1 out of 5 Harvard grads wouldn't choose Harvard again for college

College Search & Selection
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<p>sakky, I think you're shifting arguments. The point was, you jumped on another poster for using 5% and suggested there's something wrong with Wisconsin if it spends 5%, and you further went on to say that 5% was a minimum. All I was saying was that those 5% spending assumptions were sound given the SOP for higher ed. </p>

<p>The question of how much a school should spend is a different one; I've brought it up as an aside, myself, and it's worth discussing. But that's opinion and I am trying to establish a fact: endowment spending doesn't work the way you have told posters here that it does, and I don't think that any poster who happened to use UW (or any other school) as an example, and uses 5%, is wrong. From an opinion standpoint maybe 5% is stingy, but from a factual standpoint 5% IS the norm. </p>

<p>
[quote]
Uh, well then they're all terrible managers. Like I said, I can earn a super-safe 4.375% a year right now just by buying 30 year T's. These highly trained and professional endowment fund managers can't figure out a way to reliably earn 5%? Really? Come on.

[/quote]
</p>

<p>Now you have COMPLETELY lost me. The reason they fall short of 5% is because they're being managed so well. </p>

<p>When you base your spending on a previous year's value, and the value goes up significantly in the current year, the final percentage is naturally going to be lower. It's just a fact. Look at a hard-numbers example: Say your board follows the standard and elects to spend 5% of an endowment whose value has averaged $500 million over the past three years. That will put your spending at $25 million. If your endowment has a wonderful year and returns 20%, your endowment value at the end of the year will be $575 million ($100 million in earnings, minus the $25M you spent) so your spending figure for that year end up being 4.3% ($25M is 4.3% of $575M) If the endowment returns 25%, the spending rate will end up dropping to 4.2%. Good performance will always do that to the percentage. </p>

<p>That's what interesteddad meant. (and upon hitting submit I see I simulposted with bclintonk)</p>

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<p>
[quote]
You really don't get it, do you? They're not EARNING 5%, they're just SPENDING 5% of the total endowment after earnings.

[/quote]
</p>

<p>Uh, YOU really don't get it, do you? Please look back and look at what did I actually say.. I am fully aware that they may be spending 5% of their total endowment, but what I am asking is WHY? If they are always spending less than they take in, then by definition, they will be growing money to perpetuity, and what exactly would be the point of that? Please READ my posts before you respond to them</p>

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<p>
[quote]
But that would actually deplete the endowment as those dollars lost real purchasing power over time, and it would also result in wild gyrations in the amount of available cash as earnings are likely to fluctuate more from year-to-year than are total assets.

[/quote]
</p>

<p>Uh, no, I never said that they should spend ALL of their earnings. What I said is that they should clearly be making more than 5% (because even I can do that), which means that they can safely spend more than 5% and still build their endowment in real purchasing power terms. On the other hand, to spend only 5% when they are CLEARLY making more than 5% means that they would be constantly building to perpetuity. </p>

<p>
[quote]
I don't have the 2007 figures, but in point of fact from 2005 to 2006, Wisconsin's endowment grew from $1.1 billion to $1.4 billion, about a 27% increase. So I'd say their fund managers are not doing such a bad job.

[/quote]
</p>

<p>Exactly, and I never said that they were doing a bad job. What I said is that if they were making only 5% (which I never said they actually were), THEN they would be doing a poor job. Since they are clearly making more, then they can clearly be SPENDING more to help all those students who are supposedly dropping out because they can't afford it, assuming that there really are that many of those students around. </p>

<p>
[quote]
Even more impressive: from 1986 to 2007, Michigan's endowment grew from $251 million to $7.1 billion, a 2,719% increase. As a consequence, an endowment that reliably produced a revenue stream of $12.5 million in 1986 now produces and annual revenue stream of $350 million. Had they piddled away all the earnings on current spending instead of compounding the earnings to grow the endowment, they'd be a very poor school now instead of one of the richest.

[/quote]
</p>

<p>Uh, no, YOU have made a mistake. Michigan did not generate these funds purely through internal growth as I am sure Alexandre would agree. The vast majority of these funds were obtained through alumni donation (not through "compound interest"). And that is precisely what I have advocated that UW do also: ramp up its donor drive. If UW can't or won't do that, hey, don't blame me because they don't have a big enough of an endowment.</p>

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<p>
[quote]
I never said they drop out because they can't afford it. I said many are first timers who are less likely to finish for many reasons and many work while in school as they choose not to take money from their parents so they can be free to do as they wish without all the parental controls we see here every day.

