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Stopping Universities From Hoarding Money
HughPickens.com writes: Victor Fleischer writes in the NYT that university endowments are exempt from corporate income tax because universities support the advancement and dissemination of knowledge. But instead of holding down tuition or expanding faculty research, endowments are hoarding money. Last year, Yale paid about $480 million to private equity fund managers for managing about $8 billion, one-third of Yale's endowment. In contrast, of the $1 billion the endowment contributed to the university's operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at Harvard, the University of Texas, Stanford and Princeton.
Fleischer, a professor of law at the University of San Diego, says that as part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal. According to a study by the Center for College Affordability and Productivity a minimum payout of 5 percent per annum, would be is similar to the legal requirement for private and public foundations. "The sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities," concludes Fleischer. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment."
Fleischer, a professor of law at the University of San Diego, says that as part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal. According to a study by the Center for College Affordability and Productivity a minimum payout of 5 percent per annum, would be is similar to the legal requirement for private and public foundations. "The sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities," concludes Fleischer. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment."
They are for empowering a small group of people.
College level should be 100% free to citizens in the USA, there is no reason at all to have to charge for classes up to associates, and it should be inexpensive to get to bachelors and beyond.
No the dean does not deserve $980,000 a year salary, he doesn't do shit. If you want to pay the coach well, base his salary on ticket sales for games.
Do not look at laser with remaining good eye.
So they are spending almost three times as much on bankers to keep their money safe than on the education of students!
Also 6% seems a very high price to manage money. Where they getting a return on investment of 12%?
Or is this the old boys club where they are shoving student's money around to justify higher wages for themselves?
Thank you, Bradley Manning, Edward Snowden and so many others, for courageously defending humanity, my freedom and more!
Are there any guards against loopholes like creating holding companies that provide 'educational services' and diverting the funds there?
It isn't just education. It's everywhere.
In the past couple of decades, we've seen a rise in need for "administration" in the engineering field.
I've been to plenty of meetings where there have been more PMPs (or prior to the last five years, proto-PMP administrative types) than there have been engineers. I've been to technical interchanges that could have been cut down in attendance by half to two-thirds if the engineers in attendance could have been bothered to do their own damn reporting. I see that "meeting minutes" is a deliverable on any contract I'm working on.
I can't say that I get where this is coming from, whether it is because engineers don't want to be managers, or because the "everybody gets a trophy" generation required employers to start giving aspirational administrators more power for less qualification, or because contractors needed to pad out how many employees they needed on any given contract to establish perceived value, or maybe any combination of these.
But there's a perfect storm of "my small function, no matter how small, is worth an extra man-year and I will make a meal out of a nibble to justify it" going on here.
Some people don't believe in fairies. I don't believe in The Patriarchy.
That is just crazy. These are not high-risk/return investments funds. Just load up on a diversified bluechip portfolio, and make sure you follow all the other sheep so that you can't be singled out for getting something wrong.
The annual fund manager convention must just be putting up pictures of regular people and laughing profusely.
Make all management distributions a taxable. Or better ... make all management distributions above a % of education payouts at a taxed penalty. Then the donors will want more accountability since some money is going to the government instead of fund managers.
Making college "cheaper" by providing tuition assistance as TFA says - or worse, by "liar [student] loans" - is just making tuition go up.
Just like the housing bubble did a decade ago.
Better to pitch "higher" education and just make high school diplomas worth something again - by letting those who want to drop out, and kicking those who won't behave out of school.
As long as the Feds keep pushing student loans the universities are not under any pressure to contain costs or use endowments. And now you hear talk of loan forgiveness being the only solution to the burden of these loans. Ha, that will just make it worse.
Planet money had a nice segment on this. Sticker prices are super high and climbing fast but the amount people are actually paying isn't. It is good advertising for the school, and shows how much they want you if they knock $40k off the sticker price.
Yale says 52% off their student are on need base aid and averages to $41,250
And while 480 millions is a huge number it is also 6%, and at the same time they seem to know what they are doing "Yale’s Endowment generated a 20.2 percent return in fiscal 2014".
Pension funds (pdf) cost between 0,1 and 1,2%. Is there a good explanation for this or is Yale getting scammed?
$1 billion - $480 million (fund managers) - $170 million (scholarships) = $350 million.
Forget for a moment that the $480 million for the fund managers is probably excessive. My question has to do with the claim that only $170 million benefits the students. If the university is spending this $350 million on things like professors' salaries, building maintenance costs, library services, and the like, doesn't that indirectly hold down the amount of tuition the students must pay? Making it $480 million (yikes!) for fund managers and $520 million for education?
In most Latin American countries, the best universities are fully or partly State-run. Tuition is often free or symbolic up to Bachelors, and for posgraduate studies it is still *really* cheap by US standards — i.e. I'm studying a Masters degree in the second most important university in Mexico, and pay less than US$100 per semester. Of course, that's because I chose not to be a full-time student; as I would automaticallyreceive a grant of ~US$600 per month.
Universities typically use endowments for the fixed-cost and facilities portions of their budgets, which is not student support. But, as a result, those costs do not need to be paid out of tuition. This means the number given in the summary, "endowment used for tuition etc" is meaningless because that is not what endowment is typically used for. This seems like a hit piece that is cherry-picking numbers to trump up a conclusion.
