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The Ivy League Doesn’t Need Taxpayers’ Help
- the_watcher 10y agoTax-exempt endowments seems like the absolute most logical loophole to close (perhaps a minimum size, but the point stands). They're some of the largest institutional investors in the country, yet they're taxed like a non-profit. Even if donations aren't taxed, just treat the endowments like any other institutional investor. NOTE: This should not in any way rule out additional tax reform, whatever your preferred mechanism. The point is to treat multibillion dollar institutional investors like multibillion dollar institutional investors, however we wind up choosing.
- JoshTriplett 10y ago> They're some of the largest institutional investors in the country, yet they're taxed like a non-profit. Is there a reason we shouldn't treat major educational institutions as non-profits, assuming we accept the concept of non-profits in the first place? (Note that the rules for non-profits already require spending a certain amount of the endowment every year.)
- sjburt 10y agoI think the argument is that they are much less accessible to students with less privileged backgrounds. If one views the subsidy associated with the non-profit status as a form of education spending, it's fair to ask whether that is the best use of that money.
- danhak 10y ago> I think the argument is that they are much less accessible to students with less privileged backgrounds. That's exactly backward though. The Ivy League schools all have need-blind admissions and meet 100% of demonstrated financial need (for U.S. students)
- esrauch 10y agoAnd yet the median income of the students parents at ivy league is something like $125k while the median income in America is more like $50k right?
- sokoloff 10y agoIt would be shocking to me if the profile of students applying to Ivy League schools didn't skew substantially high on median family income, highest degree attained by parents, and SAT scores. Successful parents breed (read: raise) successful children. Surely not in every case, but in aggregate. As a successful graduate of a small tech school in Cambridge, I was aided by my parents' educational bent, bias, and investments of time and money. They were aided by their parents, just as my wife and I will aid our children.
- esrauch 10y agosjburt said they are less accessible to poor students, which I was defending as true.
- sokoloff 10y agoIs accessibility best measured by: P ( student_is_poor | student_attends_ivy ) P ( applicant_is_admitted_to_ivy | applicant_is_poor ) I take the view that the latter is the better measure, but I can see people arguing that the former has some relevance.
- esrauch 10y agoThe point is that both are low, I would accept the second metric and I don't think it shows what you seen to claim it does. If you take all the applications submitted, income would be positively correlated with acceptance even though it is "needs blind". Some of that is implicit, but some of it is likely explicit (admit kids who played polo over kids who worked at McDonald's if everything else is equal)
- deleted 10y ago[deleted]
- peter303 10y agoNon profit charities MUST spend 5% of their endowments on charitable projects. Some argue universities should do this too.
- cowsandmilk 10y agoMany endowments at least aim for this. Harvard's target every year is to spend 5-5.5%. Actual spending over the last decades has been 4.2%-6.1%.
- sidek 10y agoBuilding the future doesn't count as charitable?
- hueving 10y agoNo, because you could use that same vague statement to describe Google since they are building self driving cars.
- jackcosgrove 10y ago> Is there a reason we shouldn't treat major educational institutions as non-profits, Because universities are increasingly operating like businesses, using technology transfer offices to bring in revenue and using graduate students to cut labor costs.
- the_watcher 10y agoJust their endowments. Their endowments are not even taxed on gains. As I mentioned, a good first step would just to be treating the endowments like the institutional funds the behave like. Keep donations to the school (which fund the endowment) tax-free, if you want.
- eknight15 10y agoAnyone have link to full article?
- eknight15 10y agoRelated: I wish more schools could/would adopt the Ivy League's financial aid model. Free (with room and board) if your family makes under ~$65k, and you only pay a small percentage if your family makes up to $150k - depending on the school. Stanford is free (excluding room and board) for families making under $125k - http://money.cnn.com/2015/04/01/pf/college/stanford-financial-aid/ http://money.cnn.com/2015/04/01/pf/college/stanford-financia...
- sotojuan 10y agoI'm sure it's much easier to make those policies when your endowment is $22.2 billion.
- DasIch 10y agoAlso helps that they only accept a small proportion of such students.
- tedunangst 10y agoSource?
- DasIch 10y agoThe Revisionist History podcast has two great episodes on the subject. http://revisionisthistory.com/episodes/05-food-fight http://revisionisthistory.com/episodes/05-food-fight http://revisionisthistory.com/episodes/06-my-little-hundred-million http://revisionisthistory.com/episodes/06-my-little-hundred-...
- gohrt 10y agoRevisionist History is Malcolm Gladwell's podcast, not a reliable source for anything. https://www.boston.com/news/education/2016/07/15/bowdoin-college-malcolm-gladwell https://www.boston.com/news/education/2016/07/15/bowdoin-col...
- addicted 10y agoI haven't read the article (can't get past the paywall), but based solely on the headline, if we do have to tax exempt somebody, I would rather it be the Ivy League colleges, than the university attached to the Alabama football team, or the UNC effort to exploit a loophole to get unpaid labor for its football operations. (I want to reiterate I am only commenting on the headline, since this is a pet peeve of mine, and the article may completely refute or be unrelated to my comment).
