The “$500 million club” of colleges tends to be stingy with aid to low-income students

Paying for College
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"Call them the top four percent: elite private colleges and universities that together sit atop three-quarters of the higher education terrain’s endowment wealth.

Among that group of 138 of the nation’s wealthiest colleges and universities, four in five charge poor students so much that they’d need to surrender 60 percent or more of their household incomes just to attend, even after financial aid is considered. Nearly half have enrollment rates of low-income students that place them in the bottom 5 percent nationally for such enrollment.

These findings come from a new report released by the Education Trust, which noted that while these places of higher learning possess endowments of at least $500 million each, few are spending that largess at anywhere near the rate they could to ease college costs for talented low-income students." …

http://hechingerreport.org/the-500-million-club-of-colleges-tends-to-be-stingy-with-aid-to-low-income-students/

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It would be better if the article was a bit more accurate in its assessment. It talks about its 500 million dollar club, then links to an article about Amherst that is in the 2 Billion dollar club.

This idea that schools need to spend more on X (could be whatever social cause inserted here) at the expense of longevity is really just uninvolved people trying to tell others how to spend their own money. Nothing new there.

Simple math, as usual, evades the article. Ironically, the Amherst article is correct for its 2 Billion endowment. However, the loss of wealth would be much worse and happen much more quickly for the schools in the 500 million dollar range, so the takeaway for the less endowed schools would be not to do what the article suggests.

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The article was somewhat skewed but it does have some validity, overall.

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List of schools, please!

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What validity? The article presents zero proof of anything - it simply makes assertions without any supporting evidence. Such as opinions masquerading as fact:

OK, so what if this is true? The article does not state what the downsides are in terms of the stability and the services offered by the colleges. So, increased spending goes a long way for what the authors wants, but ignores any negative effects in terms of college stability etc.

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Some of the schools on the list do already make attending super cheap. On the list they include the Ivies that, if you’re poor, the cost is minimal. Vassar is known for recruiting and funding low-income students: several sources feel that it helped set the standard and won an award for doing so. It has a special program for bringing in first-gen college students from community colleges to Vassar, gently. Amherst then followed in terms of providing lower income students more opportunity. Somewhere in the back of my mind I feel that it also won an award, maybe the year after Vassar did. Someone can correct me on this.

I think a more nuanced assessment would make the article more useful.

Like: are students who can meet the academic qualifcations applying to these schools in sufficient numbers for the schools to meet the lofty goal set in this article? For all we know, there just aren’t enough low-income students applying.

And what about the middle income students? It’s not like middle income families have a lot of extra cash to pay for college either. Maybe middle income students and the aid they are offered needs to be looked at more closely too

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^^ Even nuanced rubs me the wrong way.

This idea that a private institution with private money is somehow obligated to be some vessel for social engineering is repulsive to me. They can do what they want. Now, a public school is taxpayers money and a different story. I just do not understand this entitled “pay for me” attitude and belief to begin with.

People who cannot buy Mercedes should not be in the dealership upset that other people are not paying for them.

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I had to click through 2x to get to the actual paper.

https://edtrust.org/wp-content/uploads/2016/08/EndowmentsPaper.pdf?utm_source=Website&utm_medium=Text%20Link&utm_content=A%20Glimpse%20Inside%20the%20Coffers&utm_campaign=Endowments

The “club” has 138 members? Regardless of student body size, it seems, and with members with endowments below $500m (into the 400ms, anyway).

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Well . . . I agree that private institutions can and should do what they want with their private money, but is the money so private?

Universities and colleges are subsidized by taxpayers. They have favored status in communities, and the most obvious sign of this is that they are not paying taxes on their real estate, much of which is often prime. Look at the real estate holdings of NYU, CUNY, and Columbia alone. It’s a large portion of NYC. That’s a big tax base that’s gone . . . . and there are a lot of poor people in the city. The infrastructure is a disaster. Gas pipe explosions, subways breaking down, steam pipe explosions.

Why is this tolerated? Why is it encouraged, even? The assumption is that private colleges and universities are there to do public good. Add to this, many universities have been known to buy up land cheap from underprivileged neighborhoods that surround them. Some schools have been known to use shadow companies to do so, to keep the price low.