...private and public. The private ones can do what they will; although they have high "list prices" on their education offerings, they offer significant scholarships that are funded by these endowments. A growing endowment allows them to offer more scholarships; ideally the donors, alumni, students, faculty, and boards would push to make things more affordable for their students.
The public universities? That is another story. They are subsidized heavily by their state governments on the merit that they will offer affordable in-state tuition to the states' residents. My proposal... either lower in-state tuition across the board if you have deep coffers, or you become private and no more state subsidies. That would change their tune, as well. Further, state universities have become rather notorious about seeking out-of-state students and limiting their in-state enrollments because out-of-state students are more profitable... uh, yeah, because the state is subsidizing you.
I expect that the "hoarding money" is confined to the Ivy League Universities, and by the time you get to Texas A&M and the like they are desperately trying to get funds and have no spare money to hoard. It would be interesting to know the spread in funding.
Are we talking about 8% of the total endowment, or 8% of the interest earned from the endowment? I have to say, this is a stupid idea if it's the former.
Assuming the endowment is earning interest in some form of savings account or investment, 8% chips away at it too quickly. If it's 8% of the interest, that's less bad. But this money isn't necessarily the school's money. Well, it is. But people donated to the school to create this endowment, didn't they?
I don't think this is a solution to high tuition prices. Here is my idea...
1. No more than X% of tuition should go for "administrative purposes" to be qualified to receive federal aid in the form of federal grants and federal student loans.
2. Cut down on DoD spending and provide free tuition (based on the state's average tuition rate for public community colleges) limited to two years. Available not just community colleges, but vocational, universities, etc. Tuition if a fraction of the Cost of Attendance. I am speaking for the qualified tuition only, not the CoA.
3. Subsidize student loan interest rates for the Direct loans. Subsidize it so the interest is capped at inflation (assume 3.5%). This way, what we borrow, is what we pay back. So if the current rate is 6.8% or whatever it is, the government would be paying the excess interest so the student only sees 3.5%. Perhaps simple requirements such as being in good standing on your Direct loans.
College-level education should be free or really cheap -- but contingent on reasonable academic performance.
Make college itself free, and you're removing one of the few real motivations to do anything other than party, screw, and play video games. Now, those are an important part of the college experience, but I'm not sure I see the great social benefit to fully subsidizing them.
To the extent I recall my college years at all, I'm remembering that maybe 20% of us were really serious about learning stuff. Another 40-50% were mostly motivated to finish and get a money-making degree, or not get in trouble with their parents, or just felt like it was "something they were supposed to do". The rest were there to party, or get laid, or get stoned, and keep the good thing going as long as possible.
.. economics... aka "throw money at stuff to make the problem go away"...
Look, you want education to be cheaper? You need to increase the competition for education. Yale and Harvard are always going to be expensive because they're Yale and Harvard and they can get away with that. Forget them.
Focus on the schools that educate the majority of college graduates. And if you look at them you'll see they basically increase their tuition whenever you increase the subsidies. government ear marks more money for education... and tuitions go up. why wouldn't they?
The same thing happened with housing. Government ear marked a lot of money to under right loans for poor people that otherwise couldn't afford homes because they're terrible credit risks... because they're poor. Well, what happened? Housing prices went up. Because people selling homes could charge more because people were showing up with these government loans. And beyond that, supply went down which also drove prices up.
now if you kept this going long enough... eventually... you get more housing. But you've got some time to wait for that AND in teh mean time prices are going up and they're going to stay up... they'll never go down... they just go up and up and up and up.
Now if you want prices to go down... you increase supply. Which means building more universities, expanding universities... what you want is EMPTY seats. A glut of supply. And that will drive prices DOWN. Making things MORE affordable instead of less affordable.
I know I know... I said "supply side" and I've made some idiots unhappy for reasons they don't even understand. But this is basic economics, kids.
You want the universities to charge less? Increase competition so they know that if they don't lower costs they lose your butt in their seats.
And while you're at it, consider making it harder for them to give subsidized educations to people that aren't even citizens. I know I know... I'm a bad guy. But consider that if they can't put those butts in their seats it also opens room up in the university for you and your kids etc.
What you want to do is get the university talking about "how are we going to get more people in our university"... and one of the things they're going to do right off the bat is NOT raise tuition costs if they're worried about attendance. With inflation alone that will cause tuition to fall back into equilibrium in about 20 years.
But don't stop there... we have the whole online education thing which some people think is shit because there are a lot of diploma mills that like to do it that way. But these education systems are entirely viable if taken seriously.
Especially for undergraduate classes that are mostly about people sitting in a lecture, writing down notes, and turning in some stuff that is graded by a teacher's aid. All of that stuff you can encourage into online classes. Possibly do it through the community college programs but push it really hard. Make federal funding for public universities/colleges contingent on their participation. Don't specify which software they have to use. By all means give them something they can use for free provided by the feds if you want. But whatever the feds come up with is going to be inferior to what some university either independently develops or contracts. Its theoretically possible that it won't work out that way but its historically unlikely.
