Campus activists and politicians have called for universities to reveal their endowment investments, but universities have refused to open their books as much as they can.
In the push for transparency, some politicians see it as a way to lower college costs, though the connection is tenuous.
Endowments, which have fewer federal regulations than other investments, sustain university operations and provide financial aid for students among other uses, according to the AP. However, public and private universities have been reluctant to give details of their investments.
“Out of 50 public and private universities asked to disclose their investments, 39 schools with combined endowments of $255 billion refused to provide a single record. Four never responded to the requests sent in September. None of the private universities, which are not subject to open-records laws, released any information,” Collin Binkley wrote. “Most public universities, which operate with taxpayer money, kept their investments secret. The universities that did provide records in most cases revealed only a small fraction of their portfolios.”
Some states, such as Michigan, exempt universities from revealing endowment investment information. Universities also cite donor privacy or structure their endowments in private foundations to avoid open-records laws.
By targeting shadowy endowments, however, activists and lawmakers aren’t doing much to improve student affordability. Billion-dollar endowments, while easy targets, are a minority of colleges.
Rep. Tom Reed (R-NY) proposed the Reducing Excessive Debt and Unfair Costs of Education Act, “which requires colleges with endowments larger than $1 billion to distribute a portion of the profits earned from this money as tuition relief for students from working middle class families.”
The bill hits hard colleges that aren’t as generous as Rep. Reed would like.
“If colleges fail to offer this amount of financial aid, colleges will face heavy tax penalties, up to and including losing their tax exempt status.”
Reed thinks the bill would bring “sunshine to this issue” and make sure students get treated fairly. “It’s just the right thing to do,” he said.
The bill would hardly affect students, however. Only about 12 percent of colleges and universities have an endowment of more than $1 billion, according to the National Association of College and University Business Officers. That’s 94 schools, which account for almost 75 percent of the total value of all university endowments.
That amount of wealth is staggering, but it’s concentrated in elite institutions that fund high-quality research, many of which also have robust financial aid programs.
“If Reed’s bill were to become law, it would require significantly more federal micromanagement of higher education and added compliance costs for the affected colleges and universities,” George Leef, director of research for the John William Pope Center for Higher Education Policy, noted.
More federal oversight of university financial-aid programs would make universities less independent, and it’d also expose them to whatever financial aid tactic is in vogue at the time, regardless of university goals or actual results.
The costs would be high, and benefits would be low, were Reed to get his way. It’s grandstanding that politicians find useful. To show constituents that they’re working to fix problem, they have to do something, and anything is better than nothing, even if it can’t fix the problem.
Greater transparency in what colleges and universities do with public funds could make colleges more responsive to rising costs, or help the public understand how higher education works. How to lower college costs, or how to spend public dollars in a more cost-effective way, however, is another matter.
