Senator Chuck Grassley (R-Iowa) pushed for the Senate Finance Committee's proposed five percent annual spending requirement for college endowments in a conference call with college newspapers on Monday. The suggested policy is part of Congress' increased focus on the rising cost of attending college.
"I believe that it's fair to say that the questions that I've raised, the questions that [the media have] raised are having a ripple effect through academia, and that ripple effect is good," said Grassley, who is the ranking Republican on the committee. "Just like Congress is not going to be responsible if our constituents don't watch over us, university trustees [and] administration may not be responsible if you don't look over them and other people look over them."
Non-profit universities and colleges receive a tax exemption, similar to foundations. Private foundations, however, must annually spend at least five percent of their endowment to maintain the tax exemption, whereas colleges face no such requirement. The Senate Finance Committee is concerned that tuition prices continue to rise despite continued growth in college endowments.
On Jan. 24, the committee mailed letters to 136 U.S. colleges and universities with endowments over $500 million. Tufts University was one of these higher education institutions. The letters requested detailed information on financial aid and endowment growth.
Tufts, which has an endowment of $1.4 billion, replied on Feb. 28 to the committee's letter. The university's endowment has doubled since the 2003-2004 school year, when it was approximately $700 million.
Tufts is one of a number of universities that have expressed opposition to the spending requirement, noting that most donations to endowments are earmarked for certain spending by the donor. Additionally, university officials argue, endowment spending is tightly controlled to protect endowments from fluctuations in the market.
Grassley said he is tired of such arguments and wants to see a change in university priorities.
"We shouldn't listen to Chicken Little stories about the sky falling. There's going to be good times and there's bad times, but we need to think in terms of the purpose of colleges and universities," Grassley said. "And colleges and universities who tap endowment dollars to help more students access top notch education are investing in the American dream."
The senator hopes congressional legislation will not be necessary. He said that forced dialogue from Congress often produces self-correction.
"We've found a lot of problems self-correcting and we haven't had to legislate much and I'd rather not legislate," Grassley said.
"Self-correction is better than legislation and particularly better than legislation in the case of having so many universities and colleges in the country that it's difficult to put them into one box and consider them all the same," he added.
Yale University, Stanford University and Harvard University have all recently announced increases in awards even to families with incomes well above average. Stanford announced on Feb. 20 that it would not charge tuition to students from families with annual incomes of less than $100,000. In addition, households with annual incomes of $60,000 or less do not have to pay for room and board either.
"The response so far revealed how much opportunity there is ... for endowments to do more with the help of college costs," Grassley said. "Just a small increase for student tuition aid has a big impact. Just a small increase for a few million is a huge benefit for working families and students."
Grassley said that he is not currently drafting legislation, and that he is not certain what legislation, if any, would be drafted.
&qut;I just want colleges to be aware of the fact that the purposes of colleges are teaching, education and research, and that ... the money ought to be used for that purpose and that college endowments should not be a storehouse of funds."
Tufts' Executive Vice President Patricia Campbell said that the university already tries to spend about five percent of the endowment every year.
"Tufts already targets an endowment distribution rate of five percent," Campbell said in a statement. "We put those resources into areas that we believe will contribute to our ability to provide an exceptional education to our students and will further our mission as a leading research university."
She said that the university has taken many steps in recent years to offer more financial aid, including introducing need-blind admissions for the Class of 2011 and future classes. Tufts also announced last semester that the university will replace loans with grants for students from households with incomes under $40,000.
The university will spend $42 million in aid this year. This number is nearly twice what it was in 1999.
The cost of tuition and other student expenses, however, has increased by $16,017 since 1999, an increase of roughly 50 percent. Campbell said that the university has instituted measures to control costs, such as moving legal counsel "in-house."
"Throughout the university we have streamlined and consolidated our processes for purchasing and paying for goods and services, and our strength in this area has reaped significant savings," Campbell said.
© 2008 Tufts Daily via U-WIRE