The point here is drop costs. Just jack the supply up to hard that the universities have to cut fees to keep the crickets from taking over.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Shouldn't the threshold be based upon the size of the institution? Two reasons:
Larger institutions have much more infrastructure to maintain if there is a decline.
A common threshold would benefit small, well endowed, and arguably elitist institutions.
Colleges are being run like businesses, not education centers. That in of itself is not a problem. However couple that with the multiple other factors: they can milk state and local governments for gobs of money via "financial aid", they can charge their financially incompetent students (customers) a ridiculous amount of tuition and they rarely say no because they can just borrow it and pay later, and they themselves are often rated on how much they cost. Colleges and universities are not even expected to prove their "value". They just make some BS marketing and some numbers out of thin air or bending existing ones and then get in trouble for it by some government watchdog a half decade later. I mean, how can this freaking NOT end up as a disaster?
For Pete's sake, even the "non profit" "Catholic" college I went to, established in 1870, originally run by humble Jesuits, no longer has any Jesuits running the place. In fact 3-4 years after I graduated the replaced the damn Jesuit president with guess who? Mr. MBA man who has a background of being CEO of profitable businesses, a proven track record of raising tons of money, and making sound financial decisions and investments. I gave them a piece of my mind next time they called me and asked for donations, which I halted immediately. Their tuition has more more than doubled in a span of 10 years. When I went it was a tall $17K/yr... it's now a ludicrous $35K/yr. From what I've read, all of that money is not being spent on students nor faculty. No it's going to their precious endowment fund.
I know the government has done minor things like require colleges to post Net Price Calculators but that's almost pointless. You could have researched that information prior to that law being passed if you were determined enough to do it. IMHO, what they should really do is require them to create a ranking and scoring system they all have to abide by. Post entry-graduation rates, by year, by field/career, indicating how many attained jobs in each respective field or whether they had to leave their field, and how long it took. I'm sure prospective students would love that, especially if they could also see what graduates are getting paid as their salaries though that's a slightly too invasive. At least with this they could compare colleges apples to apples, on equal footing. Students could truly shop around and see what their dollar could get them.
Almost every college is crazed with the idea of building new buildings. Even if the average occupancy during peak times is about 20% for the buildings. If there needs to be new technology, then refurbish existing rooms for less, vs building a new building.
Alumni, do not donate when your school is trying to get funds to build a new building!
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
That's one way to look at it. I'm not an expert on investing, but I do invest. I view it differently. Hoarding would be sitting on a mountain of money. But they are paying private equity fund managers to handle the money. What does that mean? It means the money, hardly from "sitting-around", is being invested into the market -- helping fund startup companies, investing in real-estate, providing capital for companies to invest in innovation, and whatever else may give a return. The return on investment is a constant source of income for the university. If the university spent all the money it would be gone and that constant stream of income would dry-up.
The analysis misses the real issue. Endowments are indeed spent and support perpetual operations. This has been attacked on several grounds and for various reasons, but in essence, if we accept that subjects like physics will always require future generations of teachers and researchers, there is no reason to inherently object to stable funding sources for this purpose.
However, since the 1970's (and periodically earlier), there has been a serious, problematic, society-wide trend: an increasing and now dominant fraction of the 'economy' is 'finance.' In theory, connecting every part of the economy with finance increases efficiency as money flows more freely. In practice, it all flows through certain hubs where frictions profit the finance professionals; their share of the pie has increased greatly. Is it disproportionate to the benefit of finance? That can be debated; but not up for debate is that yields and inflation will eat away at endowments if they don't get on that treadmill. You can't keep money in a savings account anymore; interest rates are too low to account for inflation. Only markets will do. With lots of money, the difference between a good return and a great return turns out to be game-changing compared to other factors like new donations. The only question left is whether 'good' investment professionals do a better job than 'mediocre' ones. If the good ones do a better job, then hiring them makes necessary sense - it would be incompetence to not - and their salaries are simply a tax taken by the finance sector, shared by people across the economy. You either pay at the bridge, or you pay by not being able to use the bridge.
The hoary trope about hoarding is usually a good indicator of someone trying to get hands on the money; as an aside.
College level should be 100% free
WHY?!?!?!
So a college degree will become as worthless as a high school diploma?
What's the point? If you didn't bother to learn in high school, you ain't gonna learn in college.
Divide spending into education and other.
Say that you have to spend more on education than other.
Education = faculty + facilities actually used for university funded teaching and research prorata on time actually used. (NO etc.)
Other = marketing, rest of faculty + facilities (especially glamour buildings and sports stuff), administration, investment services, food, housing, etc.
Spending half OUR money on their reason for being does not seem a high bar.
Scholarships and student loans are a big part of the problem because they make it look good to move money into the 'other' category.
Teaching should not be just providing the opportunity to learn. A reasonable amount of actual learning should take place.
I don't think the arts and humanities (including certainly history, literature, and writing) should be deprecated for science and technology.
Recreation, including campus life and sports should be.
You have drawn a completely wrong conclusion (that this has something to do with supply side vs demand side) because you do not understand the difference between a free market and a highly controlled market.
You're on the right track with the economic analysis. But...
"Just jack the supply up to hard that the universities have to cut fees "
Who can afford to "jack the supply up" enough to deliberately to lower prices? Governments? If it's profitable, why aren't they doing it already?
