Big news: Yale is extremely well endowed. Yes, just last week we learned that our school’s already ample endowment swelled by 20.2 percent, to reach a mind-numbing $23.9 billion. But who says size matters?
These numbers lead me to an inescapable conclusion: we could, and should, make Yale free.
Conceding the fact that I am perhaps the opposite of an economics or math major, let’s do a little arithmetic. Yale has approximately 5,400 undergrads. For the 2014-15 full-fee paying student is expected to pay roughly approximately $63,000 dollars. When you multiply 5,400 students by $63,000, you arrive at the sum of $340 million. That’s how much Yale would receive if every student here paid sticker price. Now, let’s subtract from that number $120 million, which is the approximate amount of money Yale will give out in financial aid this year. That leaves us with $220 million.
Now let’s revisit the latest endowment number: $23.9 billion. That was the approximate value of Yale’s endowment announced last week, after subtracting roughly $1.1 billion, which will go toward the university’s total operating expenses. Add to that $1.1 billion another $2 billion (representing revenue derived from grants, contracts, medical services, gifts, tuition, etc.), and you arrive at the approximate operating expenses of the university.
Last year’s endowment was $20.8 billion, and the 20.2 percent increase reported in the News actually pushed that number to $25 billion. The $1.1 billion subtracted from that, for the operating expenses, amounts to about 4.4 percent of the $25 billion. Now, let’s add $220 million to the $1.1 billion, which represents how much it would cost for Yale to do exactly what it was intending to do this year anyway and make college free for every undergrad to boot. That adds up to $1.32 billion, or 5.3 percent of the original $25 billion pot.
In other words, the difference between the current status quo and making Yale completely free for every single undergrad is less than 1 percent of the endowment.
Is this something the university could continue to do every year? In a word: yup. The endowment grows pretty much every year, and it does so faster than does tuition and room and board. In the past 10 years, the endowment has increased by 87 percent (it was $12.75 billion in 2004-05), while the cost of tuition and room and board grew by 62 percent (it was $38,850 in 2004-05). Looking over the last twenty years, the endowment has grown by 677 percent (it was $3.53 billion), while a year at Yale College has swelled by a comparatively puny 239 percent (it was $26.350 — I know, right?). There is no reason to believe that the famed “Yale model” won’t continue to outpace the costs of college for years to come.
In 2008, the News asked three leading economists to analyze the data and see if Yale could go free. The response of Ronald G. Ehrenberg, the director of the Cornell Higher Education Research Institute, summed up the consensus: “It could if it wanted to.” And if the endowment stopped returning profits for several years on end, we could simply reevaluate whether or not to be free (as Cooper Union just did).
All of this math — and I’m sure my simplistic calculations are flawed, but hopefully they get the point across — should reinforce what we’ve known for years: Yale College could be free.
By this point many of you are undoubtedly raising some of the many valid objections to such a proposal: (1) a Yale education is already subsidized; (2) we shouldn’t weaken the endowment; (3) much of the endowment is restricted by the intent of donors; (4) the University claims it provides aid to all who need it; and (5) should those who don’t need aid really get a free ride?
Please allow me to (try to) respond: (1) Sure, and that’s great, but it’s something the university is already doing — and will continue to do anyway; (2) This won’t weaken the endowment. Our endowment is massive, and this would represent such a tiny percentage of the endowment. Besides, it is quite likely the endowment would grow such that this percentage would shrink every year; (3) True, but 25 percent of the endowment represents unrestricted funds — we could pull from those; (4) Please. We all know people who have taken out loans, and, in spite of Yale’s generosity, the sky-high cost of this education is a significant burden for all but the richest families; and (5) I believe that the benefit of helping those who struggle to pay will outweigh the cost of helping those who don’t.
That last point actually brings me to the most important argument in favor of making Yale free: We will get better students. Imagine the recruiting tool! Imagine how many people’s lives will be made easier. And imagine the message Yale would be telling extraordinary underprivileged kids who might assume they could not afford Yale, in spite of the existing financial aid. We could increase our socioeconomic diversity and the caliber of students in one fell swoop.
We can make this school so much better. And we can afford it.
Scott Stern is a senior in Branford College. His column normally runs on Mondays. Contact him at firstname.lastname@example.org.