
The Ivy League Doesn’t Need Taxpayers’ Help - danielam
http://www.wsj.com/articles/the-ivy-league-doesnt-need-taxpayers-help-1476652968
======
nickles
> The 94 schools with endowments over a billion dollars averaged 7.2% growth
> from 2005-15

I'm not sure what point the authors are trying to make here. The S&P 500 (with
reinvested dividends) returned ~7.4% annually over the same period [0].

> That works out to roughly $2 million per student.

Clearly this is a deceptive comparison. The institutions do not have $2mm to
spend on each student every year. The endowment is intended to provide for
each student the institution educates in perpetuity. Spending unsustainably
destroys endowments, and subsequently their beneficiaries [1].

> Yet between 2010 and 2014, according to the same study, these schools
> received some $30 billion of taxpayer contracts, grants, direct payments,
> student assistance and tax exemption. In other words, federal cash and
> subsidies over that time averaged nearly $102,000 per student each year.

Excluding the student assistance funding, the other aid provided to the
schools is not necessarily relevant in a discussion about 'skyrocketing
tuition'. The universities mentioned fulfill other essential roles, such as
basic research, which immensely benefit society. The money allocated to these
schools through the mechanisms mentioned, like grants, directly fund this
work. Pretending it is being spent on undergraduate tuition is dishonest.

[0] [https://dqydj.com/sp-500-return-
calculator/](https://dqydj.com/sp-500-return-calculator/)

[1] [http://www.nytimes.com/2013/10/12/business/ransacking-the-
en...](http://www.nytimes.com/2013/10/12/business/ransacking-the-endowment-at-
new-york-city-opera.html)

~~~
Fomite
I agree - using grants and contracts as part of their total number is
incredibly deceptive. Much of that has nothing to do with undergraduate
students, and research grants have very, very little to do with the cost of
tuition.

~~~
dba7dba
Deceptive comparison is the thing to do for msm these days.

------
harry8
Taking money away from top universities. This is an idea who's time has come?

The positive externality provided by MIT, Caltech and Stanford alone in
startups generated by people attracted from all over the world is G8 level
wealth.

Take the funding away because it's not doing anything useful. Research.
Understanding. Cures.

The WSJ has always had blow-hard editorials, but it's hard to imagine them
writing this utter pile of excrement pre-Murdoch. We need to call it the Fox-
WSJ just so we can be clear about its former reputation's place in the modern
world.

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calvinbhai
Like one of the starred comments on the article points out, the government
should get out of the business of education loans. Industry can easily pay for
students they think are valuable.

the govt should enable companies to have some sort of contract that enables a
bright student to avail free education (sponsored by the company) in exchange
of some duration of work with that sponsor (at market level wages).

This certainly will steer education towards what the market needs. Anything
that is not in clear demand could still be funded by the endowments.

~~~
mattnewton
I disagree that industry is far-sighted enough to know what to invest in.
Curriculum decided by market needs sounds like a nightmare.

~~~
choxi
Really? Curriculum decided by government committees sounds so much worse.
University computer science curricula lags behind industry by at least five
years, a sizable portion of coding bootcamp students are actually CS grads
because they complete their degrees without competitive and employable skills.

~~~
mattnewton
There are important functions of colleges and universities outside of
vocational training. If vocational training is all your after you should skip
schools for a market solution like bootcamps.

~~~
flukus
Around here most universities advertise themselves as vocational training with
slogans like " an education for the real world".

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tgarma1234
The schools are extremely valuable to americans as research centers and hubs
of networks of power. There is ultimately no reason why Stanford or Harvard
couldn't move to India or China if there were higher quality students willing
to pay vastly more than American families can. The universities have the
prestige, we don't. We are beneficiaries of their prestige, not the other way
around.

So no, I don't agree with that article. Invest in success MORE not less.

~~~
67726e
A university is more than a name. Harvard or Stanford aren't going anywhere.

~~~
sidek
But if Americans take the perspective that their premier universities should
contribute tax dollars, whilst other countries fund their universities,
American universities will have marginally less resources. This will compound,
because international moguls who can donate to a good school in country A (and
have 20℅ taxed off the top) or in country B (and have none taxed) might well
prefer country B.

The end result is a plummet in the Ivy League's international standing.
Academics are remarkably focused on their research; prestige and nation matter
little to many of thr top ones. What attracts academics are resources and
colleagues. Without resources, the colleagues become worse, so both wither.
Suddenly you'll have American politicians wondering why their schools aren't
the best anymore.

~~~
67726e
That's a nice work of speculative fiction.

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the_watcher
Tax-exempt endowments seems like the absolute most logical loophole to close
(perhaps a minimum size, but the point stands). They're some of the largest
institutional investors in the country, yet they're taxed like a non-profit.
Even if donations aren't taxed, just treat the endowments like any other
institutional investor.

NOTE: This should not in any way rule out additional tax reform, whatever your
preferred mechanism. The point is to treat multibillion dollar institutional
investors like multibillion dollar institutional investors, however we wind up
choosing.