- wavefunction 10y agoI think the folks here prefer discussion of the articles rather than the headlines, but I'll hold off on downvoting your comment. I don't even know what the pet peeve is that you mention: it's unclear from how you structured that bit of your writing.
- muninn_ 10y agoWell then they should post articles that don't have paywalls.
- nickles 10y ago> The 94 schools with endowments over a billion dollars averaged 7.2% growth from 2005-15 I'm not sure what point the authors are trying to make here. The S&P 500 (with reinvested dividends) returned ~7.4% annually over the same period [0]. > That works out to roughly $2 million per student. Clearly this is a deceptive comparison. The institutions do not have $2mm to spend on each student every year. The endowment is intended to provide for each student the institution educates in perpetuity. Spending unsustainably destroys endowments, and subsequently their beneficiaries [1]. > Yet between 2010 and 2014, according to the same study, these schools received some $30 billion of taxpayer contracts, grants, direct payments, student assistance and tax exemption. In other words, federal cash and subsidies over that time averaged nearly $102,000 per student each year. Excluding the student assistance funding, the other aid provided to the schools is not necessarily relevant in a discussion about 'skyrocketing tuition'. The universities mentioned fulfill other essential roles, such as basic research, which immensely benefit society. The money allocated to these schools through the mechanisms mentioned, like grants, directly fund this work. Pretending it is being spent on undergraduate tuition is dishonest. [0] https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/ [1] http://www.nytimes.com/2013/10/12/business/ransacking-the-endowment-at-new-york-city-opera.html http://www.nytimes.com/2013/10/12/business/ransacking-the-en...
- firloop 10y agoPerhaps that could be used to justify the claim that the institutions aren't reinvesting the endowments back into their organizations.
- Fomite 10y agoI agree - using grants and contracts as part of their total number is incredibly deceptive. Much of that has nothing to do with undergraduate students, and research grants have very, very little to do with the cost of tuition.
- dba7dba 10y agoDeceptive comparison is the thing to do for msm these days.
- Hydraulix989 10y agoI received most of my financial aid for my Ivy League education from federal grants (my family made < $60k). I wouldn't have had the opportunity to attend an Ivy League college without federal aid.
- koolba 10y agoBan all this crap, eliminate parent income calculations, and put a flat price on things. Let students get their financial aid externally. It's a conflict of interest on the part of the school to pick and choose who they're giving it to. While you're at it, get rid of student loan subsidies (i.e. Government guarantees) and allow student loans to be be washed away by bankruptcy. After the initial shock of the bubble bursting when he band-aid is ripped off, you'll have a sustainable education cost structure with the added benefit that the altruism is externalized and insulated from the institutions.
- Meegul 10y agoAnd just say 'too bad' to the kids who can't afford it or get a loan because they have no co-signer with good enough credit?
- koolba 10y agoNo they can get free money from charities or loans from non profits. I'm saying it's not the governments job to do it. Nor is it a good idea for the schools to do it either. If they want to have a fund that provides money for a specific school, have it external to school and provide it to the students that attend that school. Otherwise you're hiding the costs.
- erroneousfunk 10y agoI would argue that schools don't do this because it's in their best interest to admit a certain percentage of kids who can't afford it, and bend over backwards to make sure the kids attend. If the schools fill up with ONLY rich kids with excellent academics, they're going to miss out on the poor (or middle class) kids who will clearly go on to do great things. The output will get bland, and they're leaving a huge market gap open for another educational institution to come in and sweep up these poor geniuses and build a reputation on that. You need to strike a delicate balance between the Malia Obamas, the Rothschilds, and the Ramanujans out there in order to build and maintain the reputation of the institution. Even if they're losing money, and dealing with a paperwork nightmare in the short term, it's a long term gain for them. So the schools don't want to eliminate these loans and subsidy programs, the consumers certainly don't want to eliminate them, and because of this, the government doesn't want to eliminate them -- adding more subsidies, scholarships, and increasing access to loans is an extremely popular political move. I would also argue that these subsidies provide a net economic benefit to society, by allocating educational resources to those who will get the most out of it, but that's a little more controversial.
- tgarma1234 10y agoThe schools are extremely valuable to americans as research centers and hubs of networks of power. There is ultimately no reason why Stanford or Harvard couldn't move to India or China if there were higher quality students willing to pay vastly more than American families can. The universities have the prestige, we don't. We are beneficiaries of their prestige, not the other way around. So no, I don't agree with that article. Invest in success MORE not less.
- 67726e 10y agoA university is more than a name. Harvard or Stanford aren't going anywhere.
- sidek 10y agoBut if Americans take the perspective that their premier universities should contribute tax dollars, whilst other countries fund their universities, American universities will have marginally less resources. This will compound, because international moguls who can donate to a good school in country A (and have 20℅ taxed off the top) or in country B (and have none taxed) might well prefer country B. The end result is a plummet in the Ivy League's international standing. Academics are remarkably focused on their research; prestige and nation matter little to many of thr top ones. What attracts academics are resources and colleagues. Without resources, the colleagues become worse, so both wither. Suddenly you'll have American politicians wondering why their schools aren't the best anymore.
