The Senate Finance Committee, increasingly concerned about the rising cost of higher education, demanded detailed information on yesterday from the nation’s 136 wealthiest colleges and universities on how they raised tuition over the past decade, gave out financial aid and managed and spent their endowments.
It also asked about endowment-related bonuses paid to college presidents and endowment managers.
The move came as a record 76 colleges and universities achieved endowments of $1 billion or more in the last fiscal year, according to a report released this week. Harvard’s endowment, the largest, grew 20 percent to $34.6 billion, while Yale’s, the second largest, grew 25 percent, to $22.5 billion.
“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” said Sen. Charles E. Grassley of Iowa, the ranking Republican on the committee. “We need to start seeing tuition relief for families go up just as fast.”
The committee, which has a central role in setting tax policy, has been pressuring universities to use more of their wealth for financial aid and is threatening to require them to spend a minimum of 5 percent of their endowments each year, as foundations must. The committee pointed out that donations to universities and their endowment earnings are both tax-exempt.
Seeking to head off congressional action, wealthy universities have been rushing in recent months to expand financial aid, in some cases using more of their endowments to increase assistance to low income and upper income students alike. Harvard recently said it would increase aid for families earning up to $180,000 a year and Yale said it would help families with annual incomes of as much as $200,000.
The request for information came in a letter, signed by Grassley and the committee chairman, Sen. Max Baucus, D-Mont. It provided a strong indication that the committee was not backing off the idea of requiring colleges by law to spend more of their endowments.
Grassley said the information gathered in the next 30 days, “will help Congress make informed decisions about a potential pay-out requirement and allow universities to show what they can accomplish on their own initiative.”
University officials expressed surprise at the broad information request and concern about Congress mandating how they use a portion of their endowment.
“I believe that Sens. Baucus’ and Grassley’s intentions may be admirable,” said Robert J Birgeneau, chancellor of the University of California, Berkeley, “but understanding university finances is an extremely complex matter, especially in public colleges and universities.” Berkeley’s endowment is roughly $3 billion.
And Henry Bienen, president of Northwestern University, in Evanston, Illinois, said that while he believed that putting more information into the open “will help eliminate many myths and misunderstandings,” he rejected the proposal that universities be required to spend at least 5 percent of their endowment assets each year.
“Universities are not like foundations,” he said. “They have operating budgets which they cannot easily adjust with the ups and downs of markets. They cannot easily turn off spigots.”