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I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge

I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? Of course this ignores financial aid so Yale's operating costs are much less than $500 mil/year. If you're going to donate to a university your money will go much further at a small college that actually needs your money and will actually spend it rather than hoarding it. TMQ had some great articles about this topic back in the day. http://espn.go.com/nfl/story/_/page/TMQWeekFour140930/robert-griffin-iii-blaine-gabbert-why-mega-trades-work-nfl-tuesday-morning-quarterback http://espn.go.com/nfl/story/_/page/TMQWeekFour140930/robert... Halfway down.

jonknee 11y ago
> I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? It's mainly a tax on rich people. Students from lower income households don't pay that tuition.
- jqgatsby 11y ago
  I walked out of MIT with $100K in student loans, because I had the combination of 'parents who make too much money' and 'parents who had five kids and did not adequately save for their children's education'. I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.
  - jonknee 11y ago
    > I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life. A private school deciding to charge for its valuable stamp of approbal has nothing to do with it being a fair price.
  - marcoperaza 11y ago
    Whenever people talk about making 'the rich' pay for something, remember that their definition of 'the rich' usually ends up being anyone who makes more money than them.
  - whack 11y ago
    It's possible that you're one of the unlucky people who falls into the combination you described above. Unfortunately, even the best system currently available will often have cracks, and you seem to have found the one that currently exists. The vast majority of the time, kids with rich parents have a substantially blessed childhood & family-support, which justifies them having to pay substantially more in tuition fees.
    - amluto 11y ago
      I tend to dislike systems of the form "if you make/own less than $X, you get $Y benefit". It often leads to nasty non-monotonic outcomes and like this. For actual public benefits, I'd much prefer to give all the benefits to all the people and raise taxes accordingly. This means that, as a CA resident, I think I should be permitted to deduct rent even if my AGI is $38,259, and I think I should get the full Affordable Care Act subsidy regardless of my income. The rules would be simpler and my taxes would be simpler. In exchange, I would gladly pay higher taxes to make up the deficit. For public university, it's a bit messier because of state residency rules. And for private universities, this wouldn't work at all unless the government directly subsidized private education. (But maybe the government should ditch all the complicated student aid and student loan benefits and offer a blanket subsidy for education at accredited universities.)
      - marcoperaza 11y ago
        Throwing more free money at universities will just make things worse.
      - _delirium 11y ago
        The universities I know of that have free-tuition programs do phase them out gradually, to try to avoid too much weirdness that would come from a hard threshold. For example, Harvard charges no tuition to students from households making under $65,000, but above $65,000 tuition phases in slowly, reaching full tuition only at $150,000+. However I do agree your proposed solution is better. Have universalist public programs that everyone can take advantage of regardless of income (tuition-free public university, no-charge public healthcare, etc.), and then instead of mucking with means-tested benefits and aid phase-outs as a way of indirectly taxing the rich, just tax them through actual taxes, the old-fashioned way.
  - ploxiln 11y ago
    It also seems unfair when one's parents lived well within their means and prioritized saving and spending on education, so one's family has to pay all their life savings for university, while a friend's family with the same or slightly higher income but no savings is given significant financial aid. (Or maybe they're better at filling in FAFSA? My father is a self-taught accountant who later went pro (incl. classes/tests etc), but may have been too honest.)
    - asddubs 11y ago
      I mean, if tuition was free it wouldn't be unfair, because you'd both be getting it for free.
  - noonespecial 11y ago
    The price of Serious Education, like that of Serious Illness is now quoted at $ImpossibleSum and then generously negotiated down to ($EverythingYouveGot + $EverythingYouCanBorrow).
    - jimbokun 11y ago
      This is the economic issue in the U.S. right now, and the only candidate who seems to even acknowledge it is Bernie. It's a difficult issue for Hillary, whose husband oversaw implementation of some of the policies that created this environment. And all of the Republican voters seem to be more afraid of brown people possibly getting money from the government, than about whether or not they can get sick or go to school without going bankrupt.
      - deleted 11y ago
        [deleted]
      - Grishnakh 11y ago
        The Republicans aren't as bad as you think. Trump has said (vague) things about providing health care for everyone. He's said a lot of things that are a big departure from standard Republican ideology, which is why a bunch of Republicans are calling him "not a real Republican" and the party as a whole is having a major shit-fit about him possibly getting the nomination. The guy isn't really a right-winger, he's a centrist nationalist as far as I can tell. The GOP is pissed at him lately because of his foreign policy stances, because he's voiced support for non-interventionism and staying neutral on Israel. But you're absolutely right about Bernie and Hillary. Hillary, to me, isn't much different from Ted Cruz, and even more like Rubio. They're right-wing war hawks in the pocket of Wall Street, and the only things they differ on are social wedge issues that they use to get people on each side to vote for them. AFAIC, our best hope is Bernie. Cruz and Hillary will both be a disaster and lead us into another war, and Trump is a wild card and highly unpredictable, though I think he's a lot less likely to get us involved in another war than Hillary or Cruz (he royally pissed off the GOP by saying the Iraq war was stupid).
        11y ago
  - diskcat 11y ago
    > but how is that fair? Socialism is only meant to be fair if you are poor. And as you say you are rich by association.
  - kough 11y ago
    I'm in a similar situation right now: on paper my father's business owes him a lot of money that he "loaned" it from his salary, but in reality that money does not exist and it's not going into his pocket any time soon. Mix in two brothers with their own college costs, stir to taste. I took two gap years to work and save money; it's absurd to me that I'm paying full tuition price in this situation, but the financial aid office doesn't give a fuck because they know as soon as my savings run out I'll take loans.
    - rdancer 11y ago
      Your family is too proud for the business to declare bankruptcy and go through Chapter 11 debt restructuring? When you're looking to pay tens of thousands in tuition, it helps to have a smart accountant, and plan a few years ahead. Is it a little unfair that people enter adulthood without a spec of financial literacy, and are immediately taken advantage of? Yes, but if a fool and his money are easily parted, the only real solution is to lessen that foolishness.