We probably also need to consider the up-shift of the demand curve due to the high subsidies that many students receive in the form of grants and low-interest loans.
The rest were there to party, or get laid, or get stoned, [...]
You make it sound as though those were mutually exclusive.
Overall the idea to force endowments to spend money is a good idea, i know many research professors that are struggling to get funds through grants even at places like Stanford, and yet the Stanford endowment is doing nothing to keep their research going.
However it won't stop tuition hikes. They'll keep going up. This push to send everyone to college for a degree of questionable value is upping the demand for college, then the student loan mess is upping the funds available for college. Basic economics says the price of tuition will just keep going up because the demand keeps going up, so the universities can keep getting away with it.
The big thing this will do is make the private universities less competitive than the public ones. The whole UCSD/USC fiasco going on right now over the big Alzheimer's project is a product of exactly this problem: UCSD's endownment isn't big enough to retain talent when compared to a private institution who can afford to pay a much bigger salary and poach talent. If a private institution wants to up it's standing at the expense of good talent at the public schools, it can afford to do it simply through offering better money to the researcher and his people. If USC was forced to reduce the size of it's endowment through a system like this, they would be unable to poach talent away. I'm not sure if that's a good thing or a bad thing, but I lean towards good.
http://tcs-online.org/
Project breaking down university spending. Draw your own conclusions.
Google: "What is a university endowment"
A: Endowments represent money or other financial assets that are donated to universities or colleges. The sole intention of the endowment is to invest it, so that the total asset value will yield an inflation-adjusted principal amount, along with additional income for further investments and supplementary expenditures.
It is a donation that is invested. It is a donation that you cannot guarantee will be given every year. You grow this money so you will have a stable amount of income into the future.
A university is an institution. It is in the business of educating intelligent people, by retaining intelligent people. If you have a large endowment why should a congress that cannot balance a budget tell you how to spend your money?
Please remember not all universities have huge endowments. Many prestigious universities have large endowments ( snark ), from wealthy alumni, or wealthy people in the state that just like that university and left them money. These often one time investments are MEANT TO LAST. so you invest them. You do the smart thing and use 1% and try to gain 8% every year. A university can survive 100's of years so it can apply good financial practices. This is why endowments have boards that review how the money is used and invested and those boards do it for free or a small nominal amount.
A little maths:
( if you cannot grow your money )
1 billion fund spent over 100 years: 1% is only 10 million a year
10 million fund spent over 100 years : 1% is 100k a year
The hope is to grow your money on average by 7% a year. And thats a big HOPE nowadays. Leave them alone, because otherwise those same universities will be broke in 30 years cause they spent the money now for a short term drop in tuition and facilities with no way to replace that money.
The government already throws massive sums at the education system. I am suggesting shifting the subsidies... not totally... that would be disruptive... but gradually and incrementally to subsidize construction and expansion of universities to increase supply.
So I would slowly be scaling back demand while scaling up supply.
As to why they aren't expanding already, they are... sorta.
As to the upshift in demand from government loans, that's actually mostly what I'm talking about. Those loans are probably a bad idea in practice.
Its good politics... it sounds good... give money for poor kids to go to college. Great optics. But the problem is that the universities just jack up their tuitions whenever that happens by pretty much exactly whatever they can get away with... so kids that previously might have been able to get themselves through college by working a job and taking classes... can't anymore. And families that could have put their kid through college or had college savings... now need subsidies. And the university will take all the money the family or student can provide PLUS whatever the government will give them... and that's just how it works.
That's the problem with demand side subsidies. You create a feed back loop where all you do sometimes is just make things more expensive for no reason.
Demand side subsidies CAN be good sometimes. It depends. But when the subsidies start getting big, that's a warning sign that a feedback loop is in operation. And there isn't enough money in the universe to overwhelm it... Throw any amount of money at it and they'll just ram their prices to the new plateau.
You could set a price and then demand that schools that wish to be eligible for the scholarships and loans not increase tuition faster than inflation. That would stop the feedback loop... probably. But maybe not... it might just suck up supply from participating schools thus increasing demand in the market in general... thus... non-participating schools would jack up their prices and at some point that might create serious problems with a two tier market... schools that were charging more maybe could pay professors more which would do things to competition for professors which would have impacts on the prestige of one school versus another which might drive students to go to a non-participating school...
Its complicated. Demand side subsidies are dangerous and you have to be careful with them. You CAN use them effectively and safely and sustainably. BUT... you have to not be a jackass about it and realize there are serious dangers of it getting out of control.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
I said to people that universities are a cult. They operate the same way with the same goal in mind.
I was ahead of my time.
We need a good trades / tech school track as well as the college track.
also does med and law students really need the full 4 years + there own schools?
You do know how endowments typically work, right? Some rich alumni gives the school $1,000,000 for a scholarship. If they just gave out the million to students they might help 50 students for 1 year, but that's not what they do. They invest the million and use the interest to fund the scholarship and can then help a few students per year - basically forever.
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College level should be 100% free to citizens in the USA
It's not free. Someone has to pay for it and frankly the students should have some skin in the game. Students who don't have to pay for their tuition routinely put less effort into it. It's almost a cliche. I agree that college tuitions have gotten WAY out of hand but I don't think it should be free either. Providing a quality education does cost money and people don't tend to value things they don't have to pay for.