[/quote]
</p>

<p>And does this phenomenon of kids working because they don't want to take money from their parents lead to a higher dropout ratio? If so, then that leads to the points I have made several times. If it does not, then it is not relevant to the discussion.</p>

65

<p>
[quote]
sakky, I think you're shifting arguments. The point was, you jumped on another poster for using 5% and suggested there's something wrong with Wisconsin if it spends 5%, and you further went on to say that 5% was a minimum. All I was saying was that those 5% spending assumptions were sound given the SOP for higher ed.</p>

<p>The question of how much a school should spend is a different one; I've brought it up as an aside, myself, and it's worth discussing. But that's opinion and I am trying to establish a fact: endowment spending doesn't work the way you have told posters here that it does, and I don't think that any poster who happened to use UW (or any other school) as an example, and uses 5%, is wrong. From an opinion standpoint maybe 5% is stingy, but from a factual standpoint 5% IS the norm.

[/quote]
</p>

<p>What I meant is that I stand with you in stating that it does not HAVE to be the norm. Particularly if UW really does have so many students who need to drop out because they can't afford to pay. Bclintonk said it best himself, and so I'll use his quote against him: if UW's endowment is really growing by 27%, then why are they still spending only 5% and not instead helping those kids who are dropping out for lack of funds? </p>

<p>
[quote]
Now you have COMPLETELY lost me. The reason they fall short of 5% is because they're being managed so well.</p>

<p>When you base your spending on a previous year's value, and the value goes up significantly in the current year, the final percentage is naturally going to be lower. It's just a fact. Look at a hard-numbers example: Say your board follows the standard and elects to spend 5% of an endowment whose value has averaged $500 million over the past three years. That will put your spending at $25 million. If your endowment has a wonderful year and returns 20%, your endowment value at the end of the year will be $575 million ($100 million in earnings, minus the $25M you spent) so your spending figure for that year end up being 4.3% ($25M is 4.3% of $575M) If the endowment returns 25%, the spending rate will end up dropping to 4.2%. Good performance will always do that to the percentage.</p>

<p>That's what interesteddad meant. (and upon hitting submit I see I simulposted with bclintonk)

[/quote]
</p>

<p>Uh, no, YOU guys have COMPLETELY LOST ME (and probably yourselves). Again, I ask the question, if there really are lots of UW kids who need to drop out because of lack of funds, then shouldn't they be spending whatever is necessary to stop that, and certainly more than 5% if they are in fact making so much on their endowment? </p>

<p>That is, of course, assuming that there really are that many kids who really do need to drop out because of lack of funding. What I actually suspect is that this does not really happen. *But in any case, UW can't have it both ways. * It can't cry poverty when its endowment is, as you and bclintonk have said, "well managed". So, either the endowment is well managed, which means that it can afford to provide better aid to these kids. Or if it cannot, then that means the endowment is probably not well managed. But you can't say that the endowment is well managed AND ALSO say that you can't afford to help these kids.</p>

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<p>
[quote]
I said many are first timers who are less likely to finish for many reasons

[/quote]
</p>

<p>And I discussed this point also. Presuambly, these "many reasons" would include a lower level of preparation, for which UW should either provide more/better remedial/support services (again, which can be easily paid for out of its apparently "well managed" endowment), or simply not admit these students at all if UW is simply too hard of a school for them. It gets back to my basic point that I asked before: why admit people who probably are not going to graduate? These students should instead go to some other school from which they will graduate.</p>

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<p>Who will and won't make it is impossible to know. You can have three people with the exact same stats and there is no way you will get the same outcomes in college. People vary far more than stats can indicate. Here's a study about 1st generation kids. Nobody has all the answers. UW spends plenty on academic support and advising. Not everyone uses them that should.</p>

<p><a href="http://apa.wisc.edu/Surveys/UnderSurvey06_firstgen.pdf%5B/url%5D"&gt;http://apa.wisc.edu/Surveys/UnderSurvey06_firstgen.pdf&lt;/a&gt;&lt;/p>

<p><a href="http://www.pellinstitute.org/files/files-sfts_what_works.pdf%5B/url%5D"&gt;http://www.pellinstitute.org/files/files-sfts_what_works.pdf&lt;/a&gt;&lt;/p>

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<p>
[quote]
Uh, no, I never said that they should spend ALL of their earnings. What I said is that they should clearly be making more than 5% (because even I can do that), which means that they can safely spend more than 5% and still build their endowment in real purchasing power terms. On the other hand, to spend only 5% when they are CLEARLY making more than 5% means that they would be constantly building to perpetuity.

