7 ms·

- 1B in donations at 5% APR conservatively invested will yield 50M every year. - At yearly tuition rate of 59K the earned interest is enough to pay for 850 stu

- 1B in donations at 5% APR conservatively invested will yield 50M every year. - At yearly tuition rate of 59K the earned interest is enough to pay for 850 students without drawing down the invested principal. - Albert Einstein college of medicine admits about 150 freshmen every year and medical school is 4 years long. So at any given time there are 600 students studying medicine at this school. It seems to me that simply earned interest on this donation should be enough to allow students to attend this school free of tuition indefinitely.

sergiotapia 3y ago
Beautiful, I hope admin bloat doesn't eat the whole enchilada.
anonym29 3y ago
It's enough not only for that, but to gradually expand the number of students they can afford to admit tuition-free into the future (strictly on interest), as well, should the desire to do so ever arise.
- delfinom 3y ago
  Given that the AMA cartel sets artificial quotas on med school admissions per school, it's not that simple lol
  - verteu 3y ago
    I don't think that's accurate. From my research, the bottleneck is residencies, whose funding is determined by Congress [1]. The AMA has supported laws to increase residencies, such as "H.R. 2389/S. 1302, the Resident Physician Shortage Reduction Act" [2]. The paper "Physician workforce in the United States of America: forecasting nationwide shortages" [3] mainly blames an aging population and too-slow growth in the number of "residents and fellows". edit: Found a dissenting view here [4], its main reference seems to be [5]. [1] https://www.washingtonian.com/2020/04/13/were-short-on-healthcare-workers-why-doesnt-the-u-s-just-make-more-doctors/ https://www.washingtonian.com/2020/04/13/were-short-on-healt... [2] https://www.ama-assn.org/system/files/2024-nac-action-kit-gme-physician-workforce.pdf https://www.ama-assn.org/system/files/2024-nac-action-kit-gm... [3] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7006215/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7006215/ [4] https://www.motherjones.com/kevin-drum/2013/11/its-doctors-who-control-number-doctors-america-not-government/ https://www.motherjones.com/kevin-drum/2013/11/its-doctors-w... [5] https://washingtonmonthly.com/2013/06/19/first-teach-no-harm/ https://washingtonmonthly.com/2013/06/19/first-teach-no-harm...
    - bradleyjg 3y ago
      > whose funding is determined by Congress There’s no law forbidding you, a state government, a local government, an insurance company, the AARP, or anyone else from funding a residency.
      - verteu 3y ago
        Good point - I don't see why they're subsidized by the federal gvt at all, rather than the resident, the hospital, the AMA, etc.
        whatshisface 3y ago
        Med students don't have a lot of money, and hospitals are actually there (from their perspective, at least) to make money. The AMA doesn't have a lot of extra money either.
        bradleyjg 3y ago
        They don’t have a lot of money yet. They have a very high amount of lifetime earning potential compared to their peers in other countries (yes, even after debt service and malpractice insurance.)
        esoleyman 3y ago
        Are you seriously asking residents to subsidize their own training working 60-80 hours a week [1] and being paid maybe $20-25/hr for 3-7 years while the hospitals make money from their services? If that were the case, then the only ones who would put up with such a system would be those who have rich families to back them up. I came from a blue collar background and my family could not help subsidize my training and I could not afford to live, make rent, or afford food if I had to pay for my training as well. There are so many other things that you are completely glossing over including annual income between generalists vs specialists, pediatricians vs non-pediatricians, reimbursement inequality from Medicare (has not kept up with inflation and is ~40% below inflation), Medicaid pays at best 10-15% on the dollar, and so on. American physicians also work almost teice as many hours as their European counterparts which would increase their incomes. [1] it’s considerably more because if you report it then the program can be in danger and lose its credentialing
bombcar 3y ago
Or another way to look at it, you only need $50m a year to be the "equivalent" of a billion dollar endowment, and $50m a year is the budget of a smallish county.
- ksherlock 3y ago
  There would seem to be about 10 countries with a budget of $50 million or less and most of those are islands you've never heard of with a population under 2,000. https://en.wikipedia.org/wiki/List_of_countries_by_government_budget https://en.wikipedia.org/wiki/List_of_countries_by_governmen... In the US, $50 million would be closer to the budget of a small city (~50,000 people.)
