Two Virginia universities among 47 U.S. schools with $1 billion endowments
NEWTON, Mass. (AP) — Crossing the main quad at Boston College, visitors can’t miss the billion-dollar view.
There is Higgins Hall, the recently renovated science center, with its pricey, Gothic exterior. Behind it sits a new, $41 million office building, complete with coffee bar. Down the road, through well-tended grounds, lies St. Ignatius Gate Residence Hall, home to 322 students in suites featuring instant cable and high-speed Internet access.
“I don’t think you can ever overinvest in higher education,” says the Rev. William Leahy, BC’s president. With a $1.15 billion endowment, BC can invest a lot: The school is in the stratosphere of wealth in American higher education.
But the stratosphere is getting crowded.
Forty-seven U.S. colleges and universities now have endowments of $1 billion or more, compared to 17 a decade ago, according to the National Association of College and University Business Officers. Harvard alone has $22 billion, nearly $10 billion more than No. 2 Yale. The billionaire schools have amassed their wealth through savvy fundraising, shrewd investing and generous tax laws, and they are the envy of the world. Outside the United States, only England’s venerable Oxford and Cambridge are in the same financial class.
In this country, $1 billion has become a benchmark, a point beyond which schools can stop worrying about the day-to-day and dream big.
“It allows a place to take its other sources of support – student revenues or state financial support – and use them as a base,” said David Ward, president of the American Council on Education. “And use the rest as a source of excellence.”
To shed light on how these schools are using their unprecedented wealth and why they still cost so much to attend, The Associated Press analyzed thousands of numbers collected by the federal government and college guidebooks over the past decade.
The AP found an increasingly varied mix of private and public schools in academe’s financial elite, a group spending heavily on new construction and aggressively recruiting top faculty.
They also are a clique that can induce tuition sticker-shock as never before: Despite tripling its wealth over the last decade, the average billionaire college has nearly doubled its price. Tuition and fees at the average private billionaire college hit $29,002 in 2004; at public universities in the group it cost $7,230 to attend the typical flagship campus.
A significant boost in financial aid means many students aren’t paying full freight, yet the costs have provoked criticism that the richest colleges should use more money from their savings than they do now – at most schools, about 5 percent per year.
Some also worry the wealthiest colleges take too big a piece of the financial pie.
The 47 billionaire schools possess nearly two-thirds of the endowed wealth in American higher education. They are indisputably engines of life-improving research but, excluding the branch campuses of billionaire public schools, they educate fewer than one in 25 American undergraduates.
“There are hundreds and hundreds of small colleges,” said Ian Newbould, president of North Carolina Wesleyan College, a school with an $8.5 million endowment that ranks No. 702 of the 741 schools in the college business officers’ latest endowment survey.
“There is the democratization of education, but in fact, there are a large number of students who need support and need resources.”
The billionaire schools, meanwhile, seem flush. But though they are grouped together at the financial peak among America’s 2,300 four-year colleges, they aren’t all alike.
Each of the eight Ivy League colleges is a billionaire, perhaps unsurprisingly, as are other private schools that wouldn’t be hard to guess – Stanford, Duke, Chicago and Notre Dame among them. Yet there also are small liberal arts colleges, such as Grinnell in Iowa, and 14 public universities, up from four a decade ago. The newcomers among public schools include Ohio State, North Carolina and Illinois.
A billion dollars goes a lot farther at a small school than a large one. Wellesley College, an all-women’s school outside Boston, for instance, ranks 39th on the endowment list with $1.18 billion. Purdue University is one slot higher with $1.21 billion, but the Indiana school has 17 times more students.
What all these schools have in common is that – by American standards, anyway – they’re old. Their average age is 168, ranging from 93 (Rice) to 369 (Harvard). Colleges need decades, even centuries, to build a reputation, reap the rewards of compounding investment returns, and produce generations of alumni who can be tapped for donations.
Ask any president of a billionaire college about the endowment and you’ll get a lecture on how little $1 billion really is: Spend too much each year and there isn’t enough left for the future. And many endowment funds are for specific purposes, from scholarships to professorships to landscaping.
That’s why the presidents say their endowments can do little more than put the brake on tuition increases.
The AP’s analysis found tuition and fees rose 63 percent at the average private billionaire school over the last decade, slightly less than the increase faced by students at private four-year colleges nationally. The University of Richmond alone plans to raise tuition and fees by $8,330, or 31 percent, to $34,850 next year.
At the 14 public schools on the list – many still dealing with state budget cuts and more dependent on tuition than a decade ago – tuition and fees at flagship campuses are up 106 percent, compared with an increase of 90 percent for students at four-year public colleges nationwide. That translates to an increase of $3,712 at the average public billionaire.
It’s no surprise, then, that the debt loads of students who borrow to attend the billionaire colleges stands above $16,000 at both the flagship public universities and private schools.
Still, for many, billionaire colleges have become more affordable.
That’s partly because the percentage of students receiving loans is down and the percentage receiving grants is up.
The private schools have increased grant aid and tuition discounts by two-and-a-half times in the last decade. That’s money students don’t have to give back.
Private billionaires are meeting almost all of what’s called “demonstrated need” – that is, getting students the cash they must have to stay enrolled. Public flagship schools are meeting 84 percent of demonstrated need.
Princeton recently replaced loans entirely with grants, and Yale and Harvard eliminated tuition for students from low-income families. Among public schools, the universities of Virginia, North Carolina and Michigan have recently implemented or announced more financial aid for low-income students.