- 67726e 10y agoThat's a nice work of speculative fiction.
- hueving 10y agoThe Harvard and Stanford names would quickly lose their prestige if they abandoned the US. Most of the prestige is derived from the citizens of the US to begin with.
- calvinbhai 10y agoLike one of the starred comments on the article points out, the government should get out of the business of education loans. Industry can easily pay for students they think are valuable. the govt should enable companies to have some sort of contract that enables a bright student to avail free education (sponsored by the company) in exchange of some duration of work with that sponsor (at market level wages). This certainly will steer education towards what the market needs. Anything that is not in clear demand could still be funded by the endowments.
- mattnewton 10y agoI disagree that industry is far-sighted enough to know what to invest in. Curriculum decided by market needs sounds like a nightmare.
- choxi 10y agoReally? Curriculum decided by government committees sounds so much worse. University computer science curricula lags behind industry by at least five years, a sizable portion of coding bootcamp students are actually CS grads because they complete their degrees without competitive and employable skills.
- notfromhere 10y agoBecause CS isn't necessarily about coding?
- mattnewton 10y agoThere are important functions of colleges and universities outside of vocational training. If vocational training is all your after you should skip schools for a market solution like bootcamps.
- flukus 10y agoAround here most universities advertise themselves as vocational training with slogans like " an education for the real world".
- harry8 10y agoTaking money away from top universities. This is an idea who's time has come? The positive externality provided by MIT, Caltech and Stanford alone in startups generated by people attracted from all over the world is G8 level wealth. Take the funding away because it's not doing anything useful. Research. Understanding. Cures. The WSJ has always had blow-hard editorials, but it's hard to imagine them writing this utter pile of excrement pre-Murdoch. We need to call it the Fox-WSJ just so we can be clear about its former reputation's place in the modern world.
- deleted 10y ago[deleted]
- hyperion2010 10y agoWho are these authors? The feds aren't "paying universities not to sped their endowments" they are paying them to take more students. All that will happen is that universities will cut funding for financial aid. Rule number one for any university endowment is that you never ever ever touch the endowment to fund ops [0]. Ever. Because the second you do the internal politics of the university go completely insane with everyone trying to get a slice of it for their pet projects. You especially don't use it to fund students tuitions. There are many people who can pay full ride for all their children. Do we really want to go back to living in a world where the vast majority of students who go to elite universities are there because their family has money? Because that is the world that this would create. 0. In fact I'd say that this is rule number one for trying to build ANY kind of lasting institution.
- Finnucane 10y agoIt would mean for one thing, that universities would have to change the way they fundraise and accept donations. A lot of endowment funds are earmarked for particular purposes. Which could be anything from an endowed professorship to a large donation for a new building. Not too long ago, Harvard got $400 million for a new engineering school. Would that same donor have been happy to give the same amount for a scholarship fund? Probably not. I work in university publishing. We have a fund that helps defray the production costs of some books. It was endowed to us for that purpose, and the funds can only be used for that. College endowments are made up of hundreds of such funds. While it would be great if we had bigger scholarship funds, people who think universities should spend down their endowments have no idea how these things actually work. And at least some portion of the government spending is going to pay tuition, at least for graduate students getting RA stipends. That money comes out of research funds.
- geebee 10y agoA while ago, the Stanford dean wrote an open letter about the decreasing amount of funding for the UC system. In this letter, the dean mentioned the value the UC system provides to Stanford, the research community in general, and the state of California. However, the Stanford Dean also said something interesting, he said that Stanford can't provide an education on the scale that the UC system does. While I agree Stanford can't match the entire UC system on scale, I have to ask, why not on a scale similar to a UC Campus? UC Berkeley, for example, has over 27,000 undergraduates, with a vastly higher percentage of low income students than Stanford or any Ivy. At Stanford and Harvard, total undergrad enrollment is below 8,000. As a result, Berkeley educates more low income students than the entire ivy leave combined. This is true of a number of UC campuses. It's clear that the elite privates have decided to keep their undergraduate populations very small. Even if they do improve the percentage of low income students, the scale is so minuscule that they can't really be large scale agents of social mobility. So, why aren't Stanford and Harvard enrolling 25,000 undergraduates? If UCB and UCLA can do this, why can't they? These institutions do enroll comparable numbers of graduate students, the big gap is in undergrads. http://blogs.berkeley.edu/2014/10/13/why-elite-private-universities-get-more-per-pupil-government-money/ http://blogs.berkeley.edu/2014/10/13/why-elite-private-unive... Because these universities get a huge amount of money from the government, and a massive tax exemption, they end up being far more heavily subsidized per student than even the elite public universities, with far less restrictions on how they are allowed to operate. I'm not absolutely against the exemption in theory, but really, why should Harvard and Stanford get to keep this massively valuable tax exemption if they're going to refuse to scale, offloading the massively important task of educating large numbers of students to state supported universities. Really, if you look at the public funding (including the favored tax status) Harvard and Stanford are essentially state supported institutions. I'd say, privates need to either scale like UCB and UCLA, or lose the exemption.