  - bombcar 3y ago
    Which is why I said “small county”. A county in the US is a division made up of the land around some cities.
deleted 3y ago
[deleted]
laweijfmvo 3y ago
Let's hope the tuition (and all other costs at the university) don't magically start going up now that they have all that money flowing around...
- et-al 3y ago
  Cynically, I'm concerned administrative bloat will catch up in 5-10 years and they'll have no choice but to charge students again.
  - hx8 3y ago
    I give it closer to 20 years, but I agree.
- earthwalker99 3y ago
  Don't worry about that! It turns out capitalists are wonderful people so they deserve it!
- gonzo41 3y ago
  This will happen. Count on it.
- mixdup 3y ago
  Well, given the numbers in the parent comment they should have a surplus of $14.7 million yearly, so they could just let the surplus go back into the endowment and that would help keep up with inflation
- thret 3y ago
  Hopefully the donation was made with sufficient fine print to avoid this eventuality.
fisherjeff 3y ago
Well they won’t touch the principal so long as tuition inflation stays below about 1.5%
Systemling0815 3y ago
[dead]
happytiger 3y ago
As long as they can reinvest the extra to keep up with inflation. It’s a reminder of what can be done when billionaires give back and pass it through to society instead of passing it along to their heirs. This kindness is going to change the world and provide doctors that will treat and help hundreds of thousands.
nshelly 3y ago
Yes, great win all round, and also can help save on administrative costs. Poetically it was Einstein who said: Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.
farseer 3y ago
There is no risk free 5% yearly return. The current interest rates may be temporary and there is inflation that erodes the 50M and the Principal amount.
- mgiampapa 3y ago
  On a large scale a 5% average return is very conservative. No interest rates won't stay where they are, but no one would invest an endowment just by putting it a HYSA.
  - JumpCrisscross 3y ago
    > On a large scale a 5% average return is very conservative Any return above GDP growth is not conservative. On average, real world GDP has grown at 3 to 5% per year since 1964 [1]. (We use real GDP because university costs will increase with inflation.) 600 students would have paid $35.4mm in tuition a year at $59,000 per year. That's a 3.54% drawdown per annum, right in line with real GDP growth. A 4 to 5% real return target is doable, but not conservative and certainly not a figure with a lot of margin for error. [1] https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate https://www.macrotrends.net/countries/WLD/world/gdp-growth-r...
    - Emma_Goldman 3y ago
      Growth is a useless indicator. The whole point of Piketty's argument is that the return on capital tendentially outstrips the rate of growth, and that large investors have access to especially high return assets. The OP is right that a 5% average annual return is conservative.
      - JumpCrisscross 3y ago
        > Growth is a useless indicator. The whole point of Piketty's argument is that the return on capital tendentially outstrips the rate of growth I'll sidestep that Piketty measures wealth and calls it capital. Because that observation says nothing about how risk is distributed across those returns. > large investors have access to especially high return assets $1bn doesn't make for a "large investor" in institutional terms. > OP is right that a 5% average annual return is conservative No, they are not. There are objective measures for this. I've worked closely with endowments the world over. A manager pitching a 5% target return on a fund with a 3.5% annual drawdown as conservative would be fired. A banker pitching the same would be subject to professional sanctions.
amirhirsch 3y ago
Michael Saylor can sell enough Bitcoin to make MIT tuition-free. We should pressure him.
- lowkey 3y ago
  MIT's existing endowment is nearly $30 Billion. Why single out a particular private individual or his publicly traded company when you could simply pressure the institution itself to make tuition free?
- stephen_g 3y ago
  Sure, but surely you'd have to dispose that much bitcoin over a really, really long time to not seriously move the price down... People might be disappointed at the amount of real money actually flowing around the cryptocurrency markets...
IG_Semmelweiss 3y ago
opportunity missed. She should have made the gift contingent on keeping tuition costs indexed at 2023 level plus a tiny fraction of inflation say 0.5% Then the real challenge would be very interesting - what they could cut every year to keep the program going.

