Wealth, Merit, and Need: Institutional and Individual Concerns and Aspirations
Weber, Jerome C., College and University
In its January 25, 2008, edition, The New York Times reports that the "...Senate Finance Committee, increasingly concerned about the rising cost of higher education, demanded detailed information on Thursday from the nation's 136 wealthiest colleges and universities on how they raised tuition over the last decade, gave out financial aid, and managed and spent their endowments" (Arenson 2008). As observers of higher education might reasonably predict, much of the concern was directed at the multibillion dollar endowments of private, highly selective, and prestigious institutions such as Harvard ($34.6 billion) and Yale ($22.5 billion) and their sister institutions with endowments of $1 billion or more. The concern may have been precipitated by reports showing that Harvard's endowment grew 20 percent last year while Yale's endowment grew 25 percent.
In the same article, Senator Charles E. Grassley of Iowa, the ranking Republican on the Committee, is quoted as saying, "Tuition has gone up, college presidents' salaries have gone up, and endowments continue to go up and up. We need to start seeing tuition relief for families go up just as fast." This is not the first comment on this topic from the Senate Finance Committee, which, as The Times article states, "...in recent months has pressured universities to use more of their wealth for financial aid and threatens 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." The latter statement is a not-so-thinly-veiled threat designed to pressure colleges and universities with large endowments into "voluntarily" using their endowment resources to help financially needy students.
Predictably, the higher education community is not particularly receptive to the idea of federal regulation of endowment funds. Henry S. Bienen, president of Northwestern University (which has an endowment of nearly $7 billion), pointed out that endowments do not always go up - certainly not in the way they did in the past year - and that "people have got used to the last few years of wonderful endowment growth." But, he added, "It does not always happen." Robert J. Birgeneau, chancellor of the University of California, Berkeley (which has an endowment of $3 billion) added that "...understanding university finances is an extremely complex matter, especially in public colleges and universities." The article points out that an economic downturn likely would reduce endowment income while creating greater pressure for financial aid. The article also points out that the concerns of the Senate Finance Committee are directed specifically toward the 76 (of America's more than 3,000) colleges and universities with endowments of $1 billion or more.
After reading the article and considering the current state of American higher education, an observer might reasonably conclude that at every level of our vast, diverse, and enviable system of higher education, we are beginning to see economic problems that work against the best interests of individual students, of higher education itself, and of the nation. This is, of course, a broad indictment, but it is one which seems borne out by the facts.
In addition to the question of how wealthy colleges and universities use their endowment funds to enhance access, there is the broader question of how escalating costs are making attending college less and less likely for many students. This is happening at precisely the time when, as Thomas Friedman (2005) so persuasively informed us, the world of knowledge acquisition and knowledge use is becoming increasingly "flat" and technology allows students from any part of the globe to gain access to that world. In other words, the continuing well-being of our knowledge-based society is highly dependent on education in science, engineering, and technology. The well-being of each of us is closely bound up in the access we provide all our citizens to the levels of education that will allow our nation to remain competitive with the rest of the world. …