“Right now, the wealthiest schools are remarkably accessible to low-income students,” said Gordon Winston, a higher education economist at Williams College ($1.23 billion), which recently reduced or eliminated loan burdens for students from families earning less than about $60,000.
At the wealthiest schools, even middle-class families may qualify for at least some need-based aid, though tuition still doesn’t come cheap. “It’s a sacrifice in terms of the extra things,” said Neale Mahoney, a graduating senior who has attended Brown University ($1.65 billion) on a partial scholarship, and whose parents are both educators. “My parents have never bought a new car.”
In 2002, Boston College joined the small group of colleges that promise to find funding for all accepted applicants. It spends about between $55 million and $60 million annually on undergraduate, need-based financial aid.
BC is now “much more attractive to a range of students who might at first be put off” by the school’s list price of $41,950, including room and board, said Leahy, a Jesuit priest who does his bit to keep costs down by declining a salary.
For a school founded to serve impoverished Irish immigrants, the financial aid policy is a source of pride.
But no matter how wealthy BC gets, Leahy doubts it ever will stop raising tuition.
“A billion dollars is a great amount of money, but it by no means eliminates all the pressure,” he said, noting the costs of heating oil, health insurance and technology. At BC, endowment income accounts for only 10 percent of the operating budget.
In part, prices rise because it’s hard for colleges to offset costs as a company would, by increasing productivity. And in part, they rise because the market allows it: The average private billionaire school gets four applications for every available slot.
But mostly, prices rise because there are so many things the billionaire colleges want to do.
Wealthy universities “have many more ideas than they have money to spend on them,” said Charles Clotfelter, a Duke economist and author of “Buying the Best: Cost Escalation in Elite Higher Education.” “If their leaders don’t feel that way, they probably need to be replaced.”
BC is whittling down a list of 200 proposals for new initiatives. Leahy wants to make BC a top-tier science power but also boost Greek and Latin programs, which are close to his heart and increasingly popular among students.
With money, “the appetite intensifies to do great things,” said Leahy. “We could use another billion.” And the school is planning a new campaign to raise it.
Critics, meanwhile, have a suggestion for American schools feeling pinched: spend more of the money they’ve already raised.
“Endowments represent money that’s not being spent on education,” said Henry Hansmann, a Yale law professor, who has criticized endowment stinginess. During the recent economic downturn, Stanford froze hiring, MIT closed its campus over the holidays and Dartmouth tried to eliminate its swimming program before alumni stepped in. But few schools significantly adjusted their 5 percent endowment spending rate for fear of long-term consequences.
“Should we tax this generation of students so we can spend it on the next?” Hansmann said. “That doesn’t make much sense, because the next generation of students is almost certainly going to be more prosperous than this one.”
The billionaire colleges say they have to be cautious, given the uncertainties of the stock market. And they answer price-gouging charges by saying students are getting more for their money – in and out of the classroom.
Many, including BC, Richmond and Swarthmore, have built or renovated science labs. But much of the campus building boom is about “atmosphere” and “experience.” The charms of decrepit dorms and bad plumbing are quickly fading in a race for the best, most well-appointed facilities possible – better food, cutting-edge computer networks and health-club-style gyms. Duke ($3.3 billion) even experimented with giving iPods to all incoming freshmen.
“We don’t have dormitories anymore, we have ‘living and learning units,'” said Ronald Ehrenberg, an economist at Cornell University ($3.24 billion). “We don’t have dining halls any more, we have ‘dining kiosks.’ It is not sufficient for any college students to be housed in buildings that were put up in the 1940s. What these students are getting facility-wise is enormous.”
Along with weekend jocks, varsity athletes also have fared well. Vanderbilt ($2.3 billion) recently opened a $2 million soccer-lacrosse complex. Virginia is spending $130 million on a project that includes a 15,000-seat basketball arena – for a men’s team that hasn’t made the NCAA Tournament since 2001.
The billionaires also are spending on academics, from student research jobs to travel grants to the salaries of celebrity professors.
Including the University of California system, 11 of the 15 American Nobel Prize winners in the last two years work at billionaire schools – not to mention 2003 literature winner J.M. Coetzee, a South African who has taught at Stanford.
Wealth doesn’t guarantee quality, but the correlation between money and reputation, at least, is hard to ignore. Each of the top 21 universities in the latest US News & World Report rankings is a billionaire.
“It seems to me there’s something really useful about having the really turned-on kids go to schools that provide them with the really turned-on resources,” said Winston, the economist at Williams.
But the “arms race” for superstar faculty is costing many nonbillionaires their best talents – researchers such as Hanna and Antonio Damasio, two neuroscientists who recently left the University of Iowa to start a brain institute at the University of Southern California ($2.4 billion).
The drain to richer colleges is a “huge problem,” said William Kirwan, chancellor of the university system of Maryland. “As talent ebbs away, and I think we’re seeing that happen, it really affects public higher education.” In some states, public universities have asked their legislatures to set up “defense funds” to make competitive offers when wealthier schools try to poach faculty.
The wealth disparity is unlikely to disappear, even as more and more schools crack the billion-dollar barrier. Fifty colleges and universities now have between $500 million and $1 billion. The $10 billion endowment soon may be the new $1 billion endowment – and $1 billion a mark of mere mediocrity, not excellence.
Remarkably, a club of billionaire high schools will likely form in the not-too-distant future. At least two New England boarding schools, Andover and Exeter, have topped the $600 million mark. By JUSTIN POPE , AP