A column by Steven Roy Goodman in the Boston Globe questions whether Harvard may have snookered Congress by enacting a seemingly altruistic financial-aid plan for the middle class that actually saves the university over $200 million each year. Senator Grassley and others proposed that Congress ought to require that “universities spend 5 percent of their endowment funds every year, as private foundations are required to do.” Goodman writes:
Harvard estimates that it may spend an additional $22 million to assist families earning between $60,000 and $180,000 a year. Under the plan, families with incomes of $120,000 to $180,000 will be asked to kick in 10 percent of their income toward tuition. … Even if the initiative does total $22 million, compare this with the figure Harvard could be required to pay if Congress mandated that Harvard and other universities spend 5 percent of their endowment income. Five percent of $35 billion is $1.75 billion. Harvard’s Alumni Affairs and Development Office reported that the university spent 4.3 percent of the endowment in fiscal year 2006. The difference between 4.3 percent and 5 percent might not seem significant at first glance, but the savings to Harvard was $245 million in one year alone. Quite a trick. Spend at best a tiny fraction of the endowment, while reducing growing political pressure in Washington and around the country that could potentially cost the university more than 10 times the additional amount of financial aid.
Then again, there’s always the possibility that Harvard will spend an extra $200 million on scientific research next year and come close to shelling out 5 percent of its endowment. The AP reported yesterday that Yale plans “to pay out $1.15 billion of its $22.5 billion endowment in the next fiscal year.” Yale didn’t specify how much will be spent on financial-aid and research respectively, but $1.15 billion translates to 5.1 percent of its total endowment. Not too shabby.
