuition free and paid the tuition to itself from the endowment fund, they still would have had $1.07 billion in interest left over.
How many years could Harvard operate tuition free if it chose to do so? At the current rate of return, how many years could Harvard operate tuition free before it had to begin to spend any of the principle of their endowment?
And did you know that Harvard is exempt from federal income tax as an educational institution under Section 503(c)(3) of the Internal Revenue Code of 1968, as amended? And it is also tax exempt under Massachusetts state law. But more than that, if you go on your computer and ask, "Is Harvard University a tax-exempt organization?" it will tell you that the president and fellows of Harvard are also tax exempt.
Who are Harvard fellows? Harvard fellows are a society of scholars elected at the beginning of their careers by Harvard University for their "potential" to advance academic wisdom, upon whom are bestowed distinctive opportunities to foster their individual and intellectual growth.
I have to wonder, are their any other areas in life where one can achieve tax exemption based on someone's perception of someone's potential? And once a Harvard fellow, always a Harvard fellow.
My online source for this information is https://bit.ly/2QqhiHm. It lists the following as the 10 largest endowments: Harvest — $39-plus billion; Yale — $29-plus billion; Stanford — $27-plus billion; Princeton — $25-plus billion; MIT — $16-plus billion; University of Pennsylvania — $13-plus billion; Texas A&M College Station — $12-plus billion; University of Michigan Ann Arbor — $11-plus billion; University of Notre Dame — $11-plus billion; Columbia University — $10 billion. For a total of $198 billion.
Do you wonder, as I do, why these 10 educational institutions need to be sitting on all this cash, while our children cannot afford to go to college/university? Who is benefitting from all this stashed cash other than the banks and financial institutions who are managing the investments and maybe the educational institutions' staffs. It surely isn't helping our students just sitting there earning interest.
And this is only 10 college/universities. Consider that there are about 5,300 colleges/universities in the United States today. I read somewhere that the average endowment is about $65.1 million, which means that there could be as much as $327 billion idling out there.
I also found an article published by the Daily Texan in March 2019, boasting that the University of Texas now has the second largest endowment fund at $31 billion. But, if I understood the article correctly, this fund is shared by all the schools in the Texas university system. From the news article, it would seem that Texas A&M has the lions share.
All of this makes me wonder why our politicians, who are trying to appeal to our youth by suggesting that we taxpayers should foot the bill for their college loans, don't instead go after this ocean of stagnant wealth that has been given to these institutions of higher learning. I assume that the intent of these funds is to further higher education. But maybe I am naïve and the money was given for a tax write-off and the ability to say, "I am supporting a prestigious school."
I do wonder why anyone knowing these institutions have all this wealth would continue to give money to them. Would it not be better to give the money to an organization who would use it to do some good? There are so many needs out there and so many worthwhile organizations, like the Salvation Army, the Red Cross, Medical Teams International, Doctors without Borders, etc.
I am sure some would say that I don't understand the situation and maybe that is true. One of the pieces I read said that often funds are given to certain schools within the school and restricted to use within that school. Another article said that the school had its endowment invested in 13,000 different funds, so maybe it is complicated.
But what I do understand is that there is a huge amount of money in these endowments that is doing few of the current generation any good. I think it is time that the laws governing these funds be changed to require that they be spent to zero within a few years and the rules governing the use of these funds be simplified so that they can be expended expeditiously to expand educational opportunities and reduce the cost of education.
Do you think our politicians, who seem to be concerned about student college debt, will look at the laws governing these funds and amend them to cause this money to be used for educational purposes within a short period of time? And can you imagine the massive lobbying effort that would be mounted by these institutions and their financial partners to protect their Golden Goose?
If you are interested in this subject, my son told me about a discussion, "Malcolm Gladwell on Harvard Endowments, Satire and More Conversation with Tyler," which can be found at https://www.youtube.com/watch?v=ehlhrqSWPbo. This is a 90-minute conversation, but the segment on Harvard's endowment occurs between minutes 22 and 36. I found it very interesting.
I really feel that something needs to be done to lower the cost of education and to put the nation's wealth back into circulation for the benefit of all Americans.
John Bonham is a Newberg resident
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