      - estefan 11y ago
        If only these people could get some sort of... I don't know... "education" to learn how not to be so foolishly parted from their money...
        rdancer 11y ago
        After 12 years of primary and secondary school, one would think they'd have gotten some, wouldn't one?
      - kough 11y ago
        Wow, fantastic advice -- if only we weren't so financially illiterate, proud, and foolish to boot!
        rdancer 11y ago
        Why's your father's business not bankrupt then, and why are you pissing away a fortune and going into debt when you shouldn't? Add denial to the lot.
  - plandis 11y ago
    I suppose it's a question of utility. If universities truly (I doubt this is really true) cannot afford to pay everybody's tuition then how do you prioritize need? One could argue that as someone from a wealthy family that you have a decent safety net if you fail even with large student loans. You probably have a place to stay at your parents home if you really needed it. Contrast that to someone who might be poor and have the same loans as you do but perhaps they don't have their parents' illiquid assets to fall back on. This happened to me around my senior year of college. It's a scary thought that once you're done with college you need to get a job or be homeless. It lead to a lot of stress in the fall semester of my senior year while I was job hunting. It also stands to reason that if you're from a wealthy family then you had access to a good education. I can't understate how unprepared I was for college being from a poor school district even through I was in the honor classes! Poor students play a lot of catch-up in college early on. This is really hard to do when you're also trying to work 20 hours a week to afford food. I'm not saying it's fair that you have so much debt but if it's zero-sum for financial aid I can understand why you were not given any over poor students whose parents are equally not able to pay. You're not thinking about the external factors that statistically probably put you ahead over a lot of poor students. Unfortunately that is life all we can really do is make sure our kids don't have the same problems!
  - mdpopescu 11y ago
    You're all for soaking the rich, except when it applies to you?
    - JonFish85 11y ago
      Almost by definition, "the rich" in the context of who should pay more in tuition/taxes/whatever is "someone better off than me".
    - jqgatsby 11y ago
      My line there was intentionally facetious. That being said, there are people who can legitimately afford to pay $100K in tuition. I was not one of them. I am doubtful that universities are able to distinguish between the two, but currently they pretend they can.
  - 13thLetter 11y ago
    > I'm all for soaking the rich, but how is that fair? Perhaps this experience should make you rethink your support of "soaking the rich."
  - onion2k 11y ago
    The difference is that you come from a background where you see people (eg your parents) earning a good income and believe that a $100k loan is something you can actually afford in the long term. Someone from a poor background whose parents have never earned a high income would very likely see $100k debt as an impossible barrier they'll never get past, and consequently would be a lot less likely to take on the risk. If schools didn't "soak the rich" then the potential of the student from a poor background would never be realised, and humanity would be the worse for it.
    - jqgatsby 11y ago
      I'm not saying we should saddle people from poor backgrounds with the same crushing debts as the middle class folks. I don't know of another country that expects any students to take on the kind of debt burden that we take on here in the US. If they can make college affordable for everyone, even the middle class, then so can we.
  - 1stop 11y ago
    You know if you didn't want the 100k loan, you could have gone to another university...? You make being a privileged middle class kid seem like such a chore. There is always someone better then you, and there id always someone who got what you did for less. But on the flip side, you are also the someone to someone else.
    - alistairSH 11y ago
      FWIW, the total in-state cost for students at UVA is approaching $28,000/year[1]. U. of Michigan and Georgia Tech are similar. Take out the room/board fees, and you're still looking at $14,000/year just for tuition. So, even going to a top state university isn't going to keep you debt-free. Maybe not $100,000 in debt, but still a significant sum. There is definitely a "donut hole" in terms of aid available to middle-class undergraduates[2]. If you're poor, chances are you can obtain grants or other aid. If you're rich, you can pay cash and not sweat it. If you're somewhere in the middle, that aid dries up fast, but you can't write a check. [1] https://news.virginia.edu/content/board-visitors-sets-2015-16-tuition https://news.virginia.edu/content/board-visitors-sets-2015-1... [2]https://www.washingtonpost.com/news/get-there/wp/2015/01/29/middle-class-families-are-fed-up-with-their-financial-aid-options/ https://www.washingtonpost.com/news/get-there/wp/2015/01/29/...
      - elsherbini 11y ago
        I agree with your point that state schools are becoming extremely expensive for many. Georgia Tech (and all Georgia public schools) have the Hope Scholarship[1] for in-state students which pays 90% of your tuition if you meet certain academic requirements. They have the Zell Miller scholarship with higher acadmic requirements for the remaining 10%. It ends up being very good for lots of people, but the academic requirements, especially for your high school record, do introduce some socioeconomic and racial disparity with the awards. [1] https://secure.gacollege411.org/Financial_Aid_Planning/HOPE_Program/Georgia_s_HOPE_Scholarship_Program_Overview.aspx https://secure.gacollege411.org/Financial_Aid_Planning/HOPE_...
        alistairSH 11y ago
  - twoodfin 11y ago
    You don't think an MIT education is worth $100K?
    - jqgatsby 11y ago
      It is definitely worth $100K. Just because it was a rational decision from my perspective is separate from saying that the system which decided to charge me that amount is a good system.
  - chrisan 11y ago
    Technically you walked in to MIT knowing you would have $100K of debt and weighed the pros and cons and decided in the end that, yes $100K for a MIT education was worth it.
    - conceit 11y ago
      And its his decision alone that makes it worth it, indeed. Nothing to do with economic pressure.
    - jqgatsby 11y ago
      I fully concede that taking $100K in debt was my best option. Saying that I did it freely and even well-informedly is not the same thing as saying it was a fair situation.
  - Lawtonfogle 11y ago
    >but how is that fair? Having no monetary help from a family making 100K a year is still different from having no monetary help from a family making 20K. If we want fair, how is growing up in a family with poor parents fair compared to growing up in a family with rich parents? While you might be able to blame the parent for their own financial situation, you cannot blame the child. >it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life. Considering that they already had an ~18 year start of life where they likely weren't having it easier...
