As Cornell reached the halfway mark of its $4 billion Capital Campaign to strengthen the University’s endowment last week, the Senate Finance Committee questioned the large endowments of institutions of higher education. Last Thursday, the committee sent a letter to the 136 U.S. universities with endowments larger than $500 million, requesting detailed information on endowment growth and student financial aid.
The letter, addressed from Sen. Max Baucus (D-Mont.) and Sen. Charles Grassley (R-Iowa), was sent in response to a recent study finding explosive growth in university endowments and concern over access to financial aid for low and middle-income students.
“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up. We need to start seeing tuition relief for families go up just as fast,” said Grassley in a press release.
According to a study by the National Association of College and University Business Officers, Cornell’s endowment increased from $4.3 to $5.4 billion in the 2006-07 fiscal year, a 25.5 percent increase.
In 2007-08, Cornell expects to spend about $117 million towards student financial aid from its own resources. Of this amount, roughly $40 million comes from the endowment payout, meaning the interest generated by the endowment.
Due to a new financial aid plan announced yesterday by Provost Biddy Martin that will be implemented over the next two years, Cornell will eliminate need-based loans for families with incomes of $75,000 and under so that these students can graduate without debt to Cornell. Part of this funding will come from the endowment payout, in addition to reallocating existing funding.
“I want to make it clear that in general, making higher education more affordable and especially eliminating or capping loans is imperative because we don’t want students choosing what they want to do after graduation based on their debt burden,” said Martin.
Cornell’s endowment is currently ranked as the 18th largest in the nation. Harvard and Yale top the list with $34.6 billion and $22.5 billion, respectively. Earlier this year, Harvard and Yale announced plans to change their financial aid policies. Harvard will now offer financial aid assistance to families with annual incomes of up to $180,000 and Yale will offer aid to families earning up to $200,000.
Vice Provost David Harris stressed that endowment is only one part of a multi-faceted puzzle making up a university budget, and that not all of it is meant to be used towards financial aid.
“Sometimes it’s couched as if all universities do with their endowments is pay for financial aid, so our options are to either provide more financial aid or to sit on money, but in reality, it’s everything about the university,” said Harris. “We’re at a time when research is a huge chunk of the university budget. You’re not seeing [research] budgets escalating at the rate we’ve seen in the past, so that means we’re being asked to do more and more as a university. Financial aid is only a piece of that. That’s important.”
The Senate letter is not a subpoena, so universities are not being forced to comply, but Cornell officials feel that by responding they are helping to better inform the government on some of the complicated issues involved with university budgets and funding.
“I think there’s a lot of complexity about how we finance higher education that’s not well understood,” said Carolyn Ainslie, vice president of planning and budget. “We don’t have to respond, but again, most of it is public and we’re going to try to do it and use it as an opportunity to set the larger context about some of the issues that are implied.”
Provost Martin and other Cornell officials are hoping for continued discourse between institutions of higher learning and the government, but due to the complex nature of University budget and policies, they remain wary of the government getting directly involved without fully understanding all of these issues.
“It’s fair to say that their focus on higher education is welcome,” said Martin. “But the fact that they cut off a slice of what higher education does and is asked to do by the public, and then decide to develop legislation or bring pressure to bear on that portion without understanding how it works on the whole is problematic ... That’s why there needs to be a lot more discussion and information about the complexity of these things.”