It’s the Endowments

Lynne Munson, an adjunct fellow at Richard Vedder’s nonprofit Center for College Affordability and Productivity, has an answer to why college tuition is rising so quickly, and it isn’t greedy student loan companies. A major cause, writes Munson in an editorial in USA Today, is ballooning college endowments.

“Last year, these endowments increased 17.7% on average. But, despite double-digit gains stretching back at least a decade, annual spending is at a nearly all-time low of 4.2% – down from 5.1% in 1994 and 6.5% in 1982.”

Munson, in her testimony before the Senate last month, laid out a two-fold plan. The first step would be to demand more transparency regarding endowments.If transparency alone doesn’t raise the payout, than a minimum payout should be mandated, similar to the 5% currently required of nonprofit organizations.

Bruce R. Hopkins, a tax lawyer who specializes in nonprofit organizations, disagrees. “This focus on endowments, from a higher ed point of view, should be quite troubling.” Hopkins points out that a one-size-fits-all approach could create major problems for colleges. “Sometimes they’re ready to spend the money and sometimes they aren’t.”