Endowments And Free Education

[Lehigh Football Nation]

I pop the cover off this very interesting subject in my latest blog posting:

http://lehighfootballnation.blogspot.com/

Should schools be forced to spend their endowments on (gasp) their students and sponsor scholarships that could allow more minority students to join their ranks?

[CCU97]

I personally fall into the category where I bvelieve no student should get a "full ride". I've been in Financial Aid as a career for over 10 years now and the one thing you see when students don't borrow at least a small loan....No ownership in the issues that arise with them...I'm all for limiting loans but this generation of students specifically has an issue with wanting everything handed to them and thinks that their situation is special....what they don't realize is there are thousands of other students just like them going through the same things. The students who borrow even a small amount are more committed to making it work because they know they owe money. I always recommend to parents...Make them borrow a little even if the plans are to pay it back the day they graduate...just don't tell them....

As for allowing more minority students to join a school's ranks....I think the fit has to be right and the ability to get in has to be there...I don't think that forcing schools to spend their endowments will change the makeup of a school drastically. From what all research shows it takes a minimum of $5000 to change a student's mind of which school they will attend.

The other thing this doesn't take into account is the donor's wishes. If the donor wants the recipient to be from the 1st congressional district of GA, an early childhood ed major, in Pi Kappa Phi, and be left handed you may not give that money out each year because of the restrictions. Standard policy for most endowments is to award no more than 5% of the full amount each year....assuming that at least 5% will be made in investments and as a 401(c)3 they must also pay their employees from the profits made each year and not from the school's payroll. The reasoning behind the limited spending is so the funds will last a lifetime which tends to be the wishes of the donor...usually the school has an annual fund in which they award scholarships as well and that is money donated each year in which the entire funds are spent in the form of one time scholarships.

The changes that certain people have suggested would require the law on 401(c)3 non-profits to bve rewritten as well as several million donors contacted to request a change in their donotation requirements. It would take 5-10 years just to be able to make the changes...not to mention require the foundations to hire that many more employees just to go find more money to replace the current funds when they dry up.....xtwocentsx

[mathman]

As stated above, there is a fallacy in thinking that all of a school's endowment is unrestricted. For instance, money often is given to endow a chair. Nothing helps to elevate a school's stature better than having renowned faculty, especially in graduate programs.

As for the idea that universities have a mission of educating students...well...yes and no. Sure, all schools talk of educating, they have to. But there isn't that much emphasis on educating undergraduates at 'research' universities. Funny in a way because it is these research universities that most students want to attend for a 'good education'. But in reality, the faculty's careers depend on research and more importantly...bringing in money. Excellence in undergraduate education doesn't offer faculty as much incentive as does research. In short, being a good instructor doesn't count for much and won't help much when seeking tenure. And it's sad too, that undergraduate education at these research universities doesn't really cost as much as the student is billed. The undergraduate is helping to supplement the cost of graduate education. It's crazy to charge thousands of dollars to teach something like...calculus.

[Lehigh Football Nation]

At the big-money FB$ schools (or at least at a handful of them), sports can also fund the research and university as well (like UConn, Michigan, Penn State, USC and the like). More likely, though, football is an expense to entertain students and alumni, and help educate students and (frequently) provide a path to education for many kids who otherwise couldn't afford it.

As for distributing funds, the alternative is having the endowment money sit in the fund and gaining value tax-free. What does seem clear is that either the law guiding non-profits ought to be changed back, or a law ought to govern university endowments in the same way - but the way it is now, it's not consistent.