[/quote]
</p>

<p>You are forgetting inflation. If a college's goal is to keep the buying power of its endowment absolutely fixed in real dollars, then to spend 5% a year, it would need to earn 5% a year PLUS an additional percentage to keep up with inflation.</p>

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<p>
[quote]
Who will and won't make it is impossible to know. You can have three people with the exact same stats and there is no way you will get the same outcomes in college. People vary far more than stats can indicate. Here's a study about 1st generation kids. Nobody has all the answers. UW spends plenty on academic support and advising. Not everyone uses them that should.</p>

<p><a href="http://apa.wisc.edu/Surveys/UnderSurvey06_firstgen.pdf%5B/url%5D"&gt;http://apa.wisc.edu/Surveys/UnderSurvey06_firstgen.pdf&lt;/a&gt;&lt;/p>

<p><a href="http://www.pellinstitute.org/files/f...what_works.pdf%5B/url%5D"&gt;http://www.pellinstitute.org/files/f...what_works.pdf&lt;/a>

[/quote]
</p>

<p>Obviously nobody ever knows for sure. But there are long-standing statistical techniques you can use. For example, car insurance companies never know exactly who is going to get into an accident and who isn't, but they know that certain trends are clear: i.e. teenage boys are far more likely to get into expensive accidents than are older women. Hence, insurance companies charge higher premiums (and some don't even offer insurance at all) to teenage male drivers. Now, granted, that's "unfair" to those particular teenage boys who don't get into any accidents at all, but hey, that's what the statistical trends tell you.</p>

<p>Hence, what UW could do is simply comb through all of the data regarding all of its past students find which particular attributes seem to be highly correlated with dropping out, and then either provide better support for those students or simply admit fewer of those students in the future (and admit more students who have a lower drop-out correlation). Keep in mind that the goal is to prevent those students from coming to the school and then dropping out; those students would be better served by going to another school where they are more likely to actually graduate. </p>

<p>
[quote]
ou are forgetting inflation. If a college's goal is to keep the buying power of its endowment absolutely fixed in real dollars, then to spend 5% a year, it would need to earn 5% a year PLUS an additional percentage to keep up with inflation.

[/quote]
</p>

<p>Uh, no, I specifically dealt with this issue, because I never said that any school should always spend all of its annual earnings. I have simply said that the more that they earn, the more they can spend, especially if, as was claimed, they really do have all of these students who are dropping out for lack of support (either academic or financial). </p>

<p>But that's really neither here nor there anyway. The entire purpose of an endowment is to provide for a better education for students, either current or future, and if current students truly are dropping out because of lack of funds, then that is a quite acute problem that requires immediate aid. Heck, I would say that such a problem ought to mandate that a school should spend more than its current earnings. Why not? After all, why would you build up an endowment for future use when you have an immediate problem? That would be like me saving money for my future by simply eating unnutritious food and hence endangering my present health; who cares how much money I have in the future if I am too sick to enjoy it? Hence, if there really are all these UW students who are dropping out because they aren't getting sufficient financial aid, then I would say that UW ought to be redirecting as much funding as necessary to solve that problem, even if it actually means shrinking the endowment.</p>

<p>Now, what I really think is the case is that the above is not actually happening: that you don't have a lot of UW students who are dropping out because of a lack of funding. Instead, they are dropping out for other reasons: i.e. they are poorly academically prepared, or they just don't like UW, or they successfully transfer to a better school, etc. But then that just all calls for different responses. Again, for those students who are truly poorly prepared, why is UW admitting them in the first place? For those students who find that they don't like UW, why can't UW be made to be more liked; after all, even if Harvard students don't like their school, you don't see a mass exodus of students transferring out of Harvard. Similarly, if many students are truly transferring out of UW because they are looking for something better, then why can't UW be made better so that other students from other schools aren't looking to transfer to UW? </p>

<p>But all of that is really neither here nor there anyway. After all, I have never meant to single out UW, it's just that you guys continue talking about it, and so I will naturally respond. The real point is this. Maybe 1 out of 5 Harvard seniors are not "satisfied" with their experience. But, hey, at least they became seniors<a href="and%20hence,%20presumably,%20will%20graduate">/i</a>. At other schools (like UW), a quite high percentage of students won't even become seniors. Like I said before, Harvard's 6 year graduation rate is 98%. UW's *freshmen retention rate is only 93%. Hence, a far higher percentage of Harvard students will actually graduate than will stay even past their first year at UW. Now, to be clear, I agree that that UW figure is still better than most other colleges in the country. But it nevertheless shows that Harvard deserves great credit for bringing such a high percentage of its students to graduation.</p>

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<p>i have much pressure over there.
but a far brighter future</p>

71

<p>I really don't know where else to go with this. What you're saying now--that all of your statements meant that the standard needs revising--is hard for me to see. </p>

<p>Lest other people make MY mistake, and read your posts about "poor management" and T-bills and such the way I did, let me recap one thing:
sakky's earlier post MIGHT be read as that coming in well less than 5% means colleges are "all terrible managers" of their endowments. That is absolutely backwards. As a couple of people have shown, the better and more successful the management of the endowment, the bigger the gap between the intended 5% and the actual percentage spent when the final accounting is done. </p>

<p>Perhaps it's true that all along, all you were ever saying when you brought up T-bills and terrible management and the like was that colleges should be less stingy, and that I just missed the boat. I'm glad posters invested the time in clarifying misunderstandings that OTHER posters may have had about endowment. Thank you for your patience as we (apparently needlessly, for you) provided some additional information.</p>