Big boost to college aid unlikely despite moves by Yale and Harvard
Most schools don't have the funds to follow the lead of well-endowed universities.
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The University of Chicago, which has over $6 billion in its endowment, only managed to reduce loans for a quarter of its students after an alumnus donated $100 million for that purpose. Trying to further lower the price of attendance could risk hurting the quality of education offered, says Michael Behnke, vice president and dean of college enrollment at the university.Skip to next paragraph
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"We particularly have a very expensive mode of education with our small, discussion-style classes," he says. "It's very hard to economize there without switching to a large lecture format, which a place like University of Chicago certainly doesn't want to do."
Critics have called for schools to use more of their endowments for tuition relief. At least 62 schools have endowments worth over $1 billion and Sen. Charles Grassley (R) of Iowa argues that these resources should be used to keep prices down.
"Parents and students have a right to expect these universities with big endowments to end the hoarding and start the helping with skyrocketing tuition costs," said Senator Grassley in a press release Monday. He's also urged Congress to consider creating certain payout requirements for universities with large endowments.
For years these endowments were conservatively invested and considered untouchable, says Lynne Munson, a research fellow at the Center for College Affordability and Productivity. In recent years, however, many universities have modernized investment strategies and recruited top financial managers to control their endowments, drastically increasing their size. But "they still have a Depression-era, save-for-a-rainy-day [mentality]," says Ms. Munson. "At this point it would require a rainy day of Noah's proportion to spend this money."
Still, donor restrictions can make managing an endowment difficult. Some donors earmark funds for specific purposes, such as research. Even if a donation is designated for financial aid, it may be for very specific types of students in special programs, such as a Portuguese drama major.
"Not every endowment dollar is available for student financial aid and that may be something the institution has relatively small amounts of control over," says Matt Hamill, senior vice president at the National Association of College and University Business Officers.
Despite Harvard and Yale's aid initiatives, like virtually every other college and university in the US they, too, will raise the overall cost of tuition.
"We'd all like to see the tuition [cost] slow down, but a good college education is expensive," says USC's Mr. Lucido.