Colleges Fight Calls to Dip Further Into Endowments Congress wants universities to spend more of their endowments to reduce tuition costs, but colleges say their costs vary a great deal from year to year, and they can't hand out money. Analysts say universities are caught up in a spending binge and feel no incentive to reduce costs.
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Colleges Fight Calls to Dip Further Into Endowments

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Colleges Fight Calls to Dip Further Into Endowments

Colleges Fight Calls to Dip Further Into Endowments

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Harvard has plenty of money in the bank. It currently has an endowment of $35 billion. Second place, Yale has 22 billion. Penn in ninth place nationally still has an endowment of $6 billion. Those sums concern some members of Congress. They're demanding that schools spend more of their wealth to reduce tuition costs.

As NPR's Larry Abramson reports, school leaders are fighting back, saying it would be a disaster for lawmakers to dictate how they spend their budgets.

LARRY ABRAMSON: If you give money to your alma mater, that money is tax deductable for you, and so is the interest income for the school, whether you go to Harvard or Slippery Rock University.

Richard Vedder, of the Center for College Affordability and Productivity, says top schools probably don't need that kind of help.

Mr. RICHARD VEDDER (Director, Center for College Affordability and Productivity): We're building country clubs at some of the elite schools that are partially financed out of private monies. There are tax-exempt monies that are encouraging that.

ABRAMSON: Members of Congress are pushing schools to spend at least 5 percent of their endowments the way many nonprofits are required to do. But pay a visit to a well-endowed university and you'll see that the country club is in need of some repair.

At Johns Hopkins University in Baltimore, Adam Falk, dean of the College of Arts and Sciences, stands before one of the school's most revered buildings, Gilman Hall, a stately Georgian building named after the school's first president, Daniel Coit Gilman. The main hall is ornate, surrounded by gorgeous stained glass windows. But despite Hopkins' nearly $3 billion endowment…

Mr. ADAM FALK (Dean, College of Arts and Sciences, Johns Hopkins University): You can't get in it in a wheelchair. You can't get out of there in a fire. You can't heat it in the winter. You can't cool it in the summer. It doesn't function anymore. And it's a 90-year-old building.

ABRAMSON: So now you have this $2.8 billion gathering dust. Why can't you just take a little bit of it and fix this place up?

Mr. FALK: All of the endowments that we have are restricted in ways that would not allow us to do that. Either they are the original endowments given to the university and so they can't be spent or they are in earnings on endowments whose use is restricted. So we're not allowed legally to take the existing Hopkins endowment and use that money to rebuild this building.

ABRAMSON: Nor can the school use money to boost financial aid if it was donated, say, to fund an endowed chair. So Falk says, schools like Hopkins are rich on paper but face constant pressure to raise more funds. But many in the field say even if schools spend more of their endowments, that won't stop them from increasing tuition. The real problem, according to Christopher Morphew of the University of Georgia, is that top schools had no incentive to cut costs.

Professor CHRISTOPHER MORPHEW (Institute of Higher Education, University of Georgia): You can always spend more on a quality educational product. You never run out of ways to, you know, spend more, to either lower the student-to-faculty ratio or to make the grounds nicer.

ABRAMSON: And many say that trend trickles down from the elite schools to other institutions contributing to the spiraling cost of higher ed. Congress is responding to growing anger over the power of top schools, but Richard Vedder, who also teaches at Ohio University, says there's also fear of messing with the jewels of the educational crown.

Mr. VEDDER: The reason why America has a reputation for greatness is what's going on at Harvard, at Berkeley, at the University of Chicago, schools in this nation, most of which are very wealthy and have large endowments.

ABRAMSON: As the U.S. faces stiff competition from overseas, Congress may think twice before interfering with the one piece of the U.S. education system that works. Harvard, Yale, and other schools have recently announced plans to spend more on financial aid. Similar moves may be enough to mollify lawmakers, though that depends on whether endowments continue to experience double-digit growth.

Larry Abramson, NPR News, Washington.

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