University Endowments, Tuition Relief and Charitable Restrictions

Carlos Santos with the Times-Dispatch has joined Bacon’s Rebellion and others who experience cognitive dissonance from the fact that Virginia’s public universities continue to jack up tuitions even as their endowments soar to record levels. The University of Virginia endowment, he notes, grew by roughly $800 million last year even as the university hiked tuitions by 8.3 percent. The experience at Virginia Tech and William & Mary were comparable. (If this sounds familiar, it may be because you read it here.)

United States senators are paying attention, too. Santos quotes Sen. Charles E. Grassley, R-Iowa, as follows: “Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up. We need to start seeing tution relief for families go up just as fast.”

Santos does make a couple of valid points in defense of the universities. Much of a university’s endowment is restricted — people attach conditions to their gifts. As Yoke San Reynolds, vice president and CFO of UVa, says, “We cannot spend the distribution from an endowment for cancer research to reducing tuition.”

Fair enough. The next step is getting more information from universities about their endowments. How much of the endowment is restricted, and how much is not? Inquiring alumni and donors want to know.

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  1. I believe the AccessUVA program guarantees that qualifying students will have at most one year of tuition funded through student loans upon graduation.

  2. Anonymous Avatar

    Typical Times-Dispatch these days under the Silvestri-Procter regime. Reporting on important stories like this is a day late and a dollar short.

  3. I’d like to see the endowments used to guarantee low interest student loans. If tuition is $8,500 per year, the it’s $34,000 for four years (making the optimistic simplifying assumption that it will stay $8,500 per year). If you assume that you need a dollar in living expenses for each dollar in tuition that’s $68,000. If you borrow $68,000 at 8% interest with a ten year note, you’ll pay about $825 per month for 120 months to pay off the note. If you take out the same loan at 3% your monthly payments drop to $656. If you have an effective tax rate of 30% (i.e. you keep 70% of what you make after taxes) then you need to make $11,200 per year to have $656 per month after taxes. In other words, paying off your college loan would consume the first $11,200 of your salary for a $68,000 loan over 10 years at 3%. That same loan would take the first $14,142 of your pre-tax income at 8% interest.

    What is a reasonable amount of pre-tax income to have to pay as the cost of your education? $5,000 per year, $10,000 per year, $15,000 per year?

    I don’t know the answer but it seems to me that this is the right way to look at the affordability of an education. And I doubt that the salaries paid to recent college graduates are rising at 8+% per year. So, every year that UVA raises tuitions that much they are making a college education less and less affordable.

  4. Anonymous Avatar

    I’d like to see a fair and open investigation of higher education operations and costs by a group that did not include people whose egos were being stroked by the colleges and universities to the point where they just nod approval of the status quo.


  5. Anonymous Avatar

    To Jim Bacon:

    Totally off topic, but this is an insider scam by the wealthy elite landed interests at Tysons who want to pass off the majority of the costs of rail to someone else.

    “The Virginia home-building industry offered a compromise Monday that would exempt Tysons Corner and the Reston Town Center from a Senate bill that would dramatically change the way developers contribute money for roads, schools and other services.”

    The dirty little secret is that most recent rezonings at Tysons and Reston have not come close in proffers to the impact fees being proposed.

    The big boys like WestGroup want to continue their almost free ride.

    Please start a thread on this.

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