Federal Lawmakers Probe Into Smith Endowment
Emily Kowalik '18 Assistant Copy Editor
There is no question that attending college is more or less expected of young Americans today. But, as tuition rises, a growing number of students and their parents struggle with the increasing costs of higher education. Many are asking why the cost of college continues to increase while college endowments grow.
Congress, in response to constituent concerns about tuition increases, recently sent inquiries to colleges and universities with large endowments. According to the Boston Globe, last month both the Senate Finance Committee and the House Ways and Means Committee sent requests for information to the 56 private institutions with endowments exceeding $1 billion.
Congress’s letter requesting information stated that “Despite these large and growing endowments, many colleges and universities have raised tuition far in excess of inflation.”
The goal of these inquiries is to lay the groundwork for Congress’s ultimate decision as to whether action needs to be taken to compel more college endowment money to be spent on financial aid.
Smith, whose endowment exceeds $1.8 billion, is among those to receive a request for information. Smith officials, in response to The Sophian’s inquiry, acknowledged their receipt of the letter, saying, “We will respond fully to their queries by their April 1 deadline.”
There is tension between those who believe that maintaining an ultra-large endowment is a good business practice benefitting future generations of students and those who believe there is a basis for Congress’s concerns that colleges are hoarding money while increasing tuition costs.
Part of the difficulty of understanding college endowments and their relation to financial aid lies in the fact that these issues cross into several different departments. After reaching out to several Smith staff members regarding the use of the endowment for financial aid and tuition stabilization, The Sophian received a series of referrals to other offices and staff members, ultimately culminating in a response sent through the Office of Media Relations.
“This year, Smith has provided about $61 million in institutional aid to more than 60 percent of our students,” said a statement delivered jointly from several administrators outlining the financial aid benefits Smith offers its students. “Smith students receiving financial aid graduate with packaged loans totaling $19,000, an amount quite a bit lower than the national average of $28,950.”
Students, in general, conveyed a lack of knowledge regarding the college’s endowment. When asked the size of Smith’s endowment, responses ranged all the way from $1.7 million to $4 billion.
Smith freely provides graphs, facts and figures concerning the endowment on their website, but students say that this information is not readily decipherable and cannot easily be used as an indicator of whether the endowment is being used in a way that optimally benefits students.
In addition, statistics can be disconcerting when due consideration of other institutions being measured is taken.
Natalie Weiss ’18 expressed the concern that, while Smith is highly ranked in terms of the degree of financial support it provides for its students, there are doubtlessly still students at other institutions struggling to pay their tuition. Weiss wonders, “How far down does [the scale] go?”
There are also some students who have voiced the difficulty they have in reconciling the increasing amount of their student loans with the percentage of endowment money spent on staff salaries and new building projects, even given Smith’s rank regarding socioeconomic diversity among students.
Professors Randall Bartlett and Roger Kaufman from the economics department both attempted to shed light on common misconceptions concerning the goals of college endowments.
“It’s a balance, a tradeoff between how much goes to this generation and how much goes to future generations,” said Bartlett.
“Wealthy colleges already spend a lot on financial aid, and many of the poorer colleges can’t really afford to spend much more on financial aid,” said Kaufman. “Parenthetically, I don’t see anything wrong with students graduating college with debt of around $25,000. Going to college is one of the best investments one can make.”
However, many see the congressional inquiries not as an attack on rich colleges, but more as timely concerns about tuition costs and the strain it puts on family budgets.
With student debt rates higher than ever, averaging at around $35,000 according to the Wall Street Journal, it’s no wonder that some people gasp at the size of some college endowments which, as Bartlett mentioned, are close to “the size of small countries’ [treasuries].”
On the other hand, colleges, even wealthy ones, cannot use endowment wealth in any way they wish. Colleges have limitations placed on their funds by donors and pre-marked allocations, and they must ensure that their endowments will last to serve future generations.
The issue of endowment spending must be considered in light of both students’ and parents’ concerns over costs of attending college and the necessary pragmatism colleges must take in regarding their finances.