  - rbcgerard 11y ago
    I like that you talked about being "unfair" to rich people and fair to you in one sentence. So we should encourage people that earn decent money not to save adequately for their children's college education?
    - jqgatsby 11y ago
      I am not my parents. I did not have a say in their financial decisions. The argument you're making is equivalent to arguing that the debts of parents should be passed on to their children, a practice that was outlawed long ago.
      - rbcgerard 11y ago
        While there is theoretical merit to that line of thinking, the practical extension of that thinking is that for all intensive purposes nearly every student planning on attending college is jobless and broke (aka a high school senior) and therefore can not afford college, and thus entitled to financial aid (regardless of if their parents are billionaires or below the poverty line)
  - eli_gottlieb 11y ago
    If we had a functioning state university system, you could have gone to UMass for basically nothing.
- marcoperaza 11y ago
  That pricing structure has allowed these elite colleges to get away with gross waste and inefficiency. Imagine the scandal if Yale actually cost $50,000 a year for your average family. It'd blow up even more when people realized where all the money from tuition hikes go (hint: it's not toward hiring more professors). The people who get really screwed are those just above the threshold where they receive no or negligible financial aid.
- jimbokun 11y ago
  It's a tax on anyone whose parents have any financial assets. If your parents have next to nothing, sure, tuition will be very low. Whatever your parents do have, though, tuition will be set at the optimum value to extract as much of it they possibly can.
nemothekid 11y ago
>Tuition is ~$45,000 per student. $45,000 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?* Most schools with that size of tuition don't. Stanford (http://thinkprogress.org/education/2015/04/02/3642085/stanford-free-tuition/ http://thinkprogress.org/education/2015/04/02/3642085/stanfo...) is free is your household income is less than $120,000, and cheap from there on.
- prawn 11y ago
  I didn't know that the aid would be that significant. Abroad, we hear so much about student debt and parents saving for college fees, but I imagine there'd be a large group of families under that $120k figure.
  - allemagne 11y ago
    That's Stanford's own policy, not a standard practice for colleges in the US.
rayiner 11y ago
Yale's financial aid is extremely generous. It's free for HHI below $65k per year. It's $12,500 per year up to $150k. It's half-price up to $200k. I'd argue it's better for families making more than $200k/year to be paying in than to give them free tuition.
- huac 11y ago
  Yale, Harvard, Penn (to a lower extent) all have a no-loan financial aid policy. Cornell with its $6b endowment doesn't - and neither do many other schools - and that's ludicrous.
  - harryh 11y ago
    Harvard Endowment - 37.5B. Yale - 25.5B. Penn - 10.13B. Cornell - 6B (as you said). Harvard Undergraduates - 6,700. Yale - 5,500. Penn - 10,500. Cornell - 14,000. Maybe it's because Cornell has less money and more students than the other schools you listed? Spending 4% a year, that gives Cornell about 17k per student. It doesn't sound unreasonable to think that's just not enough to cover the tab.
- Cacti 11y ago
  That's much better than I expected. That being said, outside of a handful of extremely rich universities (and we are really talking a handful or two), most tend to "tax" the middle class more than anyone. I mean... I'm not sure if I'd consider 150k for a household middle class (probably upper middle) but in most places, again, with a few exceptions, you're basically required to pay the full tuition. In cash. After taxes. $50k a year. It's an astronomical sum for just about anyone. And these are not terrible schools, we're talking some of the top universities in the world here, sitting on tons of money. I mean, I know the gutting of the middle class is hardly news but, phew. Education costs really take it to another level.
  - ams6110 11y ago
    Tuition is tax deductible, you can also save for it tax-free (529 plans). If a family of 4 cannot save for college on $150K a year their priorities are out of balance. My parents did it and they never made half that. Put my brother and I through college with no financial aid. In-state, but still....
Pyxl101 11y ago
> [Yale] can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The purpose of research universities is to engage in scientific research, not to educate people. Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]: > But there is one misimpression that people seem to have[]: the purpose of Harvard is not to educate students. If anything, its primary purpose is to produce research and scholarly work. Nobody should be surprised that the gigantic endowment isn’t put to use in providing top-flight educational experiences for a much larger pool of students; it could be, for sure, but that’s not the goal. The endowment is there to help build new facilities, launch new research initiatives, and attract the best faculty. The purpose of an endowment is to generate an income stream forever. It's typical for the organization with an endowment to spend only what they earn in interest at most, with some preferring to spend less so that the endowment grows over time. It's possible that they're investing so well that they can afford to spend 2% every year, but that's just one cost among many costs that the university has - such as paying for its staff, its facilities (real estate, buildings, and so on) - and staff and buildings that help produce research. [1] http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/the-purpose-of-harvard-is-not-to-educate-people/ http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/...
- santaclaus 11y ago
  > The purpose of research universities is to engage in scientific research, not to educate people. Shouldn't Yale be kicking everyone's butt here, then? Yale engineering ranks a paltry number 38, with quite a few publics far ahead of it.
  - djcapelis 11y ago
    Yes. Funny, that. Turns out money can't buy everything. Especially when directed at the things that don't matter.
    - akhilcacharya 11y ago
      In the case of Yale, it does buy prestige.
jldugger 11y ago
> They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The safe withdrawal rate is set at 4 percent. Earmarking half of that 4 percent for student aid is pretty severe on the budget.
- ww520 11y ago
  Just to clarify so that people won't plan their retirement wrong, the 4% safe withdrawal rate from the Trinity study is for having at least $0 of a fund at the end of 30 years. The withdrawal rate for an indefinite fund like Yale's is much lower.
  - jldugger 11y ago