No the dean does not deserve $980,000 a year salary, he doesn't do shit. If you want to pay the coach well, base his salary on ticket sales for games.
I have no problem with colleges paying market rates for talent. If that is a big number then so be it. What I have a HUGE problem with however is colleges raising tuitions to pay for things that have little to do with educating students. Want to pay the big name coach so the college can be in the business of professional football? Fine - no tuition money goes to his salary and you have to enable the athletes who are effectively university employees to earn a market rate too. Want to pay the dean a huge salary? That's fine but no tuition money goes to him unless he's doing actual work regarding educating students. Research is explicitly not educational in most cases.
I also think state colleges should actually be funded adequately to keep tuition costs reasonable but the funding streams for that should be kept separate from funding streams for research or athletics or social outreach or other non-academic goals.
The 2% amounted to $137M and 20% of the growth was $343M, which means that the managers' efforts increased the size of the endowment by $1.7B.
No that is not at all phenomenal and in fact is probably worse than simple index investing and almost certainly has little to do with their efforts. Using your numbers the fund grew by [(1.7-0.343)/(8-1.7)-1]=21.5%. Depending on the exact year in question putting the money in a simple broad US stock market ETF such as one offered by Vanguard would have generated a 33.51% increase in 2013 and 12.58% in 2014 and if this is the amount paid in 2014 it will likely include some or all of the 2013 gains because you cannot pay before you know what the gain is.
Doing this would have cost them a 0.05% expense. It's really easy to make "phenomenal" returns when the stock market is rising as much as it has in the past few years. What I do not understand is why they are paying such exorbitant expenses and, if they want to offer a bonus it should be based on performance above the market not just the total increase which has little to do with a manager's performance.
When money is donated to the university, it is categorized into buckets like facilities, capital projects, scholarships, salaries, etc. Some of these things get spent right away or put into a fund that is spent over a short period of time. But certain categories, like scholarships, faculty positions, and some staff positions, can be endowed so that they live on in perpetuity. These endowments need to be large because they fund these based on the capital gains of the investment. The university I work at has almost 200 endowed faculty positions and a TON of endowed scholarships. You need a large investment to have enough returns for to function given market fluctuations. Our board of directors is tight with the endowment because it is a well oiled machine does directly impact the students - and yes it does affect tuition in the form of financial aid grants. It's long term investment and anybody who invests knows that you don't fiddle with your investments for short term gains.
The main cost of tuition is keeping the university running. Most faculty and staff positions are not covered by endowments. Our endowed faculty is under 10% of our total faculty and staff count. Students want less students per class. They want better access to professors and not to be taught by assistants. They want every electronic service imaginable. Both students and parents want electronic front ends to everything. The IT staff to support all of these is not cheap. Universities are not the universities from 50 years ago.
Those edge case high salaries are a pain, yes. It irks me when I see our president's salary publicised. But, it irks me from more of an honor sake. When our university says it is trying to adjust our operating expenses to give the lowest tuition possible and those insane salaries remain untouched, it is somewhat hypocritical in my eyes. In reality though, I don't see it making much change in tuition for the students. Say there are 10 employees making $1M a year. If we cut that in half, that is $5M a year that can go towards a tuition cut. That's huge if you have a school of 500 but nothing if you have a school of 20k. But, from a PR point of view, it affects perception. Coaches have a different job and can get whatever salary they earn because they are a money generating entity all in themselves.
University education should be free. And in some countries it is.
It is NEVER free. Someone somewhere is paying for it. There is no such thing as a free education. Furthermore people tend not to value things they don't have to pay anything for. I think students should have some financial skin in the game. I have no problem with the cost of an education being subsidized through taxes or donations or other funding but I don't think the cost to the student should be zero. Modest? Yes. Zero? No.
Why have the Boomers decided it's acceptable to cannibalize our younger generation?
Fine. "(party || get laid || get stoned)".
Endowments are for the future and paying out 8% per year will use up that endowment. If your intention is to eventually defund universities, this plan will do it.
Top 10% of income earners pay 68% of the taxes.
Sounds reasonable.
The PRIVATE universities with large endowments seem to be very good at managing their money in ways that keeps them very stable even when the economy tanks. You don't see them slash and burn staff like the for profit schools every other quarter when there is small downturn.
Should we make retirees spend at least 8% of their investments as well. They are just hoarding that money it should be out in the economy. It really seems to bother some people to let any person, school or company keep ample funds to be stable through any financial disaster, typically caused or allowed to happen by "experts" with a 90 day view of the world.
Short-circuit evaluation makes for some very dull parties :(
College-level education should be free or really cheap -- but contingent on reasonable academic performance.
Make college itself free, and you're removing one of the few real motivations to do anything other than party, screw, and play video games. Now, those are an important part of the college experience, but I'm not sure I see the great social benefit to fully subsidizing them.
To the extent I recall my college years at all, I'm remembering that maybe 20% of us were really serious about learning stuff. Another 40-50% were mostly motivated to finish and get a money-making degree, or not get in trouble with their parents, or just felt like it was "something they were supposed to do". The rest were there to party, or get laid, or get stoned, and keep the good thing going as long as possible.
