In the past two months, Yale and Harvard have announced the largest increases in undergraduate financial aid in the respective schools’ histories. But for the Senate Finance Committee, that may not be enough.
As part of its probe into whether universities are generous enough in spending their endowment riches to provide financial aid and head off rising tuition, the committee announced last week that it will request detailed information concerning aid, tuition and endowment spending from more than 100 of America’s wealthiest universities.
And despite their recent announcements, Yale and Harvard were among them.
The request comes as the Finance Committee’s ranking member, Sen. Chuck Grassley (R-Iowa), continues to push for Congress to require wealthy universities like Yale to spend at least 5 percent of their endowments annually, a mandate that the University and its peers have fiercely resisted.
And Grassley is not the only member of Congress who is concerned. The chairman of the Finance Committee, Montana Democrat Max Baucus, joined forces with Grassley in submitting the request to colleges.
“We need to engage America’s colleges and universities to come together to address the fact that college tuition for young Americans and their families is increasing at a faster rate than inflation,” Baucus said in a statement on Thursday. “The questions we put forward in this letter will help Congress better understand how colleges use their endowments to make certain that talented young folks in Montana and across the country aren’t left out of the classroom.”
Added Grassley: “It’s fair to ask whether a college kid should have to wash dishes in the dining hall to pay his tuition when his college has a billion dollars in the bank.”
Or, in Yale’s case, $22.5 billion.
The crux of the question in Congress is to what extent schools like Yale should be tapping into their coffers to control the cost of tuition and to offer increased financial aid to students. Since Grassley began beating the endowment-spending drum in October, both Yale and Harvard have announced sweeping financial-aid initiatives, and Yale also announced it would boost its endowment spending by nearly 40 percent next year.
Whether that will be enough, at least in the eyes of Congress, remains to be seen.
Yale’s two announcements — first, that it was bumping its endowment payout, and then that it would boost its undergraduate financial-aid budget by over $20 million annually — drew praise from Grassley, and the letter from him and Baucus stressed that “recent actions by our nation’s top universities … are already having a broad positive effect throughout the university community” in terms of financial aid.
But Jill Gerber, a spokeswoman for Grassley, said on Friday that the senator was not yet prepared to take the heat off of Yale and that more details were needed on the University’s specific practices vis-à-vis student aid, tuition policy and endowment practices.
“It’s important to look at the entire picture of spending in student aid, and I’m not sure that he has enough information about Yale in particular to render a judgment,” Gerber said in a telephone interview.
Under its new initiative, Yale will bump its endowment spending to a minimum of 4.5 percent, up from 3.7 percent this year. Whether the senator will push for the 5-percent requirement to be written into law is still unclear.
“The information will come in, and they’ll evaluate it and then determine what, if anything, to do next,” Gerber said. “It’s a little premature to say what exactly will happen.”
This much is certain, however: Wealthy schools like Harvard and Yale are vehemently opposed to any such Congressional action mandating endowment spending.
“We’d much prefer to keep the matter one of private regulation rather than public regulation,” University President Richard Levin told the News in October.
Similarly, John Longbrake, a Harvard spokesman, said such a federally mandated spending requirement would be “unwise.”
“It does not allow for flexibility to protect steady and stable programs in times of market turbulence and, over time, will distort these programs,” Longbrake said in an e-mail on Friday.
That, essentially, is Yale’s argument, too. While Chief Investment Officer David Swensen has been able to guide Yale’s endowment to nation-leading returns in recent years, University officials warned that market conditions will eventually stop being so favorable — and that requiring a minimum spending rate will leave Yale too vulnerable to the whims of the market.
Over the last decade, the Yale endowment has quadrupled in value, and over that time it has played an increasing role in balancing the University’s budget each year. In 1998, the endowment accounted for one-fifth of the University’s budget; this year, it will fund 37 percent of Yale’s operating expenditures. That share is expected to increase to as much as 45 percent in the next fiscal year.
Still, some parents, students and experts have called on Yale and other schools to spend even more than that. One of them is Lynne Munson, an adjunct fellow for the Center for College Affordability and Productivity in Washington, D.C., who testified before the Finance Committee in September and helped launch Congress’ focus on rising tuition costs.
In a telephone interview on Friday, Munson called the senators’ letter to Yale and other schools a “very important request.”
“It’s unprecedented,” Munson said, “because colleges and universities basically have never had to tell anyone anything about what they’re doing with endowment monies.”
Sent to the 136 U.S. universities with endowments exceeding $500 million, the Finance Committee’s letter, which ran to 1,259 words, laid out 11 questions for the universities to answer and requested a response within one month. While the universities are not bound by law to respond to the letter — which was not technically a subpoena — the committee expects most will cooperate.
Some of the questions, if answered, could reveal with an unprecedented level of detail how wealthy universities like Yale manage their money. The letter requested information ranging from the size of bonuses received by university administrators based on endowment performance to the overall amount spent annually in managing the endowment over the last decade.
Others questions were almost biting. “If [the endowment payout] is below 5 percent,” the senators asked, “please explain how this meets the needs of the current student body.”
The broad request for information is a first for the Finance Committee. While the committee has requested such details from foundations and other nonprofit organizations in the past, this is the first time Congress has requested such details from universities.
The request might not sit well with some schools. When asked by a Chronicle of Higher Education reporter how universities would react to the letter, one lobbyist responded with incredulity.
“Are you kidding me?” the lobbyist said, according to the Chronicle. “They’re going to blow gaskets. The committee is asking for a lot of numbers colleges just don’t have.”
In an e-mail message this weekend, Yale Spokesman Tom Conroy said the University would cooperate with the committee’s request for information, but he said he was not sure whether administrators had yet received a copy of the letter. Longbrake, the Harvard spokesman, also said his school would cooperate.
“We look forward to complying with the request,” Longbrake said, “in the hope it will foster a greater understanding of the endowment, the broad range of programs it serves and the robust investment we make in assuring affordability to prospective students of all financial means.”
The release of the senators’ letter coincided with the unveiling of an influential annual study by the National Association of College and University Business Officers, which placed the average endowment spending rate among American universities last year at 4.6 percent, one-tenth of 1 percent lower than the year before.
Among the wealthiest colleges that the senators are targeting, those with endowments worth over $500 million, the spending rate was even lower, at 4.4 percent. Yale was even stingier, spending only 3.8 percent of its endowment.
Last year, Yale’s endowment grew to $22.5 billion, an increase of 28 percent. That jump — well over the national average of 17.2 percent, according to the NACUBO study — is believed to be the largest of any major university endowment nationwide.