… I’m thinking that if this bill passes (it won’t; we’re just playing around), Harvard will have a whopper of a problem on its hands.
A U.S. Congressman is floating an idea that’s likely to find opposition from the wealthiest colleges: devote 25 percent of a school’s annual endowment income for financial aid or lose tax-exempt status.
So I figure this would mean Harvard would have to give out close to $500 million each year in financial aid. How the hell do you dispense that much money? Where do you find the students?
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I mean, maybe I’m wrong. In 2012, “Harvard spent about $242 million from its endowment on tuition assistance.” Maybe they’ve doubled it since then? (UD can’t find current figures.)
Even more appallingly, under this bill Harvard might be forced to reduce the tens of millions of dollars it pays many of its fund managers. Talk about income inequality!
January 9th, 2016 at 8:57PM
Actually, there would be an easy solution for Harvard. Raise the sticker price of tuition to $100K/year or higher. Scale up financial aid accordingly. Then reimburse yourself $500M from the endowment for relief of general funds in the operating budget. The very wealthy who are above the financial aid ceiling will still pay for the prestige. The income ceiling for financial aid would go up commensurately, and just about everyone would get a discount. For family incomes up to about $130K, Harvard could probably offer a free ride. You’d have to adjust the spending rate on the endowment, and the money managers wouldn’t be comfortable with this, but since money is fungible and such a large part of Harvard’s operating budget is coming from endowment earnings anyway, this would probably be smoothed out in the long term as the money flows were shifted around. This may be simplistic, but I’d predict that some variant of this approach would be the result if a regulation like this were to come into effect. Good intentions almost always result in tuition going up, never down.
January 10th, 2016 at 1:19AM
Polish Peter: Just jack up the tuition! I hadn’t thought of that. Simple, elegant.
January 10th, 2016 at 8:05AM
I’m not necessarily a friend of Harvard, but it already does something very close to your financial aid proposal. If your family income is below 150K, the max they ask you to pay is 10% of your income:
https://college.harvard.edu/financial-aid/how-aid-works
January 10th, 2016 at 6:21PM
Yep, they’d raise the tuition.
A clever lawmaker would write in a restriction on how much tuition could go up a year (yeah, yeah, there’d be ways around that – they could charge more for food!) – but what about REWARDING Ivies that use their endowments to pay the tuition for students at state universities? How about a Harvard Foundation Scholarship at one of the UMass campuses?
January 10th, 2016 at 11:13PM
This proposal would, in effect, give more money to well-off people. This is of course the basic program of at least one of our great political parties; I am nonetheless constantly surprised by the broad appeal of such pseudo-populism.
January 11th, 2016 at 9:15AM
Mr Punch: I see it as Step One on the road to Harvard’s well-deserved loss of its tax exemption.
January 11th, 2016 at 2:41PM
Michael: The problem with any charitable options is that this would threaten the “rainy day” narrative Harvard, Yale, and Princeton have been putting out for so long: Sure, it looks like a lot of money, but it’s a rainy day fund. You never know when you’re going to need an extra ten billion.