    You say that, but Wikipedia states that 4-6 percent are spent annually on operations and capital. It offers no citations, but I can produce some: Princeton (https://finance.princeton.edu/policy-library/endowment/endowment-spending/ https://finance.princeton.edu/policy-library/endowment/endow...): > The Trustees have endorsed a spending rate range of 4%-5.75% to achieve this balance. In order to enhance predictability and stability in endowment payout, the Trustees have established a standard spending rule that increases the spending distribution per unit by 5 percent per year, although the standard spending rule increase may change if necessary to maintain the spending rate within the prescribed policy band. Yale (http://giving.yale.edu/ways-to-give/endowment-fund http://giving.yale.edu/ways-to-give/endowment-fund): > Yale combines a long-term spending rate of 5.25 percent of the total endowment value with a smoothing rule that adjusts spending gradually in accordance with changes in the endowment market value. ... In January 2008, Yale announced that in the future, its endowment formula will be modified to place a floor of 4.5 percent on the expected payout rate and a ceiling of 6 percent. I might not have called it 'safe withdrawal' rate, as it conflates the two spend rates. But it's in the same ballpark. 2 percent of the endowment would be 1/3 to 1/2 the annual spend. And this all sets aside the concept of earmarks; money donated with an earmark cannot be used to offset the loss of income to the general fund.
    - ww520 11y ago
gozur88 11y ago
>They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? Oddly enough, it's possible they can't. Endowment bequests frequently come with conditions, so they don't have complete flexibility in that respect.
inthewoods 11y ago
Even worse, in my opinion, is that these institutions can continue to be considered Not for Profit organizations. Harvard is very interesting in this way - they have so much money in their endowment that they seek all kinds of investment. Real estate is one of their favorites. When they buy property, it can no longer be taxed. This is why the towns surround Cambridge hate when Harvard buys up property. Watertown, in particular, has really been furious at this trend. In Worcester, the colleges use up city resources and yet pay nothing in taxes in terms of city services.
- chrisabrams 11y ago
  Am I reading this correctly? A non-profit can buy real estate property and not pay taxes on the property? Is this investment property, or property being used for university usage?
  - tanderson92 11y ago
    It is both, it is the nature of mega universities as the operating arm of large trusts. Northwestern is receiving similar pushback from Evanston, IL.
  - hkmurakami 11y ago
    That's why churches can remain where they are, often in very desirable locations.
    - Ntrails 11y ago
      It is also why charity shops annoy people so much, they can afford to run rather easier whilst skipping out on chunks of business rates etc
      - chrisbennet 11y ago
        Who's annoyed?
        11y ago
dbjacobs 11y ago
Just to add some fact. According to Yale's financial statement [1], their operating expenses in 2015 was around $3.2 billion. So tuition doesn't come close to covering their operating costs. And it looks like they typically spend around 5% of their endowment (the spending level most foundations target because that is the minimum a foundation must spend to maintain their status). [1] http://finance.yale.edu/sites/default/files/2014-2015%20Annual%20Financial%20Report_0.pdf http://finance.yale.edu/sites/default/files/2014-2015%20Annu...
- rbcgerard 11y ago
  So glad you brought this up as well, it's one of my pet peeves (thinking tuition and expenditures are linked)...this is also pretty scary http://www.bain.com/sustainable-university/interactive.asp http://www.bain.com/sustainable-university/interactive.asp
- deleted 11y ago
  [deleted]
branchless 11y ago
Great question: what is this money for?
EGreg 11y ago
That's why they should flip the classroom
ange1a 11y ago
the problem is that when the economy falters or the government fights with itself (look at what's happening in IL) these universities would very much prefer to be self-sufficient. It isn't the only reason of course, but with the anti-intellectualism movement in america growing and the government playing more and more budget games that affect people's livelihoods I don't really blame them.
hkmurakami 11y ago
Interestingly, when Trinity College @ the University of Cambridge decided to make all tuition for its students free, the remaining colleges protested that it was "unfair" that Trinity would be able to attract the best students simply because it had more money than the others (it owns the second largest port in England, among other assets). Their policy was rescinded.
- joefarish 11y ago
  I heard another rumour that they wanted to provide free accommodation for their undergraduates as well. In 1988 they setup the Newton Trust [http://www.newtontrust.cam.ac.uk/studsupport http://www.newtontrust.cam.ac.uk/studsupport] which awards "bursaries to nearly 3000 undergraduate students every year" which seems like a pretty good use of their money.
IkmoIkmo 11y ago
Mos of these financial institutions actually have high fees that are only charged if your parents are rich. I've been surprised to see how high your income may be at some of them, and still receive near-free education. Thus the fees aren't really fees, they're fees for rich people who can afford them. And then you may wonder why you'd give a rich person free education by paying it from an endowment that, among other things, pays for the poor people's education, when the rich person can afford it. As for your note on donations, I fully agree. You really, really, don't need to donate to Harvard. But that's mostly a function of alumni networks/events of the university itself, not necessarily people going 'hey I want to donate to a university... ah well, guess I'll choose Harvard then'. So it's not a decision you'll change easily.
conceit 11y ago
Ever heard of price differentiation, is that what you allude to? Also, it's not like %2 was a small gain for stable growth. On a individual level 10.000$ per month of activity, not counting 2 months vacation per semester, would be enough for a good enough private instructor. Certainly, tuition, as in schooling, is completely covered by tuition, so it's not completely fair to throw it all in one bag. That is, of course the billions can be taken into account in a mixed cost calculation, but that would delude the elitism, wouldn't it? I agree, subsidized gratis pro bono education should be possible, but it could never be costless. Now, what about the private tutors: Wouldn't one on one instruction be a remarkable improvement over huge, passive lectures? There is the problem of quality control, but from what I can tell, this does exist too to a lesser degree in academia. It can sway into the opposite direction even, if a research professor is too far out there to be helpful, for lack of better words. A lot of undergrad classes are taught by mere grad students. There are a lot of them. Wouldn't the dialog still far outdo the lesser quality content that is communicated, because the latter relies a lot on the students understanding anyway and the sooner that reaches a certain basic level of fundamental knowledge, the better? Edit: Meaning, fundamental knowledge that is enough to allow the student to judge the progress and to also study independently, knowledge that is fundamental enough, that less than world class understanding makes virtually no difference.
rbcgerard 11y ago
Tuition is a red herring - it's a made up number. A better metric would be what is the school's operating budget? In Yale's case it's $3.2 billion...I'm not saying free tuition isn't an option for a couple of schools with mega endowments, but you're analysis misses the mark. http://finance.yale.edu/sites/default/files/2014-2015%20Annual%20Financial%20Report_0.pdf http://finance.yale.edu/sites/default/files/2014-2015%20Annu...