sergiotapia 3y ago

Beautiful, I hope admin bloat doesn't eat the whole enchilada.

anonym29 3y ago

It's enough not only for that, but to gradually expand the number of students they can afford to admit tuition-free into the future (strictly on interest), as well, should the desire to do so ever arise.

delfinom 3y ago
Given that the AMA cartel sets artificial quotas on med school admissions per school, it's not that simple lol
- verteu 3y ago
  I don't think that's accurate. From my research, the bottleneck is residencies, whose funding is determined by Congress [1]. The AMA has supported laws to increase residencies, such as "H.R. 2389/S. 1302, the Resident Physician Shortage Reduction Act" [2]. The paper "Physician workforce in the United States of America: forecasting nationwide shortages" [3] mainly blames an aging population and too-slow growth in the number of "residents and fellows". edit: Found a dissenting view here [4], its main reference seems to be [5]. [1] https://www.washingtonian.com/2020/04/13/were-short-on-healthcare-workers-why-doesnt-the-u-s-just-make-more-doctors/ https://www.washingtonian.com/2020/04/13/were-short-on-healt... [2] https://www.ama-assn.org/system/files/2024-nac-action-kit-gme-physician-workforce.pdf https://www.ama-assn.org/system/files/2024-nac-action-kit-gm... [3] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7006215/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7006215/ [4] https://www.motherjones.com/kevin-drum/2013/11/its-doctors-who-control-number-doctors-america-not-government/ https://www.motherjones.com/kevin-drum/2013/11/its-doctors-w... [5] https://washingtonmonthly.com/2013/06/19/first-teach-no-harm/ https://washingtonmonthly.com/2013/06/19/first-teach-no-harm...
  - bradleyjg 3y ago
    > whose funding is determined by Congress There’s no law forbidding you, a state government, a local government, an insurance company, the AARP, or anyone else from funding a residency.
    - verteu 3y ago
      Good point - I don't see why they're subsidized by the federal gvt at all, rather than the resident, the hospital, the AMA, etc.
      - whatshisface 3y ago
        Med students don't have a lot of money, and hospitals are actually there (from their perspective, at least) to make money. The AMA doesn't have a lot of extra money either.
        bradleyjg 3y ago
        They don’t have a lot of money yet. They have a very high amount of lifetime earning potential compared to their peers in other countries (yes, even after debt service and malpractice insurance.)
        esoleyman 3y ago
        Are you seriously asking residents to subsidize their own training working 60-80 hours a week [1] and being paid maybe $20-25/hr for 3-7 years while the hospitals make money from their services? If that were the case, then the only ones who would put up with such a system would be those who have rich families to back them up. I came from a blue collar background and my family could not help subsidize my training and I could not afford to live, make rent, or afford food if I had to pay for my training as well. There are so many other things that you are completely glossing over including annual income between generalists vs specialists, pediatricians vs non-pediatricians, reimbursement inequality from Medicare (has not kept up with inflation and is ~40% below inflation), Medicaid pays at best 10-15% on the dollar, and so on. American physicians also work almost teice as many hours as their European counterparts which would increase their incomes. [1] it’s considerably more because if you report it then the program can be in danger and lose its credentialing

bombcar 3y ago

Or another way to look at it, you only need $50m a year to be the "equivalent" of a billion dollar endowment, and $50m a year is the budget of a smallish county.

ksherlock 3y ago
There would seem to be about 10 countries with a budget of $50 million or less and most of those are islands you've never heard of with a population under 2,000. https://en.wikipedia.org/wiki/List_of_countries_by_government_budget https://en.wikipedia.org/wiki/List_of_countries_by_governmen... In the US, $50 million would be closer to the budget of a small city (~50,000 people.)
- bombcar 3y ago
  Which is why I said “small county”. A county in the US is a division made up of the land around some cities.

