Endowments are ballooning. Tuition is rising. A lot of people are starting to ask: Where is all of the money going? Among those getting curious is the U.S. Senate Finance Committee, which is demanding that universities release detailed financial reports on endowment spending. This Senate investigation should be condemned by universities, including the University of Michigan, as an inappropriate attack on the autonomy of universities and a poor substitute for necessary federal funding. At the same time, it is clear that tuition at the University is getting out of control and must be kept reasonable, even if that means getting a little more generous with our endowment.
The trends in tuition and endowment growth at the University are typical of what is happening across the country. Yet, the University’s 25.4 percent return on investments last year was the best percentage gain achieved by any of the nation’s 10 largest university endowments. Many wonder why large tuition increases have continued despite a $1.4-billion increase in the University’s endowment, which is now the eighth largest in the nation at $7.1 billion. Although slightly offset by increases in financial aid, just last summer tuition rose 7.4 percent for undergraduate and 5 percent for graduate students.
The last thing the University needs, though, is the Senate sleuthing into its finances. How hypocritical of an institution that earmarks hundreds of millions of dollars for pet projects – from slightly useful constituent projects to completely useless, corrupt projects – to think it can tell universities how to spend their endowments. One of the main reasons universities even have to rely on endowments is because the federal government and state governments that used to financially support them have defaulted on their responsibilities. The real problem – the one that the Senate Finance Committee does not want to address – is that public universities don’t receive adequate state and federal funding.
However, the Senate is right about one thing. There’s a problem. Universities can do more to share their newfound wealth with students, especially at the University. It’s not enough for the University to say its hands are tied when it comes to the endowment.
The University should follow the lead of other schools with large endowments and make more of its endowment available for student financial aid. When a benefactor gives a massive donation to a construction project or research fund, the University should require a small percentage of that donation to go directly to tuition relief. Donors with this type of big money shouldn’t have a problem earmarking some of it for students. If they do, these really aren’t the type of people the University should want its buildings named after anyway.
The University should tell the federal government to buzz off. Then, it should fix the problem itself.