And here's the problem
We don't need Remedial English 4 to be taught in college.
Damn lies and statistics.
lmftfy "the people who make the most money pay the most taxes"
To the top 10% of income earners make 68% of the income?
The real question is what is the effective tax rate of the top 10%
Since they have over 90% of the wealth shouldn't they be paying more actually?
Wealth in terms of money is only one aspect of the goods and services the government provides and enables. The rich and powerful make lots of decisions for us because they are afraid we'd mess it up. Until the rest of us take back the decision making, taxes aren't the only thing the rich are providing for us.
Look, you want education to be cheaper? You need to increase the competition for education.
That's part of the problem, but the far bigger part of the problem is shifting the risk of student loan default to the taxpayers. This makes banks willing to make loans without any realistic assessment of whether the borrower will ever make good on the load, and the ability to borrow distances the student from realizing the actual costs they're signing up for.
Abolish government interference in education, and the market will sort it out within five years.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
In many universities athletic funding does not come from tuition, but rather from "voluntary" student "activity fees", which are not voluntary at all, not particulary "activity" fees (going often for athletic team support (often in gyms that most students can't use), administrative support and the like).
And in most universities athletics, even with commercial (television, advertising, corporate sponsorship) support, are a net drag. That million bucks you got to improve your basketball court - it might barely cover the improvement costs - but things like extra water for bathrooms, better electrical systems, parking, and so on, those are funded by the university out of other fees. In many cases, this amounts to a goodly proportion of the original donation (and sometimes is rather more - I know of one case in which a million dollar gift ended up costing the university about three million total).
And the athletics people still whine about how underpaid they are and how underappreciated.
You largely misinterpret my words and you know that.
I didn't misinterpret them at all. I said exactly what I meant and I'm pretty sure you meant that everyone should be able to attend school without paying a cent directly. I disagree. Education is not free and I strongly think that people should have to contribute, particularly when they are adults. My tax dollars support the education of children in my community and state. That isn't free. I firmly believe that college students should incur some amount of direct liability for their education though I'm fine with it being subsidized.
Education is very similar. We invest in the education of the young people today. Therefore, there will be an economy when we are old.
How an education is funded is a separate issue from providing an education. There are multiple ways to accomplish that end. I think people don't value what they don't pay for directly so I think we will see better results if adult students are required to pay a reasonable amount of money out of their own pocket for their education. If it isn't worth it to them I see no reason why I should subsidize it out of my pocket.
Surely you would expect that?
The top 10% of income earners earn 45% of the income after all, but 68 > 45 I here?
1. The tax system is intentionally progressive, the top end is supposed to pay more as a percent of income by design. 68 > 45 is a feature not a defect.
2. The stats for income are based on AGI - those at the top end have greater access to methods of lowering their AGI through deductions and exemptions and accountants that aren't available to those at the bottom end. So while they earn 45% of the AGI they earn >45% of all income
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That is what a general nonprofit is required to spend a year. Any reasonably managed fund can survive on that forever.
Not sure how this fits into the big picture of this discussion, a quote from someone who attended college in 1960s. Hope his contributions are not getting hoarded:
"Back then you didn't have to get an A+ high school grade average and perfect SAT scores to be admitted to a top notch public university. Even luckier, tuition was dirt cheap. I got a world class engineering education nearly free. I remember that good fortune, am eternally grateful and contribute regularly as an alumni. "
mfwright@batnet.com
I don't expect anything. I can't find enough data to come up with an analysis of what should really happen. 68% is the percentage of tax income to the government comes from them, and not a percentage ot their income.
The tax system should look to getting more income for the government. If a person who is rich will get more for the government if they delay the taxes and wait until the rich person investment gets higher returns for the government then that's what it should do.There's probably exceptions though, and the tax system should be more transparent.
I had to look up AGI to find out it stood for adjusted gross income, but I couldn't find a list of possible adjustments.
The rich and powerful believe in hiding information from people, because they fear that, like Frankenstein's monster, segments of the populace will not understand it and act out in fear and at the very least disrupt society with weapons against easy targets. At least, that looks like what is happening.
Even individuals are subject to a rule like this, in amassing retirement accounts. When you reach age 70, you have to observe a stipulated payout, which is taxed as ordinary income.
They will just get around it by setting up a "holding" company for their endowment. The company will hold the investments and make "cheap" loans or grants back to the institution. With the massive amount of capital, there will be a lot of creativity to circumvent any rules.
Everything that is a deduction on your income taxes lowers your AGI. Everything that is a an exemption lowers your gross income. Poorer people have some deductions (their mortgage interest in many cases, for example), richer people have far more deductions particularly when they are paying accountants to structure their income/expenses/etc to maximize them.
The first link in the search page you posted is all data based on AGI, assuming you knew what you were posting doesn't seem unreasonable.
"...the far bigger part of the problem is shifting the risk of student loan default to the taxpayers."