jonknee 11y ago

> I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? It's mainly a tax on rich people. Students from lower income households don't pay that tuition.

jqgatsby 11y ago
I walked out of MIT with $100K in student loans, because I had the combination of 'parents who make too much money' and 'parents who had five kids and did not adequately save for their children's education'. I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.
- jonknee 11y ago
  > I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life. A private school deciding to charge for its valuable stamp of approbal has nothing to do with it being a fair price.
- marcoperaza 11y ago
  Whenever people talk about making 'the rich' pay for something, remember that their definition of 'the rich' usually ends up being anyone who makes more money than them.
- whack 11y ago
  It's possible that you're one of the unlucky people who falls into the combination you described above. Unfortunately, even the best system currently available will often have cracks, and you seem to have found the one that currently exists. The vast majority of the time, kids with rich parents have a substantially blessed childhood & family-support, which justifies them having to pay substantially more in tuition fees.
  - amluto 11y ago
    I tend to dislike systems of the form "if you make/own less than $X, you get $Y benefit". It often leads to nasty non-monotonic outcomes and like this. For actual public benefits, I'd much prefer to give all the benefits to all the people and raise taxes accordingly. This means that, as a CA resident, I think I should be permitted to deduct rent even if my AGI is $38,259, and I think I should get the full Affordable Care Act subsidy regardless of my income. The rules would be simpler and my taxes would be simpler. In exchange, I would gladly pay higher taxes to make up the deficit. For public university, it's a bit messier because of state residency rules. And for private universities, this wouldn't work at all unless the government directly subsidized private education. (But maybe the government should ditch all the complicated student aid and student loan benefits and offer a blanket subsidy for education at accredited universities.)
    - marcoperaza 11y ago
      Throwing more free money at universities will just make things worse.
    - _delirium 11y ago
      The universities I know of that have free-tuition programs do phase them out gradually, to try to avoid too much weirdness that would come from a hard threshold. For example, Harvard charges no tuition to students from households making under $65,000, but above $65,000 tuition phases in slowly, reaching full tuition only at $150,000+. However I do agree your proposed solution is better. Have universalist public programs that everyone can take advantage of regardless of income (tuition-free public university, no-charge public healthcare, etc.), and then instead of mucking with means-tested benefits and aid phase-outs as a way of indirectly taxing the rich, just tax them through actual taxes, the old-fashioned way.
- ploxiln 11y ago
  It also seems unfair when one's parents lived well within their means and prioritized saving and spending on education, so one's family has to pay all their life savings for university, while a friend's family with the same or slightly higher income but no savings is given significant financial aid. (Or maybe they're better at filling in FAFSA? My father is a self-taught accountant who later went pro (incl. classes/tests etc), but may have been too honest.)
  - asddubs 11y ago
    I mean, if tuition was free it wouldn't be unfair, because you'd both be getting it for free.
- noonespecial 11y ago
  The price of Serious Education, like that of Serious Illness is now quoted at $ImpossibleSum and then generously negotiated down to ($EverythingYouveGot + $EverythingYouCanBorrow).
  - jimbokun 11y ago
    This is the economic issue in the U.S. right now, and the only candidate who seems to even acknowledge it is Bernie. It's a difficult issue for Hillary, whose husband oversaw implementation of some of the policies that created this environment. And all of the Republican voters seem to be more afraid of brown people possibly getting money from the government, than about whether or not they can get sick or go to school without going bankrupt.
    - deleted 11y ago
      [deleted]
    - Grishnakh 11y ago
      The Republicans aren't as bad as you think. Trump has said (vague) things about providing health care for everyone. He's said a lot of things that are a big departure from standard Republican ideology, which is why a bunch of Republicans are calling him "not a real Republican" and the party as a whole is having a major shit-fit about him possibly getting the nomination. The guy isn't really a right-winger, he's a centrist nationalist as far as I can tell. The GOP is pissed at him lately because of his foreign policy stances, because he's voiced support for non-interventionism and staying neutral on Israel. But you're absolutely right about Bernie and Hillary. Hillary, to me, isn't much different from Ted Cruz, and even more like Rubio. They're right-wing war hawks in the pocket of Wall Street, and the only things they differ on are social wedge issues that they use to get people on each side to vote for them. AFAIC, our best hope is Bernie. Cruz and Hillary will both be a disaster and lead us into another war, and Trump is a wild card and highly unpredictable, though I think he's a lot less likely to get us involved in another war than Hillary or Cruz (he royally pissed off the GOP by saying the Iraq war was stupid).
      - 11y ago
- diskcat 11y ago
  > but how is that fair? Socialism is only meant to be fair if you are poor. And as you say you are rich by association.
- kough 11y ago
  I'm in a similar situation right now: on paper my father's business owes him a lot of money that he "loaned" it from his salary, but in reality that money does not exist and it's not going into his pocket any time soon. Mix in two brothers with their own college costs, stir to taste. I took two gap years to work and save money; it's absurd to me that I'm paying full tuition price in this situation, but the financial aid office doesn't give a fuck because they know as soon as my savings run out I'll take loans.
  - rdancer 11y ago
    Your family is too proud for the business to declare bankruptcy and go through Chapter 11 debt restructuring? When you're looking to pay tens of thousands in tuition, it helps to have a smart accountant, and plan a few years ahead. Is it a little unfair that people enter adulthood without a spec of financial literacy, and are immediately taken advantage of? Yes, but if a fool and his money are easily parted, the only real solution is to lessen that foolishness.
    - estefan 11y ago
      If only these people could get some sort of... I don't know... "education" to learn how not to be so foolishly parted from their money...
      - rdancer 11y ago
        After 12 years of primary and secondary school, one would think they'd have gotten some, wouldn't one?
    - kough 11y ago
      Wow, fantastic advice -- if only we weren't so financially illiterate, proud, and foolish to boot!
      - rdancer 11y ago
        Why's your father's business not bankrupt then, and why are you pissing away a fortune and going into debt when you shouldn't? Add denial to the lot.
- plandis 11y ago
