Wall Street Is Making Even More Billionaires of U.S. Colleges

"American universities are the richest they’ve ever been, with more schools than ever sitting on endowments valued at $1 billion," Bloomberg reports. "From 2009 to 2016, the number of institutions hitting the 10-figure mark increased from 55 to as many as 90. As the year ends, the bull market promises to deliver additional billion-dollar endowments, given that investment returns averaged 13.2 percent for the year ended June 30. Ivy League stalwarts such as Dartmouth College and Cornell University are being joined by newcomers including the University of Arkansas and Virginia Tech. Some of these recent arrivals are already focused on bigger numbers in the years to come."

"So with all this money sloshing around, some are wondering if students facing a future filled with debt should be getting more help. In particular, consumer advocates and politicians have asked why more endowment money isn’t going toward making college more affordable. Hearings were held in 2016 on Capitol Hill as endowment values hit record levels, and inquiries were sent to the richest 56 private colleges—those with funds over the magic $1 billion mark. More than a year later, the Republican-controlled Congress has passed a tax bill that includes a new levy on endowment investment gains.

Universities contend that, while much of their endowment wealth is earmarked by donors, they do use those funds to provide discounted tuition to low- and middle-income families. Ivy League schools in particular point to statistics showing high levels of financial aid and relatively low levels of debt among their students. The new tax will damage that effort, wrote John Coatsworth, a provost at Columbia University in New York, and Lee Goldman, chief executive of its medical center. 

'Such a tax on endowment earnings would reduce resources available for student financial aid, faculty salaries and other critical needs,' they warned in a joint letter to the Ivy League school’s community. Arguing against the tax may be missing the point when it comes to defending fat endowments, however. With parents these days starting college funds before kindergarten even starts, the optics of a $1 billion endowment run by high-paid administrators aren’t favorable for higher education. 'They’re under a pretty intense amount of pressure, and they haven’t done a lot to get in front of it,' said Andy Rotherham, co-founder and partner of Bellwether Education Partners, a nonprofit that awards grants to improve education at all levels. 'They don’t generate a lot of sympathy.'"

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Publication Date: 12/22/2017

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