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Fed may view College’s endowment

__Jones says that inquiry will focus on wealthier schools __

In a move that could change how the universities use their endowments and award aid packages, the Senate Finance Committee recently requested financial data from the 136 richest universities in the country regarding the last decade of rising tuitions and fundraising initiatives.

With the coffers of many top universities at record highs — a report released last week showed 76 colleges and universities boasting billion dollar endowments — concerns have risen among senators that the costs of higher education are increasing at a far higher rate than inflation.

“Tuition has gone up, college presidents’ salaries have gone up and endowments continue to go up and up,” Sen. Charles Grassley (R – Ia.) said in the Jan. 25 edition of The New York Times. “We need to start seeing tuition relief for families go up just as fast.”

The current development leaves financial officials at colleges and universities across the country wondering exactly where all of this will go — whether the Senate requested the information as a scare tactic, to bring attention to the rising costliness of higher education or as the first step of a process that will ultimately yield legislation.

In the case of legislation, the most likely policy would require universities to spend at least 5 percent of their income per year. The College spends 4.75 percent of its income annually.
Officials at the College say that, while the College will receive a request from the government, any legislation will likely effect schools with larger endowments.

Samuel Jones, vice president for finance at the College, stressed the disparity between the richest schools and the rest, the programs already in place here, and the complexity of the university budgeting process as reasons to be positive about the College’s financial situation.

He said that these policies tend to target schools like Harvard and Yale — schools with 20 and 30 billion dollars in endowment —which are hardly comparable with the College’s $585 million.
“In addition, what you’ve seen in the last few months, in an attempt to avoid this government involvement, is the premier universities creating large-scale financial aid programs — essentially programs that mimic the Gateway Program,” he said.

The Gateway Program awards financial aid to low and middle-income Virginia students.

A university’s endowment is not necessarily analogous to free spending money. In most cases a donation comes with specific restrictions.

For instance, a donor could stipulate that the original gift not be spent, only the income received from investing that money; or, a donor could require that the gift be used only for a specific program, leaving the college unable to lower tuition for students.

In addition, universities often hold off on increasing spending during times of economic prosperity in the name of intergenerational equity, so as to ensure similar opportunities for future generations of students for whom funding may not be at such high levels.

The findings of the Senate finance committee, while not promising any immediate change, may have far-reaching consequences for students in a country with some of the most expensive schools in the world. Current students, for their part, welcome the inquiry as a way to better understand the murky world of college finances.

“I think that clarifying the process would allow us to understand where all this extra money is going,” said Mike Hodges, class of ’09. “Every year tuition increases, and the hours of operation at the University Center dining hall decrease. What am I paying for?”