  I suppose it's a question of utility. If universities truly (I doubt this is really true) cannot afford to pay everybody's tuition then how do you prioritize need? One could argue that as someone from a wealthy family that you have a decent safety net if you fail even with large student loans. You probably have a place to stay at your parents home if you really needed it. Contrast that to someone who might be poor and have the same loans as you do but perhaps they don't have their parents' illiquid assets to fall back on. This happened to me around my senior year of college. It's a scary thought that once you're done with college you need to get a job or be homeless. It lead to a lot of stress in the fall semester of my senior year while I was job hunting. It also stands to reason that if you're from a wealthy family then you had access to a good education. I can't understate how unprepared I was for college being from a poor school district even through I was in the honor classes! Poor students play a lot of catch-up in college early on. This is really hard to do when you're also trying to work 20 hours a week to afford food. I'm not saying it's fair that you have so much debt but if it's zero-sum for financial aid I can understand why you were not given any over poor students whose parents are equally not able to pay. You're not thinking about the external factors that statistically probably put you ahead over a lot of poor students. Unfortunately that is life all we can really do is make sure our kids don't have the same problems!
- mdpopescu 11y ago
  You're all for soaking the rich, except when it applies to you?
  - JonFish85 11y ago
    Almost by definition, "the rich" in the context of who should pay more in tuition/taxes/whatever is "someone better off than me".
  - jqgatsby 11y ago
    My line there was intentionally facetious. That being said, there are people who can legitimately afford to pay $100K in tuition. I was not one of them. I am doubtful that universities are able to distinguish between the two, but currently they pretend they can.
- 13thLetter 11y ago
  > I'm all for soaking the rich, but how is that fair? Perhaps this experience should make you rethink your support of "soaking the rich."
- onion2k 11y ago
  The difference is that you come from a background where you see people (eg your parents) earning a good income and believe that a $100k loan is something you can actually afford in the long term. Someone from a poor background whose parents have never earned a high income would very likely see $100k debt as an impossible barrier they'll never get past, and consequently would be a lot less likely to take on the risk. If schools didn't "soak the rich" then the potential of the student from a poor background would never be realised, and humanity would be the worse for it.
  - jqgatsby 11y ago
    I'm not saying we should saddle people from poor backgrounds with the same crushing debts as the middle class folks. I don't know of another country that expects any students to take on the kind of debt burden that we take on here in the US. If they can make college affordable for everyone, even the middle class, then so can we.
- 1stop 11y ago
  You know if you didn't want the 100k loan, you could have gone to another university...? You make being a privileged middle class kid seem like such a chore. There is always someone better then you, and there id always someone who got what you did for less. But on the flip side, you are also the someone to someone else.
  - alistairSH 11y ago
    FWIW, the total in-state cost for students at UVA is approaching $28,000/year[1]. U. of Michigan and Georgia Tech are similar. Take out the room/board fees, and you're still looking at $14,000/year just for tuition. So, even going to a top state university isn't going to keep you debt-free. Maybe not $100,000 in debt, but still a significant sum. There is definitely a "donut hole" in terms of aid available to middle-class undergraduates[2]. If you're poor, chances are you can obtain grants or other aid. If you're rich, you can pay cash and not sweat it. If you're somewhere in the middle, that aid dries up fast, but you can't write a check. [1] https://news.virginia.edu/content/board-visitors-sets-2015-16-tuition https://news.virginia.edu/content/board-visitors-sets-2015-1... [2]https://www.washingtonpost.com/news/get-there/wp/2015/01/29/middle-class-families-are-fed-up-with-their-financial-aid-options/ https://www.washingtonpost.com/news/get-there/wp/2015/01/29/...
    - elsherbini 11y ago
      I agree with your point that state schools are becoming extremely expensive for many. Georgia Tech (and all Georgia public schools) have the Hope Scholarship[1] for in-state students which pays 90% of your tuition if you meet certain academic requirements. They have the Zell Miller scholarship with higher acadmic requirements for the remaining 10%. It ends up being very good for lots of people, but the academic requirements, especially for your high school record, do introduce some socioeconomic and racial disparity with the awards. [1] https://secure.gacollege411.org/Financial_Aid_Planning/HOPE_Program/Georgia_s_HOPE_Scholarship_Program_Overview.aspx https://secure.gacollege411.org/Financial_Aid_Planning/HOPE_...
      - alistairSH 11y ago
- twoodfin 11y ago
  You don't think an MIT education is worth $100K?
  - jqgatsby 11y ago
    It is definitely worth $100K. Just because it was a rational decision from my perspective is separate from saying that the system which decided to charge me that amount is a good system.
- chrisan 11y ago
  Technically you walked in to MIT knowing you would have $100K of debt and weighed the pros and cons and decided in the end that, yes $100K for a MIT education was worth it.
  - conceit 11y ago
    And its his decision alone that makes it worth it, indeed. Nothing to do with economic pressure.
  - jqgatsby 11y ago
    I fully concede that taking $100K in debt was my best option. Saying that I did it freely and even well-informedly is not the same thing as saying it was a fair situation.
- Lawtonfogle 11y ago
  >but how is that fair? Having no monetary help from a family making 100K a year is still different from having no monetary help from a family making 20K. If we want fair, how is growing up in a family with poor parents fair compared to growing up in a family with rich parents? While you might be able to blame the parent for their own financial situation, you cannot blame the child. >it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life. Considering that they already had an ~18 year start of life where they likely weren't having it easier...
- rbcgerard 11y ago
  I like that you talked about being "unfair" to rich people and fair to you in one sentence. So we should encourage people that earn decent money not to save adequately for their children's college education?
  - jqgatsby 11y ago
    I am not my parents. I did not have a say in their financial decisions. The argument you're making is equivalent to arguing that the debts of parents should be passed on to their children, a practice that was outlawed long ago.
    - rbcgerard 11y ago
      While there is theoretical merit to that line of thinking, the practical extension of that thinking is that for all intensive purposes nearly every student planning on attending college is jobless and broke (aka a high school senior) and therefore can not afford college, and thus entitled to financial aid (regardless of if their parents are billionaires or below the poverty line)
- eli_gottlieb 11y ago
  If we had a functioning state university system, you could have gone to UMass for basically nothing.
marcoperaza 11y ago
That pricing structure has allowed these elite colleges to get away with gross waste and inefficiency. Imagine the scandal if Yale actually cost $50,000 a year for your average family. It'd blow up even more when people realized where all the money from tuition hikes go (hint: it's not toward hiring more professors). The people who get really screwed are those just above the threshold where they receive no or negligible financial aid.
jimbokun 11y ago
It's a tax on anyone whose parents have any financial assets. If your parents have next to nothing, sure, tuition will be very low. Whatever your parents do have, though, tuition will be set at the optimum value to extract as much of it they possibly can.