What country are you talking about? In the US, even in bankruptcy a student can't discharge their student loan debt. Literally, the only two ways to stop paying your student loans without paying them off in full (with interest) is to 1) become permanently indigent, or 2) DIE without enough reclaimable/salable estate to cover your debts. At no point does the 'risk of student loan default' get shifted to the taxpayers. (Note, this is in *distinct* contrast to inter-bank loans, which run at *much* lower interest rates ~0.75%, and *are* insured by the government.)
As to shifting the debt burden to the taxpayer, that's how you lower interest rates for student loans.
Interest rates are about risk. Safe borrowers pay low interest rates and risky borrowers pay high interest rates.
The government talked to the banks and said "how do we lower interest rates" and the banks said "well, you can cosign the loan and the interest rates will then be the same as loans to the government"... only students are still getting ripped off because if you look at what the government pays for its interest... you'll laugh:
http://www.treasurydirect.gov/...
And look what the students are paying:
https://studentloanhero.com/fe...
The difference between A and B is profit... which is pretty fucking tasty.
I'd like to look at alternative ways of funding education... One idea I like is trading a percentage of future income. This idea isn't useful for the trust fund kids that are just going to take art history classes and then go fuck prostitutes in where ever. But for poor kids that really need a lot of help getting into the middle class, this is excellent. Why? Because the university has a vested interest in your success. Under the current system if you fail immediately after you graduate the university doesn't really give a shit. But under this system, they don't get paid if you don't succeed. And they get paid more depending on how much you succeed.
So that means the school pushes you into classes that are more likely to make you more marketable in the job market and they'll take an interest in getting you internships prior to graduation, and try as best as possible to get you into a high paying job right out of school because they'll be taking a cut of your pay check for the next X years under that system.
Now if you go to work flipping burgers they're not going to get anything. Obviously you want a minimum earning cut off point. There's no point taking a cut of someone's pay if they're making minimum wage. That's as pointless as it is cruel.
So that's one idea I like that I think would motivate the system to take a long term interest in the future of students.
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Tenured university professor here, just to be transparent.
From my perspective, there is a demand-side problem, not a supply-side problem. The demand-side problem is employers demanding degrees, especially undergraduate and master's degrees, that are totally unnecessary so they can shirk their training and hiring responsibilities. They don't want to train employees on what they actually do, so require people to go out and get a degree instead, and then bitch when the universities aren't doing what they want them to do. They also want to have more excuses for throwing out 90% of their applicant pool to make their hiring easier. Managers also want to justify their positions by being able to say "hey, we have an MBA! That's why we're more qualified than all these other employees to run the company, even if we're a nonprofit hospital [wink wink]."
Maybe you're right about government loans to some extent encouraging this process, but I think that's only part of the problem. The deeper problem is the "for- profit MBA-ification" of everything in the US, including education and healthcare. There isn't enough scrutiny paid to whether administrators and managers are really worth the money, and whether or not they're acting in their interests or in the interests of the consumer and organization. I think that people need to start expecting to see that large nonprofits in sectors like education and healthcare are run through a self-governance model, rather than being run top-down. E.g., where the organization (e.g., professors, instructors, staff, physicians, nurses) could vote on the administrator positions rather than the other way around.
Another way of putting it is that I have no faith in the accountability of administrators and management in most of the large nonprofit organizations in the US for doing anything other than protecting their positions, and increasing the income of the organization, which is not supposed to be the point of nonprofits.
Another thing to note, from my personal experience, is that university administrators tend to increase tuition most to offset decreases in funding from state governments. State funding has decreased over time, not increased, at universities, which probably explains a lot of the tuition increases. Private universities' tuition is increasing too, but that's probably in part because public tuition is, which allows them to increase things also.
Whatever you do, keep politicians out of education. They do nothing but screw things up by micromanaging things. They cut funding for state institutions, and then are surprised when universities increase their funding through tuition. Private universities have successful endowments and then they bitch that they're too successful. If they aren't successfully funding themselves, they bitch that the universities aren't competent at that. They use Title IX funding as leverage to force universities to sidestep privacy (on the victim's sides) and due process laws (on the accused side's) to advance their own poltical agendas. Politicians getting involved in university administration almost always ends poorly.
And although I'm sympathetic to online education, it's grossly overhyped. Higher ed has had distance education for decades, and it's never replaced anything. At some point to get a real education you need to interact with people. If your degree is all based on one-way lectures, there's a problem with that program.
State support of public colleges and universities has been declining for decades - developing a big endowment is the obvious thing for a state college or university to do if it can - which makes a (lucky) state college/university begin to look like a private one.
And then there are all the private (if non-profit) colleges and universities. Whether to develop fund management skills in-house or out-source them probably seems like a loose-loose proposition - except that they think they can apply legal talent to incompetent outside fund managers.
The real problem is that fund management is so lucrative (for the few fund managers who are lucky enough to have had a winning record - whether that reflects competence or not.) The real solution is to make fund management less lucrative by increasing the capital gains tax and possibly introducing a transaction tax. Fund management should be boring - not something for adrenaline junkies hooked on betting with other people's money.
Endowments are meant to be perpetual and throw off funds meant to support colleges and their students. 4% might be a more reasonable number.
Well, that's a good point... however that craze started when the government told employers they couldn't require employees to pass IQ tests. The degrees are used as a proxy for that as I understand.
That said, I generally agree with your position that the degrees are and the general shitshow that is HR in corporate America is involved in this nonsense.
