The very size of the endowments of top US universities should be a political issue, because these endowments make inequality worse and their sizes become ends in themselves.
Harvard has a tax-exempt endowment of $35 billion, Yale $26 billion. The endowments and fees paid to money managers are tax deductible. The per student annual taxpayer contribution to the typical community college in the US has been calculated at between $2,000 and $4,000 per student per year. For Harvard, it’s $48,000 per year. For Yale, it’s $69,000 per student per year. And for Princeton, it’s $105,000 per student per year of taxpayer subsidy.
So the taxpayer spends 50 times more subsidizing the students at Princeton than it does subsidizing the students of a typical community college.
Meanwhile, students at other colleges are carrying enormous debt loads through their 20s and even into their 30s because further education has become so expensive and there is no similar endowment to cushion the blow.
The situation is highlighted by Yale, which pays private equity firms $480 million a year (!) to handle its endowment and spends $170 million dollars on financial aid for students — while frequently raising tuition costs. As endowments grow the beneficiaries are not the students or the faculty; it is the fund managers. The emphasis seems to be on growing the fund, not advancing teaching and research and scientific enquiry.
The endowments should be subject to tax and that tax should be reserved to help poorer colleges and students. The management of those institutions, referred to on this blog on October 4th is another matter. American higher “education” is in a fine mess.
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The trouble is, if the endowments are taxed, then wouldn’t these private universities pass the costs onto the students in the form of higher fees? I think you’d have to have a UK-style cap on fees in order for that to be feasible.
Though overall you’re right. Its astonishing that the US puts up with such an unfair system. Even with financial aid in place, American students from wealthy backgrounds are far more likely to go to a top university than those from poorer backgrounds. In addition to this, far too many people go to university than is necessary for the economy to function, reducing the value of a degree and the potential prospects of non graduates. The federal government should impose a cap on university places, which will make the system more competitive. A cap will also make it cheaper for the government to subsidise further education, because there will be fewer places to subsidise. Ultimately at the moment, I don’t think American universities could afford to charge European levels of tuition fees, but the combination of a gradually reducing fee cap and the replacement of federally subsidised debt with tuition fee subsidies should make the situation much fairer than it currently is.
I thought thos was mildly enlightening:
David Bromwich worries about the coddling of students on American university campuses. But he makes his case too easy for himself by downplaying the underlying causes of their disgruntlement. Yale, where Bromwich teaches and where I was an undergraduate, remains one of the most racially segregated places I’ve ever spent time in. On the whole, in the dining halls, and in the classrooms too, white kids hung out with white kids, and black kids hung out with black kids. There was a general presumption among white students that their black peers were there only because of affirmative action. (White students tend not to grasp that they are the ones benefiting most from affirmative action: if it was all just a matter of test scores, the place would be filled with East and South Asians.) I once watched a fellow undergraduate, a black woman, speak off the cuff in a debate. She was (and still is) extraordinarily eloquent. The white boy next to me (a near stranger) leaned in and whispered: ‘I wasn’t expecting that.’ Bromwich may think that what is sometimes called ‘safety’ comes at too high a cost to freedom – and he may be right – but what he dismisses as ‘identity politics’ is often simply a demand for community membership on equal terms.
Amia Srinivasan
University College London