nemothekid 11y ago

>Tuition is ~$45,000 per student. $45,000 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?* Most schools with that size of tuition don't. Stanford (http://thinkprogress.org/education/2015/04/02/3642085/stanford-free-tuition/ http://thinkprogress.org/education/2015/04/02/3642085/stanfo...) is free is your household income is less than $120,000, and cheap from there on.

prawn 11y ago
I didn't know that the aid would be that significant. Abroad, we hear so much about student debt and parents saving for college fees, but I imagine there'd be a large group of families under that $120k figure.
- allemagne 11y ago
  That's Stanford's own policy, not a standard practice for colleges in the US.

rayiner 11y ago

Yale's financial aid is extremely generous. It's free for HHI below $65k per year. It's $12,500 per year up to $150k. It's half-price up to $200k. I'd argue it's better for families making more than $200k/year to be paying in than to give them free tuition.

huac 11y ago
Yale, Harvard, Penn (to a lower extent) all have a no-loan financial aid policy. Cornell with its $6b endowment doesn't - and neither do many other schools - and that's ludicrous.
- harryh 11y ago
  Harvard Endowment - 37.5B. Yale - 25.5B. Penn - 10.13B. Cornell - 6B (as you said). Harvard Undergraduates - 6,700. Yale - 5,500. Penn - 10,500. Cornell - 14,000. Maybe it's because Cornell has less money and more students than the other schools you listed? Spending 4% a year, that gives Cornell about 17k per student. It doesn't sound unreasonable to think that's just not enough to cover the tab.
Cacti 11y ago
That's much better than I expected. That being said, outside of a handful of extremely rich universities (and we are really talking a handful or two), most tend to "tax" the middle class more than anyone. I mean... I'm not sure if I'd consider 150k for a household middle class (probably upper middle) but in most places, again, with a few exceptions, you're basically required to pay the full tuition. In cash. After taxes. $50k a year. It's an astronomical sum for just about anyone. And these are not terrible schools, we're talking some of the top universities in the world here, sitting on tons of money. I mean, I know the gutting of the middle class is hardly news but, phew. Education costs really take it to another level.
- ams6110 11y ago
  Tuition is tax deductible, you can also save for it tax-free (529 plans). If a family of 4 cannot save for college on $150K a year their priorities are out of balance. My parents did it and they never made half that. Put my brother and I through college with no financial aid. In-state, but still....

Pyxl101 11y ago

> [Yale] can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The purpose of research universities is to engage in scientific research, not to educate people. Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]: > But there is one misimpression that people seem to have[]: the purpose of Harvard is not to educate students. If anything, its primary purpose is to produce research and scholarly work. Nobody should be surprised that the gigantic endowment isn’t put to use in providing top-flight educational experiences for a much larger pool of students; it could be, for sure, but that’s not the goal. The endowment is there to help build new facilities, launch new research initiatives, and attract the best faculty. The purpose of an endowment is to generate an income stream forever. It's typical for the organization with an endowment to spend only what they earn in interest at most, with some preferring to spend less so that the endowment grows over time. It's possible that they're investing so well that they can afford to spend 2% every year, but that's just one cost among many costs that the university has - such as paying for its staff, its facilities (real estate, buildings, and so on) - and staff and buildings that help produce research. [1] http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/the-purpose-of-harvard-is-not-to-educate-people/ http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/...

santaclaus 11y ago
> The purpose of research universities is to engage in scientific research, not to educate people. Shouldn't Yale be kicking everyone's butt here, then? Yale engineering ranks a paltry number 38, with quite a few publics far ahead of it.
- djcapelis 11y ago
  Yes. Funny, that. Turns out money can't buy everything. Especially when directed at the things that don't matter.
  - akhilcacharya 11y ago
    In the case of Yale, it does buy prestige.

jldugger 11y ago

> They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The safe withdrawal rate is set at 4 percent. Earmarking half of that 4 percent for student aid is pretty severe on the budget.

ww520 11y ago
Just to clarify so that people won't plan their retirement wrong, the 4% safe withdrawal rate from the Trinity study is for having at least $0 of a fund at the end of 30 years. The withdrawal rate for an indefinite fund like Yale's is much lower.
- jldugger 11y ago
  You say that, but Wikipedia states that 4-6 percent are spent annually on operations and capital. It offers no citations, but I can produce some: Princeton (https://finance.princeton.edu/policy-library/endowment/endowment-spending/ https://finance.princeton.edu/policy-library/endowment/endow...): > The Trustees have endorsed a spending rate range of 4%-5.75% to achieve this balance. In order to enhance predictability and stability in endowment payout, the Trustees have established a standard spending rule that increases the spending distribution per unit by 5 percent per year, although the standard spending rule increase may change if necessary to maintain the spending rate within the prescribed policy band. Yale (http://giving.yale.edu/ways-to-give/endowment-fund http://giving.yale.edu/ways-to-give/endowment-fund): > Yale combines a long-term spending rate of 5.25 percent of the total endowment value with a smoothing rule that adjusts spending gradually in accordance with changes in the endowment market value. ... In January 2008, Yale announced that in the future, its endowment formula will be modified to place a floor of 4.5 percent on the expected payout rate and a ceiling of 6 percent. I might not have called it 'safe withdrawal' rate, as it conflates the two spend rates. But it's in the same ballpark. 2 percent of the endowment would be 1/3 to 1/2 the annual spend. And this all sets aside the concept of earmarks; money donated with an earmark cannot be used to offset the loss of income to the general fund.
  - ww520 11y ago

gozur88 11y ago

>They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? Oddly enough, it's possible they can't. Endowment bequests frequently come with conditions, so they don't have complete flexibility in that respect.

