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> 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
by 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.
- Retric 10y ago2 million * .04 = 80k/year.
- nickles 10y agoFirst and foremost, that rule of thumb is meant for retirees, not institutions looking to sustain themselves in perpetuity. Secondly, a 4% withdrawal rate offers a decently high chance that the principal can be drawn upon for 30 years. Withdrawing 80k per student per year would be exceptionally irresponsible on the part of the school administrators.
- Retric 10y agoI doubt they would actually need 80k/year per student preserving their capital. More broadly though, what's the point of a foundation if you never extract anything. Further they will receive donations and tuition, but they clearly don't need 'help'. In fact not having a long term plan to use their foundation is more irresponsible as they really could just lose all that money in 200 years without using it for anything.
- nickles 10y ago> what's the point of a foundation if you never extract anything These institutions do utilize their endowments. As nonprofit entities they are only allowed, by law, to retain a portion of their gains. > Further they will receive donations and tuition, but they clearly don't need 'help'. At least some are currently operating at a deficit. > In fact not having a long term plan to use their foundation is more irresponsible as they really could just lose all that money in 200 years without using it I hope you see that there's a contradiction in that statement. You're encouraging rampant short term spending while simultaneously claiming centuries old institutions have no long term plan.
- Retric 10y agodo utilize their endowments Not really, if they receive donations of X and take less than X out of their foundation every year they are not utilizing their endowment while complying with the law. > At least some are currently operating at a deficit. Good, if none of them every operate at a deficit they are not pulling enough money out. On average you should draw down an endowment so it's growth over 20 years is just below inflation letting new donations top it off. PS: Your model of indefinite investment fails the societal instability test. There are no fortunes from even just 3,000 years ago because institutions are not stable. Further, people may not exist in even 100 years so investing for the ultra long term is a mistake.