Leveling the Playing Field on Endowments

Elite institutions are under pressure to spend more of their endowments to help low-income students.

BY CHARLES DERVARICS

To improve college affordability for low-income students, some lawmakers and education researchers are beginning to ask the question: Why don’t elite colleges spend more of their endowments on need-based financial aid?

From the halls of Congress to Ivy League institutions, the size and practices of college endowments are generating new interest. The powerful Senate Finance Committee is "likely” to examine college endowments this year, a committee aide told Diverse. A chief concern is transparency: While charitable foundations must spend 5 percent of their assets each year, the rule does not apply to college endowments. As a result, it’s not clear how some elite colleges use their endowments to help needy students.

Overall, 20 elite universities account for almost half of all university endowment funds, says the Congressional Budget Office.

“Parents and students have a right to expect these universities with big endowments to end the hoarding and start the helping with skyrocketing tuition costs,” says Sen. Charles Grassley, R-Iowa, senior Republican on the Senate Finance Committee.

Some institutions are taking action prior to any congressional decisions. The latest example is Yale University, which has pledged to cut college costs for low- and middle-income students by 50 percent. Along these lines, Yale announced last year that it would increase payout from its endowment by 37 percent, from $843 million to $1.15 billion for fiscal year 2008-09. The funds would go to bolster financial aid, expand access to Yale’s resources and strengthen scientific research, according to a university press release.

Harvard University announced last year that families earning up to $180,000 a year will pay no more than 10 percent of their income toward tuition.