deleted 3y ago

[deleted]

laweijfmvo 3y ago

Let's hope the tuition (and all other costs at the university) don't magically start going up now that they have all that money flowing around...

et-al 3y ago
Cynically, I'm concerned administrative bloat will catch up in 5-10 years and they'll have no choice but to charge students again.
- hx8 3y ago
  I give it closer to 20 years, but I agree.
earthwalker99 3y ago
Don't worry about that! It turns out capitalists are wonderful people so they deserve it!
gonzo41 3y ago
This will happen. Count on it.
mixdup 3y ago
Well, given the numbers in the parent comment they should have a surplus of $14.7 million yearly, so they could just let the surplus go back into the endowment and that would help keep up with inflation
thret 3y ago
Hopefully the donation was made with sufficient fine print to avoid this eventuality.

fisherjeff 3y ago

Well they won’t touch the principal so long as tuition inflation stays below about 1.5%

Systemling0815 3y ago

[dead]

happytiger 3y ago

As long as they can reinvest the extra to keep up with inflation. It’s a reminder of what can be done when billionaires give back and pass it through to society instead of passing it along to their heirs. This kindness is going to change the world and provide doctors that will treat and help hundreds of thousands.

nshelly 3y ago

Yes, great win all round, and also can help save on administrative costs. Poetically it was Einstein who said: Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.

farseer 3y ago

There is no risk free 5% yearly return. The current interest rates may be temporary and there is inflation that erodes the 50M and the Principal amount.

mgiampapa 3y ago
On a large scale a 5% average return is very conservative. No interest rates won't stay where they are, but no one would invest an endowment just by putting it a HYSA.
- JumpCrisscross 3y ago
  > On a large scale a 5% average return is very conservative Any return above GDP growth is not conservative. On average, real world GDP has grown at 3 to 5% per year since 1964 [1]. (We use real GDP because university costs will increase with inflation.) 600 students would have paid $35.4mm in tuition a year at $59,000 per year. That's a 3.54% drawdown per annum, right in line with real GDP growth. A 4 to 5% real return target is doable, but not conservative and certainly not a figure with a lot of margin for error. [1] https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate https://www.macrotrends.net/countries/WLD/world/gdp-growth-r...
  - Emma_Goldman 3y ago
    Growth is a useless indicator. The whole point of Piketty's argument is that the return on capital tendentially outstrips the rate of growth, and that large investors have access to especially high return assets. The OP is right that a 5% average annual return is conservative.
    - JumpCrisscross 3y ago
      > Growth is a useless indicator. The whole point of Piketty's argument is that the return on capital tendentially outstrips the rate of growth I'll sidestep that Piketty measures wealth and calls it capital. Because that observation says nothing about how risk is distributed across those returns. > large investors have access to especially high return assets $1bn doesn't make for a "large investor" in institutional terms. > OP is right that a 5% average annual return is conservative No, they are not. There are objective measures for this. I've worked closely with endowments the world over. A manager pitching a 5% target return on a fund with a 3.5% annual drawdown as conservative would be fired. A banker pitching the same would be subject to professional sanctions.

amirhirsch 3y ago

Michael Saylor can sell enough Bitcoin to make MIT tuition-free. We should pressure him.

lowkey 3y ago
MIT's existing endowment is nearly $30 Billion. Why single out a particular private individual or his publicly traded company when you could simply pressure the institution itself to make tuition free?
stephen_g 3y ago
Sure, but surely you'd have to dispose that much bitcoin over a really, really long time to not seriously move the price down... People might be disappointed at the amount of real money actually flowing around the cryptocurrency markets...

IG_Semmelweiss 3y ago

opportunity missed. She should have made the gift contingent on keeping tuition costs indexed at 2023 level plus a tiny fraction of inflation say 0.5% Then the real challenge would be very interesting - what they could cut every year to keep the program going.