Endowments May Help Rein In Tuition Hikes

By U.S. Sen. Chuck Grassley


The College Board’s new annual survey reveals that the escalating costs of higher education continue to outpace inflation and saddle new graduates with crushing debt that can take years to repay.


According to the survey, tuition for in-state, public, four-year colleges rose 6.6 percent over last year. Calculate the average tuition, room/board and other fees, and the price tag for the 2007-08 school year climbed to $13,589. At private colleges, undergraduate students face even higher sticker shock, paying on average $32,307.


The rates of increase are eye-popping. Consider paying $15 for a gallon of milk or shelling out $9.15 per gallon of gas. That’s what those items would cost today if their prices climbed at the pace of college tuition since 1980.


As a federal policymaker, I understand educating tomorrow’s mathematicians, engineers, health care professionals, business leaders, teachers, public servants, entrepreneurs and vocational experts is vital to America’s long-term economic and national security interests. For generations of newcomers and long-time citizens, earning a higher education is a gateway to the American dream. A college degree traditionally paves the way toward higher lifetime earning power and gives graduates a head start to succeed professionally in the workplace.


The new report should push federal and state lawmakers to address out-of-control tuition increases. Along with other worries about making ends meet, parents are feeling overwhelmed at the prospect of saving for a child’s higher education, especially when many still may be repaying their own student debts.


Many policymakers believe the way to make college more affordable is by pouring more money into financial aid. However, staking out a bigger claim of the Federal Treasury isn’t going to do anything about uncontrolled tuition increases. It’s going to take a creative, think-outside-the-box approach to rein in tuition.


Just as raising taxes is not the solution to controlling the federal deficit, more government aid is not the answer to tuition control. Counting on federally-subsidized and private loans to pay the bills only puts students deeper in debt and encourages tuition increases year after year.


Don’t get me wrong. As the Ranking Member of the Senate Finance Committee, I strongly support using incentives in the federal tax code to make higher education more accessible and affordable to more Americans. In fact, this summer I helped make permanent a college savings tool known as 529 plans, a popular state-sponsored college savings program.  As chairman of the committee in recent years, I also worked to create the deduction for tuition and secured the tax deductibility of interest on student loans.


Obviously more must be done to make college affordable, and we ought to unleash the brain trust working within the ivory towers of academia. College administrators and trustees need to study cost-control and money management. Something’s not adding up when rising tuition rates keep climbing year after year while many universities are flush with ballooning endowments.


At a U.S. Senate Finance Committee hearing in September, witness testimony revealed college and university endowments have grown enormous fortunes. The top 25 college and university endowments are $11 billion more than the combined assets of the top 25 largest private foundations. Investment returns often exceed 12 percent or more. However, college endowment spending averages a paltry four percent.


Some of those endowments are massive and have gotten so big, in large part, because they benefit from very generous tax breaks. Yale University’s endowment equates to $2.8 million per undergraduate. Tapping endowment returns to help keep college accessible to non-wealthy families seems more than reasonable.


As the tax-writing Senate Finance Committee hammers out details of an education tax package, an endowment pay-out requirement ought to be included in the discussion to reduce tuition and help students afford college.


Let’s not forget why colleges are in business. They are institutions of higher learning which receive significant tax breaks to fulfill this noble mission. In turn, the taxpaying public deserves access to affordable education.


As a strong proponent of openness in government, I’d like to shed the light of day on basic college endowment statistics. The public has a right to know how tax-deductible donations and tax-free endowment income are serving the public good.  


Beyond that, policymakers and higher education leaders must work together.  If tuition hikes continue to climb year after year, some families will never realize their hopes for a college education.


Colleges and universities benefiting from tax-advantaged endowments have a non-negotiable public obligation attached to their tax-favored treatment. I’d like to see America’s elite institutions do more to make college more affordable for everyone.