inthewoods 11y ago

Even worse, in my opinion, is that these institutions can continue to be considered Not for Profit organizations. Harvard is very interesting in this way - they have so much money in their endowment that they seek all kinds of investment. Real estate is one of their favorites. When they buy property, it can no longer be taxed. This is why the towns surround Cambridge hate when Harvard buys up property. Watertown, in particular, has really been furious at this trend. In Worcester, the colleges use up city resources and yet pay nothing in taxes in terms of city services.

chrisabrams 11y ago
Am I reading this correctly? A non-profit can buy real estate property and not pay taxes on the property? Is this investment property, or property being used for university usage?
- tanderson92 11y ago
  It is both, it is the nature of mega universities as the operating arm of large trusts. Northwestern is receiving similar pushback from Evanston, IL.
- hkmurakami 11y ago
  That's why churches can remain where they are, often in very desirable locations.
  - Ntrails 11y ago
    It is also why charity shops annoy people so much, they can afford to run rather easier whilst skipping out on chunks of business rates etc
    - chrisbennet 11y ago
      Who's annoyed?
      - 11y ago

dbjacobs 11y ago

Just to add some fact. According to Yale's financial statement [1], their operating expenses in 2015 was around $3.2 billion. So tuition doesn't come close to covering their operating costs. And it looks like they typically spend around 5% of their endowment (the spending level most foundations target because that is the minimum a foundation must spend to maintain their status). [1] http://finance.yale.edu/sites/default/files/2014-2015%20Annual%20Financial%20Report_0.pdf http://finance.yale.edu/sites/default/files/2014-2015%20Annu...

rbcgerard 11y ago
So glad you brought this up as well, it's one of my pet peeves (thinking tuition and expenditures are linked)...this is also pretty scary http://www.bain.com/sustainable-university/interactive.asp http://www.bain.com/sustainable-university/interactive.asp
deleted 11y ago
[deleted]

branchless 11y ago

Great question: what is this money for?

EGreg 11y ago

That's why they should flip the classroom

ange1a 11y ago

the problem is that when the economy falters or the government fights with itself (look at what's happening in IL) these universities would very much prefer to be self-sufficient. It isn't the only reason of course, but with the anti-intellectualism movement in america growing and the government playing more and more budget games that affect people's livelihoods I don't really blame them.

hkmurakami 11y ago

Interestingly, when Trinity College @ the University of Cambridge decided to make all tuition for its students free, the remaining colleges protested that it was "unfair" that Trinity would be able to attract the best students simply because it had more money than the others (it owns the second largest port in England, among other assets). Their policy was rescinded.

joefarish 11y ago
I heard another rumour that they wanted to provide free accommodation for their undergraduates as well. In 1988 they setup the Newton Trust [http://www.newtontrust.cam.ac.uk/studsupport http://www.newtontrust.cam.ac.uk/studsupport] which awards "bursaries to nearly 3000 undergraduate students every year" which seems like a pretty good use of their money.

IkmoIkmo 11y ago

Mos of these financial institutions actually have high fees that are only charged if your parents are rich. I've been surprised to see how high your income may be at some of them, and still receive near-free education. Thus the fees aren't really fees, they're fees for rich people who can afford them. And then you may wonder why you'd give a rich person free education by paying it from an endowment that, among other things, pays for the poor people's education, when the rich person can afford it. As for your note on donations, I fully agree. You really, really, don't need to donate to Harvard. But that's mostly a function of alumni networks/events of the university itself, not necessarily people going 'hey I want to donate to a university... ah well, guess I'll choose Harvard then'. So it's not a decision you'll change easily.

conceit 11y ago

Ever heard of price differentiation, is that what you allude to? Also, it's not like %2 was a small gain for stable growth. On a individual level 10.000$ per month of activity, not counting 2 months vacation per semester, would be enough for a good enough private instructor. Certainly, tuition, as in schooling, is completely covered by tuition, so it's not completely fair to throw it all in one bag. That is, of course the billions can be taken into account in a mixed cost calculation, but that would delude the elitism, wouldn't it? I agree, subsidized gratis pro bono education should be possible, but it could never be costless. Now, what about the private tutors: Wouldn't one on one instruction be a remarkable improvement over huge, passive lectures? There is the problem of quality control, but from what I can tell, this does exist too to a lesser degree in academia. It can sway into the opposite direction even, if a research professor is too far out there to be helpful, for lack of better words. A lot of undergrad classes are taught by mere grad students. There are a lot of them. Wouldn't the dialog still far outdo the lesser quality content that is communicated, because the latter relies a lot on the students understanding anyway and the sooner that reaches a certain basic level of fundamental knowledge, the better? Edit: Meaning, fundamental knowledge that is enough to allow the student to judge the progress and to also study independently, knowledge that is fundamental enough, that less than world class understanding makes virtually no difference.

rbcgerard 11y ago

Tuition is a red herring - it's a made up number. A better metric would be what is the school's operating budget? In Yale's case it's $3.2 billion...I'm not saying free tuition isn't an option for a couple of schools with mega endowments, but you're analysis misses the mark. http://finance.yale.edu/sites/default/files/2014-2015%20Annual%20Financial%20Report_0.pdf http://finance.yale.edu/sites/default/files/2014-2015%20Annu...