~~~
JoshTriplett
> They're some of the largest institutional investors in the country, yet
> they're taxed like a non-profit.

Is there a reason we _shouldn 't_ treat major educational institutions as non-
profits, assuming we accept the concept of non-profits in the first place?
(Note that the rules for non-profits already require spending a certain amount
of the endowment every year.)

~~~
sjburt
I think the argument is that they are much less accessible to students with
less privileged backgrounds.

If one views the subsidy associated with the non-profit status as a form of
education spending, it's fair to ask whether that is the best use of that
money.

~~~
danhak
> I think the argument is that they are much less accessible to students with
> less privileged backgrounds.

That's exactly backward though. The Ivy League schools all have need-blind
admissions and meet 100% of demonstrated financial need (for U.S. students)

~~~
esrauch
And yet the median income of the students parents at ivy league is something
like $125k while the median income in America is more like $50k right?

~~~
sokoloff
It would be shocking to me if the profile of students applying to Ivy League
schools _didn 't_ skew substantially high on median family income, highest
degree attained by parents, and SAT scores.

Successful parents breed (read: raise) successful children. Surely not in
every case, but in aggregate. As a successful graduate of a small tech school
in Cambridge, I was aided by my parents' educational bent, bias, and
investments of time and money. They were aided by their parents, just as my
wife and I will aid our children.

~~~
coredog64
Even if your tuition to Harvard or Yale was $0/semester, you still need to
live nearby to attend. And if you're going to succeed, you're not going to
want to have to take a minwage job in order to eat/stay warm/have clothes.
Having the money to set up a student in a completely separate apartment (or
whatever) means you're more likely to be in that $125k range than not.

~~~
closeparen
This is "not even wrong."

Residential life is part of the package of top-tier universities - you live in
the dorms first year by default, and are usually required to. When students
migrate to nearby apartments depends, and is sometimes never.

Financial aid offices "meet demonstrated need" and don't typically
differentiate between tuition, fees, and room and board.

If a student with a full ride moves off, financial aid cuts them a check for
living expenses. Sometimes this amount is calculated based on the expectation
that the student will work a campus job (with govt-subsidized wages - Work
Study) and sometimes not.

------
eknight15
Related: I wish more schools could/would adopt the Ivy League's financial aid
model. Free (with room and board) if your family makes under ~$65k, and you
only pay a small percentage if your family makes up to $150k - depending on
the school.

Stanford is free (excluding room and board) for families making under $125k -
[http://money.cnn.com/2015/04/01/pf/college/stanford-
financia...](http://money.cnn.com/2015/04/01/pf/college/stanford-financial-
aid/)

~~~
apsec112
I went to an Ivy League college, and my parents are by no means rich, or even
upper middle class. What happened was the college tried to use any excuse they
could possibly find to deny "financial aid". One time I was denied because of
a rounding error in my parents' tax returns. _Literally_ a rounding error. The
only reason I managed to graduate was because a lawyer I happened to know
threatened to sue the school.

If the Ivies want to say, "we're a school for the rich, tuition is $XXXK, put
up the cash or don't come here", that is 100% their right as private
institutions. But if they promise that aid will be provided to anyone who
needs it, and they then revoke that promise on a whim when someone is already
partway through their degree, they are lying bastards and need to be called
out on it.

~~~
sidek
You speak of the Ivies as a group which has wronged you, but I don't
necessarily think your experience is representative of the group as a whole.