However, it is important to understand that that shitshow is largely a liability shield. The US department of labor etc creates liabilities that can only be mitigated by jumping through a lot of hoops. Unintended consequences.
As to non-profits being run by nurses and professors etc, the problem with this communal system is who takes responsibility? I know in the non-profits the directors and presidents just buck pass or otherwise mitigate responsibility but there's at least some sense that someone is ultimately in charge of the thing. Still its an interesting idea and I have no real problem with it.
I'm given to understand that in hospitals a major cost is the administration and accounting departments. The top three flours of many hospitals is just pure administration. My understanding is that insurance and medicare claims are a nightmare and you need a Brazil-like (reference to the movie) bureaucracy to deal with it all.
As to keeping politicians out of education, then don't take public money. If you take the public dime then you're in the system. You can't have it both ways. Sorry. We're not cutting you a blank check and letting you do whatever without oversight or input. We paid you. That money from the government entitles them to a say in how you conduct yourself.
Its like the people that say they want government funded healthcare but think the government shouldn't have a say in how healthcare is run. You can't have it both ways. You want the money... there is a price and it isn't just in taxes. You become involved and entangled. I appreciate that the modern university system can't function without the subsidies and your point about the HR departments being somewhat complicit in the situation is apt. However the systems did work prior to those subsidies and absent the specious demands for degrees they may well be quite viable without them in the future.
As to Title IX being an on going legislative toxic waste dump that mutant horrors continue to crawl out of... everyone is aware. The problem is the atmosphere of political correctness which... frankly the universities have not been helping with... the rest of society is having a hard time dealing with it. The only effective strategies are either to smile and give it lip service while secretly doing everything in your power to isolate its hold on you. Or to render yourself immune from various reactionary elements that take political correctness seriously and then treat the entire concept with contempt.
No one has as yet found a solution to it besides that. Though I assure you, society at large throughout the Western world is attempting to find the mass producible silver bullet that will put that monster down. Any help from Academia would be appreciated.
As to online education being over-hyped because it hasn't been relevant in the past. Things change and things stay the same. I can say things will change and you can say they'll stay the same and neither of us will be wrong. I'm talking to you over the internet... that's a new thing. But both of us will have dinner tonight on food our ancestors would have likely found as appealing and possibly recognizable as we do... thus things stay the same.
I think in practice we're both going to be right on this last point. I think aspects of education are going to be increasingly handled exclusively in this fashion. You can have the best lecturers in the country produce the best lecture on a given subject. And if that is the class why settle for second best? Quite a few in person classes are just listening to lectures, taking tests, writing a paper... people that raise their hands should be shot. I had a lot of
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I relooked at that graph, which I didn't look at too closely because I have difficulty reading graphs and sheet music, and there's a button that says "share of taxes paid", and thought that should back them up. But the numbers in the graph don't make any sense to me and when the mouse is over it another number that doesn't seem to have any connection with the others, but then when I don't link to a particular story, only providing a search it's because... wait a minute... it's not always clear to me why I do it, but I think maybe this time it's if someone finds a page that doesn't help them, there are plenty more out there that may do better. But scanning some of the results, they don't even seem to bother to say "trust that we got them from the right government agency",
I finally looked at http://www.irs.gov/uac/Facts-%... and some of the pages it links to, and can find no information that readily converts to taxes paid by various tax brackets as a percentage of income.
No, but apparently you does need remedial English track.
The private equity fund is being paid for a service, they're not employees and it's not an optional rate. If the fees are too expensive, Yale can always choose different managers, but they might perform worse and end up costing the university money overall. 21% return, minus 6% performance fee (what Yale got) is better than an 8% return with a 1% performance fee, but there would be less snarky articles about it.
http://www.irs.gov/uac/SOI-Tax...
Top 10% of income earners pay 68% of the taxes. Sounds reasonable.
Except it isn't true. All those things are federal income taxes. There are many many other taxes. Some like social security are almost entirely paid for by the poor and middle class, but are intentionally left out of your statistic.
I tried looking at that page, and ran into a few files that I thought might fit the bill at first but was quickly obvious they did not, but I then thought that the ones under Tax Generated, might work, but it stops at 10,000,000, which is probably a higher percentage than the 10% highest income, and it's adjusted gross income(I've got this notion that if it's adjusted that might make it net?) not gross income. Then I noticed the percentages along the top, which i have no idea what that means or how it effects the numbers below them.
University money does not go to tuition, which raises student loans. And the funny thing that student loans might still be fueled by university money which was injected into the financial system
Fortunately, the upcoming student loan bubble burst will fix that nonsense.
Maintaining infrastructure is absolutely essential to the long term viability of any institution. Spend the money, yes. But don't exclude facilities maintenance or IT, for example. The buildings and network infrastructure are absolutely essential to a university's operation. It's not a direct educational benefit, but unless we want students to live in tents and keep their books in plastic bags to protect them from the rain, still pretty important.
Spending 8% of their endowment each year seems excessive, since market gains are almost always less than that. True, you still have people (usually alumni) contributing to it, but universities shouldn't be required to spend enough that their endowments eventually go away.
Examine even your most deeply held beliefs. Nobody is always right.