February 11, 2008
By Carlos Santos
CHARLOTTESVILLE — The University of Virginia’s endowment grew 20.8 percent — from $3.6 billion to $4.4 billion last year — yet the school still increased in-state tuition by about 8.3 percent to about $8,500 last year.
Virginia Tech’s endowment grew 17.3 percent — from $447 million to $525 million — yet the school’s in-state tuition increased by 6.1 percent to $7,397.
The College of William and Mary’s endowment grew 19.2 percent from $492 million to $586 million, yet its in-state tuition increased by 7.1 percent to $9,164.
Public and private college endowments are getting fatter — two schools in Virginia boast totals over $1 billion — but don’t expect those riches to reduce tuition, at least at public institutions.
Some U.S. senators are trying to find out why.
“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” Sen. Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee, said recently. “We need to start seeing tuition relief for families go up just as fast.”
A college business officers’ group recently reported on endowments at nearly 800 public and private colleges in the nation, including most public and some private colleges in Virginia.
U.Va.’s $4.4 billion was the largest endowment by far in the state for fiscal 2007. The University of Richmond, a private school with about $1.65 billion, had the second largest total, according to the National Association of College and University Business Officers.
“U.Va. has grown its endowment over time, through the generosity of its donors and generally strong market performance,” Yoke San Reynolds, vice president and chief financial officer of U.Va., said in an e-mail to The Times-Dispatch.
Overall, some 76 colleges and universities in the country had endowments of $1 billion or more in the last fiscal year, according to the analysis. Harvard had the largest endowment at $34.6 billion and Yale the second largest with $22.5 billion.
Those endowments have prompted concern among members of the Senate committee about the growing cost of higher education.
The committee has requested information from the nation’s 136 wealthiest schools — including U.Va., W&M and UR. The senators want to know how endowments are used, how financial aid is given and how much tuitions have gone up in recent years.
School officials respond that endowments are only loosely tied to tuition. They note that many donors earmark contributions for particular projects such as buildings, cancer research or chaired professorships.
Sam Jones, vice president for finance at W&M, said the “lion’s share of our endowment is restricted.” The same holds true for other schools, according to officials there.
U.Va.’s Reynolds wrote, “Some of our endowments are established to provide financial aid and we use the payout accordingly. However, we cannot spend the distribution from an endowment for cancer research to reduce tuition.”
Steven Roy Goodman, an educational consultant in Washington and author of a book on college admissions, is critical of how schools hoard endowments.
“While universities are bragging about the size of their endowments, middle-class families are suffering,” he said. “Many universities claim they’re saving for the future and it’s true. But it’s not in society’s best interest for universities to sack away millions and billions of dollars when students need the money now.”
School officials say, however, they must be careful to protect their endowments that may see a negative return during economic turndowns. So most schools spend only a small percentage of their endowment each year.
Virginia Tech spokesman Larry Hincker said that while his school’s endowment seems huge, the revenue it generates is not, relatively speaking.
“In our case, about half of the endowment is dedicated to scholarships, or about $250 million. That $250 million would throw off about $12 million in earnings to be applied to the tuition bills. Compare that against the $442 million it takes to run the educational and general operation of the university and you can see that it’s only a small portion.”
Hincker argues that “tuition is going up because state support is going down.”
Dan Hix, finance policy director for the State Council of Higher Education for Virginia, suggested that was partially true, though state funding of colleges is complex.
“Since 2004, general funding to higher education has been significant,” Hix said. “But because of state budget cuts, in this current year there’s virtually no increase over 2007.”
Private schools use endowments differently. UR spokesman Brian Eckert said “the size of the endowment directly affects how much tuition is charged.”
Though UR’s endowment is large, Eckert maintained that the $37,610 yearly tuition is not high “for the quality of education” it provides. By contrast, Harvard’s tuition is about $45,000.
Eckert said two-thirds of UR’s students receive some form of financial aid: “It is through endowment earnings, for example, that we can offer Virginia students whose family incomes are less than $40,000 the opportunity to attend the university free of charge.”
The Senate committee, which influences tax policy, wants schools to use more of their endowment money for financial aid and is threatening to make schools spend at least 5 percent of their endowments each year, as foundations must.
W&M said it spent 4.75 percent of its endowment in fiscal 2007-08. Virginia Tech said it spent 5 percent of its endowment and U.Va. said it spent 4.5 percent of its endowment. Eckert said UR is still compiling data on its spending rate.
But Goodman says rich colleges need to spend more to help not only poor and middle-class students but also graduate teaching assistants, poorer colleges and even high schools.
“If universities take a leadership role in improving education in America, it behooves them to spend more,” he said.