Certainly my experience at another Ivy has been that this one goes out of
their way to make sure students are funded, and will usually accept even
egregiously late paperwork with no reduction in financial aid.

~~~
enraged_camel
I would further posit that, in addition to differences among the various
schools, you are often times at the whim of individual financial aid officers,
who have full authority to accept or reject the applications they are
processing.

------
Finnucane
It would mean for one thing, that universities would have to change the way
they fundraise and accept donations. A lot of endowment funds are earmarked
for particular purposes. Which could be anything from an endowed professorship
to a large donation for a new building. Not too long ago, Harvard got $400
million for a new engineering school. Would that same donor have been happy to
give the same amount for a scholarship fund? Probably not. I work in
university publishing. We have a fund that helps defray the production costs
of some books. It was endowed to us for that purpose, and the funds can only
be used for that. College endowments are made up of hundreds of such funds.
While it would be great if we had bigger scholarship funds, people who think
universities should spend down their endowments have no idea how these things
actually work.

And at least some portion of the government spending is going to pay tuition,
at least for graduate students getting RA stipends. That money comes out of
research funds.

------
Hydraulix989
I received most of my financial aid for my Ivy League education from federal
grants (my family made < $60k). I wouldn't have had the opportunity to attend
an Ivy League college without federal aid.

------
geebee
A while ago, the Stanford dean wrote an open letter about the decreasing
amount of funding for the UC system. In this letter, the dean mentioned the
value the UC system provides to Stanford, the research community in general,
and the state of California.

However, the Stanford Dean also said something interesting, he said that
Stanford can't provide an education on the scale that the UC system does.
While I agree Stanford can't match the entire UC system on scale, I have to
ask, why not on a scale similar to a UC Campus?

UC Berkeley, for example, has over 27,000 undergraduates, with a vastly higher
percentage of low income students than Stanford or any Ivy. At Stanford and
Harvard, total undergrad enrollment is below 8,000. As a result, Berkeley
educates more low income students than the entire ivy leave combined. This is
true of a number of UC campuses.

It's clear that the elite privates have decided to keep their undergraduate
populations very small. Even if they do improve the percentage of low income
students, the scale is so minuscule that they can't really be large scale
agents of social mobility.

So, why aren't Stanford and Harvard enrolling 25,000 undergraduates? If UCB
and UCLA can do this, why can't they? These institutions do enroll comparable
numbers of graduate students, the big gap is in undergrads.

[http://blogs.berkeley.edu/2014/10/13/why-elite-private-
unive...](http://blogs.berkeley.edu/2014/10/13/why-elite-private-universities-
get-more-per-pupil-government-money/)

Because these universities get a huge amount of money from the government, and
a massive tax exemption, they end up being far more heavily subsidized per
student than even the elite public universities, with far less restrictions on
how they are allowed to operate.

I'm not absolutely against the exemption in theory, but really, why should
Harvard and Stanford get to keep this massively valuable tax exemption if
they're going to refuse to scale, offloading the massively important task of
educating large numbers of students to state supported universities. Really,
if you look at the public funding (including the favored tax status) Harvard
and Stanford are essentially state supported institutions.

I'd say, privates need to either scale like UCB and UCLA, or lose the
exemption.

------
hyperion2010
Who are these authors? The feds aren't "paying universities not to sped their
endowments" they are paying them to take more students. All that will happen
is that universities will cut funding for financial aid. Rule number one for
any university endowment is that you never ever ever touch the endowment to
fund ops [0]. Ever. Because the second you do the internal politics of the
university go completely insane with everyone trying to get a slice of it for
their pet projects. You especially don't use it to fund students tuitions.
There are many people who can pay full ride for all their children. Do we
really want to go back to living in a world where the vast majority of
students who go to elite universities are there because their family has
money? Because that is the world that this would create.

0\. In fact I'd say that this is rule number one for trying to build ANY kind
of lasting institution.

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koolba
Ban all this crap, eliminate parent income calculations, and put a flat price
on things. Let students get their financial aid externally. It's a conflict of
interest on the part of the school to pick and choose who they're giving it
to. While you're at it, get rid of student loan subsidies (i.e. Government
guarantees) and allow student loans to be be washed away by bankruptcy.

After the initial shock of the bubble bursting when he band-aid is ripped off,
you'll have a sustainable education cost structure with the added benefit that
the altruism is externalized and insulated from the institutions.

~~~
Meegul
And just say 'too bad' to the kids who can't afford it or get a loan because
they have no co-signer with good enough credit?

~~~
koolba
No they can get free money from charities or loans from non profits. I'm
saying it's not the governments job to do it. Nor is it a good idea for the
schools to do it either. If they want to have a fund that provides money for a
specific school, have it external to school and provide it to the students
that attend that school. Otherwise you're hiding the costs.

------
eknight15
Anyone have link to full article?

~~~
TwoFactor
Click the "web" link under the article title, then click on the first result.

~~~
eknight15
ooo thanks!

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addicted
I haven't read the article (can't get past the paywall), but based solely on
the headline, if we do have to tax exempt somebody, I would rather it be the
Ivy League colleges, than the university attached to the Alabama football
team, or the UNC effort to exploit a loophole to get unpaid labor for its
football operations.

(I want to reiterate I am only commenting on the headline, since this is a pet
peeve of mine, and the article may completely refute or be unrelated to my
comment).

~~~
wavefunction
I think the folks here prefer discussion of the articles rather than the
headlines, but I'll hold off on downvoting your comment.

I don't even know what the pet peeve is that you mention: it's unclear from
how you structured that bit of your writing.

~~~
muninn_
Well then they should post articles that don't have paywalls.

~~~
sokoloff
That's what the web link is for. Click it and then click the top search
result.

In this case, you can thank a Google policy for forcing access to paywalled
articles in order to be indexed.

~~~
addicted
Thanks. I wasn't aware of the web links.

That's good to know.

