The N.Y. Times vs. the Well-Endowed College

In the past few months, there have been a string of articles¯particularly in the New York Times ¯aimed at the evils of well-endowed, elite universities.

First there was a Times editorial calling for a tax on large endowments to redistribute their wealth to colleges with less money.

Then came an article in the Times ’ business section talking about more money flowing into private universities than into public coffers, with the result that, for example, Yale’s buildings are thriving, while New Haven’s infrastructure is crumbling.

Next we had an article in the Education section about legacy admissions, their evil, and an admittedly far-fetched interpretation of the Constitution that would make them illegal.

And then, last week, the Times had yet another article, this time about Harvard’s and Yale’s proposals to spend more of their endowments to increase the coverage of their financial aid packages for families earning from $120,000 to $180,000 per year, at Harvard, and from $120,000 to $200,000, at Yale. Next year, the two schools will each spend $20 million more on financial aid. The students and families in this income bracket will have their $45,000 tuitions reduced to around $20,000.

More students going to school for less money¯a good thing, right? Well, not according to the article in the Times :

That’s good news for students at Harvard or Yale. But it’s bad news for many hoping to attend other private four-year colleges¯and for the nation in general.

The problem is that most colleges will feel compelled to follow Harvard and Yale’s lead in price-discounting. Yet few have enough money to give more aid to relatively wealthy students without taking it away from relatively poor ones.

Most colleges already tend to favor the affluent because their budgets require it. More than 90 percent of America’s private colleges have endowments less than 1 percent the size of Harvard’s. Giving an upper-middle-class applicant even a generous partial scholarship puts less strain on their budgets than giving a full scholarship to a student whose family can afford to pay nothing.

The authors of the article are Roger Lehecka and Andrew Delbanco, a former dean of students and a current professor at a Harvard and Yale competitor, Columbia University, which has an endowment one-fourth their size.

Taking their positions into account, we shouldn’t be surprised by the authors’ point of view. But that does not make it right. I’m no expert, but, as far as I can see, America’s top schools are so committed to diversity that they would happily give full scholarships to underprivileged students¯long before they increased financial aid for upper-middle-class applicants. Meanwhile, as schools they are also in competition for upper-middle-class students, and this increased aid is the latest salvo from Harvard and Yale in that competition.

There’s no logical reason that this should issue in less financial aid for poor students. But the Columbia professors argue for an odd sort of trickle-down effect. Harvard and Yale, being cheaper, will attract more kids who could have somehow paid full tuition. But those schools have large endowments and thus don’t depend much on income from tuition. Schools such as Columbia, which need tuition income, will be pressured to increase financial aid to upper-middle-class students¯and that will leave these underendowed schools with less money to give as full aid for low-income students.

Lehecka and Delbanco are outraged by it all:

In a society that claims to believe in equal opportunity, our top universities should lead by example. The scandalous fact is that between 2004 and 2006¯an era of enormous private wealth accumulation¯27 of the 30 top-ranked American universities and 26 of the top 30 liberal arts colleges saw a decline in the percentage of low-income (Pell-grant-eligible) students. The problem Mr. Summers described is only growing worse. While some upper-middle-class families have to sacrifice in order to pay for college and may deserve more financial help, most of their children find a way to attend college. Low-income students earn bachelor’s degrees at less than one-third the rate of high-income students.

The fact that poorer students do not earn as many college degrees is not going to change, though we can be glad that more low-income students are getting excellent educations than ever before. But there’s a real problem with the authors’ use of Pell grants¯for, in December 2004, the federal government restricted eligibility for Pell grants, with 90,000 students cut off from the program and 1.5 million receiving smaller grants. The comparison of Pell grants before and after 2004 is a faulty measure of low-income students.

In their conclusion, Lehecka and Delbanco say that the solution is federal grant money, tax incentives, and debt-reduction programs. They never give a concrete answer to how Harvard and Yale should be spending their money if they are not broadening their financial-aid program.

As I said, I think the commitment to poorer students will, in the end, outweigh any desire of schools to compete over financial aid to richer students. And, in this particular case, the protestors against well-endowed schools seem to be the faculty of a jealous competitor armed with faulty facts.

Do all these articles add up to a drumbeat¯the first martial stirrings of a general campaign against well-endowed private institutions?

At first, I was hesitant to think so. And then, two days later, I found another article on the topic, this one on the Times ’ front page¯a news report that the Senate Finance Committee had sent a letter to the nation’s 136 wealthiest colleges and universities demanding information on how they distributed financial aid, raised tuition, and managed and spent their endowments:

The committee, which has a central role in setting tax policy, has been pressuring universities to use more of their wealth for financial aid and threatening to require them to spend a minimum of 5 percent of their endowments each year, as foundations must. The committee pointed out that donations to universities and their endowment earnings were both tax-exempt.

Seeking to head off Congressional action, wealthy universities have been rushing in recent months to expand financial aid, in some cases using more of their endowments to increase assistance to low-income and upper-income students alike. Harvard recently said it would increase aid for families earning up to $180,000 a year, and Yale said it would help families with annual incomes of as much as $200,000.

The request for information . . . provided a strong indication that the committee was not backing off the idea of requiring colleges to spend more of their endowments.

[The committee’s ranking Republican, Sen. Charles] Grassley said that the information gathered in the next 30 days “will help Congress make informed decisions about a potential pay-out requirement and allow universities to show what they can accomplish on their own initiative.”

University officials expressed surprise at the broad information request and concern about Congress mandating how they use their endowments . . . . “Universities are not like foundations,” [Northwestern University president Henry] Bienen said. “They have operating budgets which they cannot easily adjust with the ups and downs of markets. They cannot easily turn off spigots.” Northwestern, thanks to a recent cash infusion, now has a nearly $7 billion endowment.

Senator Grassley was last heard from when he wrote a similar letter to numerous evangelical ministries rolling in cash from the prosperity gospel they preach.

Whether he is out to get perceived tax violators or any nonprofit with large amounts of money, you have to grant the man one point: Private universities should do something about the skyrocketing tuition rates students and their parents pay. But Grassley also needs to remember that these are rates people choose to pay. Even if Harvard or Princeton are public fixtures, they remain private institutions, and, for better or worse, under our legal system they can charge whatever the market will bear. Tuition relief may need to be a top priority for these schools, but that is not the business of the Senate Finance Committee.

Make no mistake: Between Senator Grassley and the New York Times , we’ll be hearing more about all this. These are rumors of war¯of people building for an attack on private institutions with lots of money. I expect the drumbeat will grow louder.

Nathaniel Peters is a junior fellow at First Things .

References

http://www.nytimes.com/2007/12/21/opinion/21allen.html?scp=1&sq=harvard+williams+endowment

http://www.nytimes.com/2008/01/06/business/06haven.html?scp=5&sq=university+endowment+tax

http://www.nytimes.com/2008/01/15/us/15bar.html?ref=education

http://www.nytimes.com/2008/01/25/education/25endowments.html

http://usliberals.about.com/od/education/p/PellGrant.htm

http://www.nytimes.com/2007/11/07/us/07ministers.html?scp=2&sq=grassley+hinn+ministries&st=nyt