But shady real estate deals or no, they are obligated to help the community at large–the nation–and the community that they are in. Partly this is offset by offering jobs and new ideas through research. Partly also they are to raise the horizons of bright, hard working students who were born unlucky to be poor–and yet without extra edge that money can provide nonetheless through sheer smarts and grit meet the academic standards of a premier institution.

Colleges also offer huge salaries to administrators. They take in gifts, donations, funds from events and other sources, and pay no taxes on those. They invest money and it grows. Where do the non-profit profits go?

Colleges pay no taxes. At least to my mind they should give students the leg up they deserve if they are deserving.

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Validity in that some do practice unethical means and that short-changes deserving students. Hope that helps or clarify intended point.

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The biggest landowner in NYC is the Catholic church. And presumably they have a greater obligation to the poor than a private university. (CUNY is a public U).

Dusty- what’s your plan for getting the church to divest its holdings?

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@awcntdb Your objections appear to be changing with every post. First you complain that a school with 500 million in the bank can’t afford to provide more aid to low income students. Then you complain that the study has no proof for its claims. Then you just get mad at the idea that a wealthy institution is ever judged at all for how much financial aid it provides. Sounds like the very idea of financial aid angers you.

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A $500 million endowment isn’t all sitting in a cash-earning investment. For arguments sake, let’s assume half of it is, so $250 million is earning cash income.

Let’s assume 4% earnings on that $250 million portion. That generates $10 million income per year.

$10 million divided by $60k COA yields 166 full-ride scholarships. Divide that by 4 graduating classes. That means only approx 40 full-ride scholarships per graduating class. The college may elect to spread that around to more students, which means less per student.

This is not Nobel Prize level economics…

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No, my arguments are consistent, and all are true. It is you that seem not to understand the context of each point. Multiple arguments apply here.

I never said they could not afford to give more money. What I said is if they follow what the article says they will eventually lose much of their endowment - up in smoke. These are two different issues. One can give more money such as the article suggests, but the school would be slowly squeezing itself and would become much lesser of a school with much less resources.

However, if these schools want to remain as is or even improve, then they have to be wise in how they use their investment income. The one thing about scholarships and grants is that they literally and naturally have a negative return on investment. They are an automatic monetary loss. The students who get those huge scholarships and grants very rarely, if ever, donate that amount back to the school with the interest that covers the total lost income over time.

Therefore, it is true that if increasing grants and scholarships must be accounted for as ever-increasing losses to the endowment and to the school balance sheet, then increasing the amounts makes no fiscal sense.

This is also true.

The article never financially accounts for its claims that the schools can increase these grants and scholarships and still exist in the future as as they are today. And the reason the article provides no proof is because it is mathematically impossible to do because grants and scholarships are flat-out losses with negative ROI.

Now, if a school wants to increase its low income grants and scholarships at the expense of a new science building that is needed or with a reduction in capital expenditures for upkeep, then fine. But, realize that something has to give. The article pretends like nothing has to give with such an increase, which is just plain wrong.

Again, it is true that it is rather silly for other people to think they are somehow entitled to money of a PRIVATE school; money that was donated by its ALUMNI. The people complaining about more financial aid have no claim on that money. Weird - who in the world taught people that other people’s money is theirs to complain about?

I guess one can ask for more money in this area, but this is not asking the way the article is written. The article implies the schools are purposefully, even if subtle, withholding money from low income students - it is an accusation that is not warranted or proved by the article.

What I said was spending more on financial aid to the detriment of the longterm fiscal health of an institution is not smart to do. This is not anger; this is an opinion supported by economics.

Basic operating portfolio rule which also applies to colleges with endowments - One cannot sustain something by increasing one’s losses on the books beyond the average aggregate return. And since grants and scholarships are losses, each increased dollar spent in this column MUST be made as income in order to sustain the endowment.

15

Apples and Oranges.

No one pays to go to church (donations are voluntary). More importantly, no one from the public is standing by the door saying that others should pay for him to go to church.